UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K/A
 Amendment No. 1
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                 to
 Commission file number: 001-31783
 RAE Systems Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    77-0280662(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)3775 North First Street San Jose, California
    
    95134(Address of principal executive offices)
    
    (Zip Code)
 408-952-8200
(Registrants telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock, $0.001 par value per share
    
    NYSE Alternext US
 Securities registered pursuant to Section 12(g) of the Act:
None
 o þ
 o þ
 þ o
 o
  Large
accelerated
filer oAccelerated
filer oNon-accelerated filer þ(Do not check if a smaller reporting company)Smaller reporting company o
 o þ
  DOCUMENTS INCORPORATED BY REFERENCE




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PART III
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
   DirectorName
    
    Position with RAE Systems
    
    Age
    
    Since(*)Robert I. Chen
    
    President, Chief Executive Officer and Chairman
    
    
    63
    
    
    
    1991Peter C. Hsi
    
    Chief Technology Officer and Director
    
    
    61
    
    
    
    1991Lyle D. Feisel
    
    Director
    
    
    75
    
    
    
    2001Sigrun Hjelmqvist
    
    Director
    
    
    55
    
    
    
    2004Keh-Shew Lu
    
    Director
    
    
    64
    
    
    
    2009James W. Power
    
    Director
    
    
    81
    
    
    
    2006Susan Wang
    
    Director
    
    
    60
    
    
    
    2009
 
 (*)
    
    Years noted include Board service prior to the April 2002 reverse
merger between RAE Systems Inc., a California corporation, and
Nettaxi.com. Robert I. Chen
 Dr. Peter C. Hsi
 Dr. Lyle D. Feisel inter alia
 Sigrun Hjelmqvist
 2




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##### 



Dr. Keh-Shew Lu
 James W. Power
 Susan Wang
 Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Business Conduct and Ethics
 http://www.raesystems.com.
 Audit Committee
  3




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##### 



ITEM 11. EXECUTIVE COMPENSATION
 Compensation Discussion and Analysis
 Role of Compensation Committee
    Compensation Philosophy and Programs
  
    
    pay competitively to attract, retain and motivate executives who must operate in a high
demand environment;
    
    relate total compensation for each executive to overall Company performance as well as
individual performance;
    
    the mix of total compensation elements will reflect competitive market requirements and
strategic business needs;
    
    a significant portion of each executives compensation should be at risk, the degree of
which will positively correlate to the level of the executives responsibility; and
    
    the interests of our executives will be aligned with those of our stockholders.
  Compensation Elements
 Cash Compensation
 Base Salary
  4




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##### 



Non-Equity Incentive Plans
 Management Incentive Plan
    
    
    the Companys revenue (50%);
    
    the Companys fully diluted EPS (35%); and
    
    individual goals (15%).
   
    
    40% of base salary for the Chief Executive Officer;
    
    30% for the Chief Financial Officer; and
    
    30% for the Executive Vice President Operations.
  Sales Incentive Plan
   5




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##### 



Long-Term Compensation
 Stock Options
  Other Benefits
  Tax and Accounting Considerations
   6




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##### 



2010 SUMMARY COMPENSATION TABLE
 Non-EquityIncentiveOption
    
    Plan
    
    All OtherName and Principal
    
    
    
    
    
    Salary
    
    Awards
    
    Compensation
    
    Compensation
    
    TotalPosition
    
    Year
    
    ($)(1)
    
    ($)(2)
    
    ($)(3)
    
    ($)(4)
    
    ($)Robert I. Chen
    
    
    2010
    
    
    
    350,000
    
    
    
    
    
    
    
    198,844
    
    
    
    22,226
    
    
    
    571,070President and Chief Executive
    
    
    2009
    
    
    
    363,462
    
    
    
    129,160
    
    
    
    
    
    
    
    23,194
    
    
    
    515,816Officer
    
    
    2008
    
    
    
    329,538
    
    
    
    229,460
    
    
    
    
    
    
    
    25,754
    
    
    
    584,752Randall Gausman
    
    
    2010
    
    
    
    250,000
    
    
    
    
    
    
    
    168,967
    (5)
    
    
    7,314
    
    
    
    426,281Vice President and
    
    
    2009
    
    
    
    259,615
    
    
    
    106,245
    
    
    
    
    
    
    
    7,595
    
    
    
    373,455Chief Financial Officer
    
    
    2008
    
    
    
    242,701
    
    
    
    121,875
    
    
    
    
    
    
    
    4,153
    
    
    
    397,889Chris Hameister
    
    
    2010
    
    
    
    195,648
    
    
    
    
    
    
    
    220,390
    
    
    
    67,692
    
    
    
    483,730Vice President, Asia-Pacific &
    
    
    2009
    
    
    
    195,648
    
    
    
    35,415
    
    
    
    96,062
    
    
    
    71,030
    
    
    
    398,155EMEA Business Operations
    
    
    2008
    
    
    
    195,648
    
    
    
    40,625
    
    
    
    140,396
    
    
    
    65,769
    
    
    
    442,438Ming-Ching Tang
    
    
    2010
    
    
    
    240,038
    (6)
    
    
    
    
    
    
    107,129
    
    
    
    33,229
    
    
    
    380,396Executive Vice President
    
    
    2009
    
    
    
    249,273
    (6)
    
    
    70,830
    
    
    
    
    
    
    
    29,154
    
    
    
    349,257Operations
    
    
    2008
    
    
    
    229,153
    (6)
    
    
    40,625
    
    
    
    
    
    
    
    28,217
    
    
    
    297,995Ryan Watson
    
    
    2010
    
    
    
    173,692
    
    
    
    
    
    
    
    561,310
    
    
    
    2,991
    
    
    
    737,993Vice President Americas Sales
    
    
    2009
    
    
    
    155,769
    
    
    
    35,415
    
    
    
    38,730
    
    
    
    2,617
    
    
    
    232,5312008
    
    
    
    138,577
    
    
    
    81,250
    
    
    
    118,332
    
    
    
    2,324
    
    
    
    340,483
 
 (1)
    
    Includes amounts (if any) deferred at the NEOs option under the Companys 401(k) plan.(2)
    
    Valuation based on the aggregate grant date fair value computed in accordance with
FASB ASC Topic 718. The assumptions used with respect to the valuation of option
grants are set forth in RAE Systems Inc. Consolidated Financial Statements  Notes
to Financial Statements  Note 9  Valuation Assumptions.(3)
    
    Performance-based bonuses are generally paid under our Management Incentive Plan for
the CEO, CFO, and Executive Vice President Operations and the Sales Incentive Plan for
the Area Vice Presidents, and are reported as Non-Equity Incentive Plan Compensation.(4)
    
    All Other Compensation is itemized in the table immediately below.(5)
    
    Includes a bonus of $55,000 related to the settlement of the Foreign Corrupt Practices
Act investigation of the Company by the Securities and Exchange Commission and the
Department of Justice (see Note 1 of Notes to Consolidated Financial Statements in the
Companys 2010 Form 10-K, filed with the SEC on March 31, 2010).(6)
    
    Of these amounts, $45,038, $43,926 and $43,769 were paid to Dr. Tang in 2010, 2009,
and 2008, respectively, in the currency of the Republic of China, the renminbi, and
were converted to US dollars by using the exchange rate between the renminbi and the
US dollar at the end of the respective years. 7




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##### 



All Other Compensation
 PaymentsTaxable
    
    
    
    
    
    AssociatedAmount of
    
    
    
    
    
    withCompany
    
    
    
    
    
    Group
    
    
    
    
    
    Living &Name and Principal
    
    
    
    
    
    Match
    
    Automobile
    
    Term Life
    
    Travel
    
    workingPosition
    
    Year
    
    401(k)($)
    
    Allowance($)
    
    Insurance($)
    
    Allowance
    
    abroad($)
    
    Total($)Robert I. Chen
    
    
    2010
    
    
    
    4,125
    
    
    
    14,400
    
    
    
    3,701
    
    
    
    
    
    
    
    
    
    
    
    22,226President and Chief Executive Officer
    
    
    2009
    
    
    
    3,894
    
    
    
    15,599
    
    
    
    3,701
    
    
    
    
    
    
    
    
    
    
    
    23,1942008
    
    
    
    3,750
    
    
    
    18,440
    
    
    
    3,564
    
    
    
    
    
    
    
    
    
    
    
    25,754Randall Gausman
    
    
    2010
    
    
    
    3,750
    
    
    
    
    
    
    
    3,564
    
    
    
    
    
    
    
    
    
    
    
    7,314Vice President and
    
    
    2009
    
    
    
    3,894
    
    
    
    
    
    
    
    3,701
    
    
    
    
    
    
    
    
    
    
    
    7,595Chief Financial Officer
    
    
    2008
    
    
    
    1,910
    
    
    
    
    
    
    
    2,243
    
    
    
    
    
    
    
    
    
    
    
    4,153Chris Hameister
    
    
    2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,692
    
    
    
    67,692Vice President, Asia-Pacific &
    
    
    2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,338
    
    
    
    67,692
    
    
    
    71,030EMEA Business Operations
    
    
    2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,769
    
    
    
    65,769Ming-Ching Tang
    
    
    2010
    
    
    
    2,880
    
    
    
    
    
    
    
    624
    
    
    
    
    
    
    
    29,725
    *
    
    
    33,229Executive Vice President Operations
    
    
    2009
    
    
    
    3,038
    
    
    
    
    
    
    
    1,957
    
    
    
    
    
    
    
    24,159
    *
    
    
    29,1542008
    
    
    
    2,781
    
    
    
    
    
    
    
    1,655
    
    
    
    
    
    
    
    23,781
    *
    
    
    28,217Ryan Watson
    
    
    2010
    
    
    
    2,670
    
    
    
    
    
    
    
    321
    
    
    
    
    
    
    
    
    
    
    
    2,991Vice President Americas Sales
    
    
    2009
    
    
    
    2,337
    
    
    
    
    
    
    
    280
    
    
    
    
    
    
    
    
    
    
    
    2,6172008
    
    
    
    2,079
    
    
    
    
    
    
    
    245
    
    
    
    
    
    
    
    
    
    
    
    2,324
 
 (*)
    
    These amounts were paid to Dr. Tang in renminbi and were converted to U.S. dollars by using
the exchange rate between the renminbi and the U.S. dollar at the end of the respective years.  Outstanding Equity Awards at Fiscal Year-End
  8




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##### 



OUTSTANDING STOCK OPTIONS AT DECEMBER 31, 2010
 Number of
    
    Number ofSecurities
    
    SecuritiesUnderlying
    
    UnderlyingUnexercised
    
    Unexercised
    
    Option
    
    OptionOptions (#)
    
    Options (#)(*)
    
    Exercise
    
    ExpirationName
    
    Exercisable
    
    Unexercisable
    
    Price ($)
    
    DateRobert I. Chen
    
    
    133,333
    
    
    
    66,667
    
    
    
    1.87
    
    
    
    4/11/2018President and Chief Executive Officer
    
    
    79,166
    
    
    
    120,834
    
    
    
    1.078
    
    
    
    5/1/2019Randall Gausman
    
    
    200,000
    
    
    
    0
    
    
    
    3.86
    
    
    
    10/30/2016Vice President and Chief Financial Officer
    
    
    91,666
    
    
    
    8,334
    
    
    
    2.89
    
    
    
    4/19/201796,875
    
    
    
    53,125
    
    
    
    1.40
    
    
    
    5/8/201859,375
    
    
    
    90,625
    
    
    
    0.98
    
    
    
    5/1/2019Chris Hameister
    
    
    50,000
    
    
    
    0
    
    
    
    3.22
    
    
    
    8/5/2015Vice President, Asia-Pacific & EMEA
    
    
    100,000
    
    
    
    0
    
    
    
    3.75
    
    
    
    5/17/2016Business Operations
    
    
    45,833
    
    
    
    4,167
    
    
    
    2.89
    
    
    
    4/19/201732,291
    
    
    
    17,709
    
    
    
    1.40
    
    
    
    5/8/201819,791
    
    
    
    30,209
    
    
    
    0.98
    
    
    
    5/1/2019Ming-Ching Tang
    
    
    128,125
    
    
    
    21,875
    
    
    $
    2.26
    
    
    
    07/02/17Executive Vice President Operations
    
    
    32,291
    
    
    
    17,709
    
    
    $
    1.40
    
    
    
    05/08/1839,583
    
    
    
    60,417
    
    
    $
    0.98
    
    
    
    05/01/19Ryan Watson
    
    
    10,625
    
    
    
    0
    
    
    $
    3.15
    
    
    
    08/14/13Vice President Americas Sales
    
    
    10,000
    
    
    
    0
    
    
    $
    2.81
    
    
    
    08/11/1664,583
    
    
    
    35,417
    
    
    $
    1.40
    
    
    
    05/08/1819,791
    
    
    
    30,209
    
    
    $
    0.98
    
    
    
    05/01/19
 
 (*)
    
    Each option vests at the rate of 1/4 of the underlying shares on the
first anniversary of the date of grant and 1/48 of the shares in each
of the next 36 months thereafter; provided, however, that all options
granted to Messrs. Chen, Gausman, Hameister, Tang, and Watson in 2009
(which expire in 2019) vest at the rate of 1/48 of the underlying
shares monthly, starting one month after the date of grant. Option Exercises and Stock Vested During Last Fiscal Year
  Potential Payments upon Termination or Change in Control
   9




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##### 




    
    exercise of vested options granted under the Companys stock option plans subject to the
forfeiture rules defined in the respective plans; and
    
    unused paid time off pay.
     Compensation of Directors
  2010 DIRECTOR COMPENSATION
 Fees Earnedor Paid
    
    Optionin Cash
    
    Award
    
    All Other
    
    TotalName
    
    ($)(1)
    
    ($)(2)
    
    Compensation
    
    ($)Lyle D. Feisel.
    
    
    18,000
    
    
    
    
    
    
    
    
    
    
    
    18,000Sigrun Hjelmqvist
Neil W. Flanzraich
    
    
    8,750
    
    
    
    
    
    
    
    673
    (3)
    
    
    9,423Keh-Shew Lu
    
    
    20,250
    
    
    
    
    
    
    
    
    
    
    
    20,250James W. Power
    
    
    32,750
    
    
    
    71,687
    
    
    
    
    
    
    
    104,437Susan Wang
    
    
    52,000
    
    
    
    
    
    
    
    
    
    
    
    52,000
 
 (1)
    
    Fees earned are based on membership on the Board, committee membership, and leadership positions.(2)
    
    Valuation based on the aggregate grant date fair value computed in accordance with FASB ASC
Topic 718. The assumptions used with respect to the valuation of option grants are set forth in
RAE Systems Inc. Consolidated Financial Statements  Notes to Financial Statements  Note 9
 Valuation Assumptions.(3)
    
    Payment made by the Company to the Internal Revenue Service on Ms. Hjelmqvists behalf.  10




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##### 



Directors Compensation Plan
  Attendance Fees
    
    Stock Option AwardAll Board Members
    
    $1,000 per Board meeting
    
    100,000 shares
vesting ratably
over four years,
with renewals for
each additional
four years of
serviceAudit Committee
    
    $500 per committee meeting, plus
a $5,000 annual retainer
    
    Audit Committee Chair
    
    Additional $5,000 annual retainer
    
    Additional award of
50,000 shares
vesting ratably
over four years,
with renewals for
each additional
four years of
serviceCompensation Committee
    
    $250 per committee meeting
    
    Compensation Committee Chair
    
    
    
    Additional award of
10,000 shares
vesting ratably
over four years,
with renewals for
each additional
four years of
serviceNominating and Governance Committee
    
    $250 per committee meeting
    
    Nominating and Governance CommitteeChair
    
    
    
    Additional award of
10,000 shares
vesting ratably
over four years,
with renewals for
each additional
four years of
service
  Special Committee
    
    $500 per committee meetingSpecial CommitteeChair
    
    $1,000 per committee meeting
  Non-employee Director Awards.
 EQUITY COMPENSATION PLAN INFORMATION
  11




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##### 



Number of SharesRemaining Availablefor Future Issuanceunder EquityNumber of Shares
    
    
    
    
    
    Compensationto be Issued
    
    Weighted-Average
    
    Plans [Excludingupon Exercise of
    
    Exercise Price of
    
    Shares ReflectedOutstanding Options
    
    Outstanding Options
    
    in Column (a)]Plan Category
    
    (a)(#)
    
    (b)($)
    
    (c)(#)Equity compensation plans approved by stockholders(1)
    
    
    5,266,021
    
    
    
    1.99
    
    
    
    1,919,124Equity compensation plans not approved by stockholders(2)
    
    
    100,000
    
    
    
    1.06
    
    
    
    Total
    
    
    5,366,021
    
    
    
    1.97
    
    
    
    1,919,124
 
 (1)
    
    Includes options issued pursuant to RAE Systems Inc. 2007 Equity Incentive Plan, 1993 Stock Plan and 2002
Stock Option Plan.(2)
    
    Non-plan options issued to our then Board of Directors at the time of the reverse merger with Nettaxi.com. Material Features of the Non-Stockholder Approved Plans
 Non-Plan Stock Options
  Compensation Committee Interlocks and Insider Participation
  Compensation Committee Report
   
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
 Item 201(d) of Regulation S-K:
 Item 403 of Regulation S-K:
 12




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##### 



Number of SharesBeneficially OwnedBeneficial Owner
    
    (1)
    
    Percent5% Holders:Kopp Investment Advisors, LLC(2)
    
    
    7,094,277
    
    
    
    11.9
    %Vector Capital(3)
    
    
    21,482,522
    
    
    
    35.9
    %Executive OfficersRobert I. Chen(4)
    
    
    15,826,608
    
    
    
    26.5
    %Randall Gausman(5)
    
    
    498,750
    
    
    
    *Peter C. Hsi(6)
    
    
    2,755,914
    
    
    
    4.6
    %Ming-Ching Tang(7)
    
    
    237,499
    
    
    
    *Christopher Hameister(8)
    
    
    264,582
    
    
    
    *Fei-Zhou Shen(9)
    
    
    377,017
    
    
    
    *Ryan Watson(10)
    
    
    128,266
    
    
    
    *DirectorsDr. Keh-Shew Lu (11)
    
    
    322,083
    
    
    
    *Susan Wang (12)
    
    
    78,125
    
    
    
    *Dr. Lyle D. Feisel (13)
    
    
    319,448
    
    
    
    *Sigrun Hjelmqvist (14)
    
    
    197,083
    
    
    
    *James W. Power (15)
    
    
    179,791
    
    
    
    *Directors and executive officers as a group (12 persons)(16)
    
    
    21,185,166
    
    
    
    34.2
    %
 
 *
    
    Less than 1%(1)
    
    Calculated on the basis of 59,512,064 shares of the Companys common stock outstanding as
of April 14, 2011, provided that any additional shares of common stock that a stockholder has the
right to acquire within 60 days after April 14, 2011, are deemed to be outstanding for the purpose
of calculating that stockholders percentage beneficial ownership. All shares of common stock
subject to currently exercisable options or options exercisable within 60 days after April 14,
2011, are deemed to be outstanding and to be beneficially owned by the person holding such options
for the purpose of computing the number of shares beneficially owned and the percentage of
ownership of such person, but are not deemed to be outstanding and to be beneficially owned for the
purpose of computing the percentage of ownership of any other person. Except as indicated in the
footnotes to the table and subject to applicable community property laws, based on information
provided by the persons named in the table, such persons have sole voting and investment power with
respect to all shares of our common stock as beneficially owned by them.(2)
    
    Based solely upon a Schedule 13D filed with the SEC by Kopp Investment Advisors, LLC on
February 18, 2011. Consists of shares owned by clients and held in discretionary accounts managed
by Kopp Investment Advisors, LLC (KIA). Kopp Holding Company, LLC (KHCLLC) is the parent entity
of KIA and indirect beneficial owner of the shares beneficially owned by KIA and LeRoy C. Kopp, by
virtue of his position as the control person of KHCLLC, may be deemed indirect beneficial owner of
the shares. The business address of each of the KIA, KHCLLC and LeRoy C. Kopp is 8400 Normandale
Lake Boulevard, Suite 1450, Bloomington, Minnesota 55437.(3)
    
    Based partially on a Schedule 13D filed with the SEC by Ray Holding Corporation, Ray
Merger Sub Corporation, Vector Capital III, L.P., Vector Entrepreneur Fund III, L.P., Vector
Capital IV, L.P., Vector Capital Partners III, L.P., Vector Capital Partners IV, L.P., Vector
Capital, L.L.C., and Alex Slusky on January 28, 2011. Consists of 1,432,600 shares of common stock
held by Vector Capital III, L.P., 34,800 shares of common stock held by Vector Entrepreneur Fund
III, L.P. 1,432,600 shares of common stock held by Vector Capital IV, L.P., 15,826,608 shares of
common stock beneficially owned by Robert Chen and affiliated entities, and 2,755,914 shares of
common stock beneficially owned by Peter Hsi and affiliated entities. The shares owned by Messrs.
Chen and Hsi and their affiliated entities are reported as beneficially owned by Ray Holding
Corporation and Ray Merger Sub Corporation, affiliates of Vector Capital, because of the rights of
Ray Holding Corporation and Ray Merger Sub Corporation under certain Voting Agreements (see the
Definitive Proxy Statement filed by the Company with the SEC on March 9, 2011). The principal
address of each
of Ray Holding Corporation, Ray Merger Sub Corporation and Vector Capital is One Market
Street, Steuart Tower, 23rd Floor, San Francisco, CA 94105. 13




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##### 



(4)
    
    Represents 15,382,849 shares of common stock held by Chen Revocable Trust dated May 8,
2001, Robert I. Chen and Lien Q. Chen, as trustees; 181,260 shares of common stock held by the
Robert Chen and Lien Family Foundation c/o Chen Family Foundation; and 262,499 shares subject to
options that may be exercised within 60 days after April 14, 2011.(5)
    
    Represents 5,000 shares owned by Mr. Gausman and 493,750 shares subject to options that
may be exercised within 60 days after April 14, 2011.(6)
    
    Represents 2,691,332 shares owned by the Hsi Family Trust, Peter C. Hsi and Sandy Hsi, as
trustees and 64,582 shares subject to options that may be exercised within 60 days after April 14,
2011.(7)
    
    Represents 237,499 shares subject to options that may be exercised within 60 days after
April 14, 2011.(8)
    
    Represents 264,582 shares subject to options that may be exercised within 60 days after
April 14, 2011.(9)
    
    Represents 23,717 shares owned by Mr. Shen and 353,300 shares subject to options that may
be exercised within 60 days after April 14, 2011.(10)
    
    Represents 4,517 shares owned by Mr. Watson and 123,749 shares subject to options that
may be exercised within 60 days after April 14, 2011.(11)
    
    Represents 270,000 shares owned by Dr. Lu and 52,083 shares subject to options that may
be exercised within 60 days after April 14, 2011.(12)
    
    Represents 78,125 shares subject to options that may be exercised within 60 days after
April 14, 2011.(13)
    
    Represents 71,948 shares owned by Dr. Feisel and 247,500 shares subject to options that
may be exercised within 60 days after April 14, 2011.(14)
    
    Represents 20,000 shares owned by Ms. Hjelmqvist and 177,083 shares subject to options
that may be exercised within 60 days after April 14, 2011.(15)
    
    Represents 40,000 shares owned by Mr. Power and 139,791 shares subject to options that
may be exercised within 60 days after April 14, 2011.(16)
    
    Includes 2,494,543 shares subject to options that may be exercised within 60 days after
April 14, 2011. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 Related Party Transactions
     14




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Year Ended December 31,2010
    
    
    2009
    
    
    2008Sales:Renex
    
    $
    345
    
    
    $
    509
    
    
    $
    282RAE Australia
    
    
    1,116
    
    
    
    714
    
    
    
    RAE Benelux
    
    
    2,730
    
    
    
    2,698
    
    
    
    2,287RAE Spain
    
    
    361
    
    
    
    429
    
    
    
    604$
    4,552
    
    
    $
    4,350
    
    
    $
    3,173Purchases:Renex
    
    $
    314
    
    
    $
    256
    
    
    $
    677
 December 31,
    
    
    December 31,2010
    
    
    2009(In thousands)Accounts receivable:Renex
    
    $
    200
    
    
    $
    322RAE Australia
    
    
    131
    
    
    
    59RAE Benelux
    
    
    268
    
    
    
    253RAE Spain
    
    
    123
    
    
    
    119$
    722
    
    
    $
    753Accounts payable:Renex
    
    $
    25
    
    
    $
    92
  Director Independence
  ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  2010
    
    
    2009Audit Fees(1)
    
    $
    1,454,000
    
    
    $
    1,511,000Audit-Related Fees(2)
    
    $
    
    
    
    $
    Tax Fees(3)
    
    $
    
    
    
    $
    All Other Fees(4)
    
    $
    325,000
    
    
    $
    148,000$
    1,779,000
    
    
    $
    1,659,000
 
 (1)
    
    Audit Fees consist of fees billed for professional services rendered for the audit of the
Companys consolidated annual financial statements, audit of managements annual assessment of
the effectiveness of the Companys internal control over financial reporting, audit of
controls over financial reporting and review of the interim consolidated financial statements
included in quarterly reports and services that are normally provided by the Companys
independent registered public accounting firm in connection with statutory and regulatory
filings or engagements.(2)
    
    Audit-Related Fees consist of fees billed for assurance and related services that are
reasonably related to the performance of the audit or review of the Companys consolidated
financial statements and are not reported under Audit Fees.(3)
    
    Tax Fees consist of fees billed for professional services rendered for tax compliance, tax
advice and tax planning (domestic and international). These services include assistance
regarding federal, state and international tax compliance, acquisitions, and international tax
planning.(4)
    
    All Other Fees consist of fees for products and services other than the services reported here.  15




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16




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SIGNATURES
  RAE SYSTEMS INC.By:
    /s/  Robert I. ChenRobert I. ChenPresident and Chief Executive Officer KNOW ALL PERSONS BY THESE PRESENTS
  Signature
    
    Title
    
    Date/s/ Robert I. Chen

Robert I. Chen
    
    President, Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
    
    April 29, 2011/s/ Randall Gausman

Randall Gausman
    
    Vice President and Chief Financial
Officer (Principal Financial and
Accounting Officer)
    
    April 29, 2011/s/ Peter C. Hsi

Peter C. Hsi
    
    Chief Technology Officer and Director
    
    April 29, 2011/s/ Lyle D. Feisel

Lyle D. Feisel
    
    Director
    
    April 29, 2011/s/ Sigrun Hjelmqvist

Sigrun Hjelmqvist
    
    Director
    
    April 29, 2011/s/ Keh-Shew Lu

Keh Shew Lu
    
    Director
    
    April 29, 2011/s/ James W. Power

James W. Power
    
    Director
    
    April 29, 2011/s/ Susan Wang

Susan Wang
    
    Director
    
    April 29, 2011
 17