SOURCE: Sierra Monitor Corporation

October 25, 2007 10:00 ET

Sierra Monitor Corporation Announces Financial Results for the Third Quarter and Nine Months Ended September 30, 2007

Third Quarter Sales Up 24% Year-Over-Year; Reports Net Income per Share of $0.02 (GAAP) and $0.03 (Non-GAAP) for the Third Quarter 2007

MILPITAS, CA--(Marketwire - October 25, 2007) - Sierra Monitor Corporation (OTCBB: SRMC), a rapidly growing company that delivers Information Technology for Environment Measurement and Control by developing specialized embedded software that is deployed on proprietary hardware platforms, today announced financial results for the third quarter and nine months ended September 30, 2007.

Financial Highlights

--  Record third quarter sales of $3.4 million, an increase of 24% year-
    over-year
--  Third quarter income from operations was $387,880; an increase of 12%
    year-over-year
--  Third quarter net income was $228,153; up 11% year-over-year
--  Reports Net Income per Share of $0.02 (GAAP) and $0.03 (Non-GAAP) for
    the Third Quarter 2007
    

Third Quarter 2007 Business Highlights

--  Began FieldServer shipments to a major manufacturer of specialty
    computer room air conditioning systems for communicating environment
    control data
--  Received a large, multi-unit FieldServer order from an Italian company
    for fire panel integration into building automation systems
--  Successfully qualified FieldServer for a U.S. Air Force application
    integrating stand-by generators into central base-wide data communications
    systems
--  Qualified FieldServer for installation in fire panel systems in
    shopping malls throughout India allowing network communications to central
    locations
--  Third quarter book to bill ratio of 1:1
    

Third Quarter and First Nine Months of 2007 Financial Results

Total sales for the quarter ended September 30, 2007 were $3.4 million, an increase of 24% from $2.7 million reported for the same period of 2006. For the nine months ended September 30, 2007, sales increased 22% to $9.6 million, compared to $7.9 million for the same period of 2006.

Sierra Monitor posted GAAP net income of $228,153, or $0.02 per share (basic and diluted), for the quarter ended September 30, 2007, compared to GAAP net income of $206,087, or $0.02 per share (basic and diluted), for the same period of 2006. Sierra Monitor posted GAAP net income of $532,417, or $0.05 per share (basic and diluted), for the nine months ended September 30, 2007, compared to GAAP net income of $340,209, or $0.03 per share (basic and diluted), for the same period of 2006.

Sierra Monitor posted non-GAAP net income of $317,353, or $0.03 per share (basic and diluted), for the quarter ended September 30, 2007, compared to non-GAAP net income of $261,360, or $0.02 per share (basic and diluted), for the same period of 2006. Sierra Monitor posted non-GAAP net income of $745,546, or $0.07 per share (basic) and $0.06 (diluted), for the nine months ended September 30, 2007, compared to non-GAAP net income of $458,722, or $0.04 per share (basic and diluted), for the same period of 2006.

"Our results for the third quarter reflect continued growth in customer implementation of our proprietary data handling systems that provide protocol translation between subsystems particularly in the building automation market where energy efficiency is driving demand," said Gordon Arnold, Chairman and Chief Executive Officer. "Combined with strong sales of our traditional gas detection products the FieldServer product line is contributing to robust financial performance and our ninth consecutive profitable quarter."

Cash Position

Sierra Monitor had $604,177 in cash at September 30, 2007, and no debt. Trade receivables at September 30, 2007 were $2,091,481. The Company's Days Sales Outstanding in Accounts Receivable (DSO's) was 56 days.

About Sierra Monitor Corporation

Sierra Monitor Corporation delivers Information Technology for Environment Measurement and Control by developing specialized embedded software that is deployed on proprietary hardware platforms. Embedded software enables data transfer between subsystems using protocol and physical medium translation. Proprietary hardware platforms allow the Company to increase the value proposition while protecting its intellectual property.

The Company's hardware platforms include original equipment modules for installation in customer devices and controllers, gateway boxes generally used by integrators for machine to machine (M2M) protocol translation, and multi-component safety systems generally focused on gas and fire detection. Each of the hardware platforms utilize the Company's proprietary data handling software allowing communication from lower level sensor systems through to the highest levels of Internet Protocol (IP) networks.

By providing the intelligent interface we enable various machines, devices, systems and people to reliably communicate useful information for the measurement and control of various environments including buildings, plants, and factories over the Internet. By delivering the data on various communications levels including Ethernet, Internet, LONworks, Profibus, and others, the Company makes it possible for the data to be accessed at more appropriate levels such as NOCs, control rooms or remote locations.

Sierra Monitor has over 25 years of industry experience and more than 15,000 installations worldwide. The Company is headquartered in Milpitas, California, which includes a manufacturing facility and a technical support center, and a development center in Johannesburg, South Africa.

Safe Harbor Statement

This release includes forward-looking statements that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those contemplated by the forward-looking statements. These forward-looking statements include, without limitation, statements relating to Sierra Monitor's ability to support growth. Forward-looking statements in this release are generally identified by words, such as "believes," "anticipates," "plans," "expects," "will," "would," "guidance," "projects" and similar expressions which are intended to identify forward-looking statements. There are a number of important factors that could cause the results of Sierra Monitor to differ materially from those indicated by such forward-looking statements, including, among others, the impact of perceived or actual weakening of economic conditions on customers' and prospective customers' spending on Sierra Monitor products and services; quarterly fluctuations in Sierra Monitor's revenues or other operating results; periodic fluctuations in product mix resulting in significant variation of profit margins, risks related to market acceptance of Sierra Monitor's products; customization and deployment delays or errors associated with Sierra Monitor's products; impact of long sales and implementation cycles for certain products; and competitors' release of competitive products and other actions. Further information on potential factors that could affect the financial results of Sierra Monitor are included in risks described in Sierra Monitor's filings with the Securities and Exchange Commission, including, without limitation, Sierra Monitor's Annual Report on Form 10-KSB and Quarterly Reports on Form 10-QSB. These filings are available on the web site maintained by the Securities and Exchange Commission at http://www.sec.gov. Sierra Monitor does not undertake any obligation to update forward-looking statements contained in this release.


                        SIERRA MONITOR CORPORATION
                         Statements of Operations
                                (unaudited)


                             For the three months     For the nine months
                              ended September 30,     ended September 30,
                            ----------------------  ----------------------
                               2007        2006        2007        2006
                            ----------  ----------  ----------  ----------
Net sales                   $3,368,102  $2,706,751  $9,610,988  $7,863,672
Cost of goods sold           1,311,712   1,018,368   3,869,853   3,088,854
                            ----------  ----------  ----------  ----------
      Gross profit           2,056,390   1,688,383   5,741,135   4,774,818
                            ----------  ----------  ----------  ----------
Operating expenses
   Research and development    524,668     466,990   1,553,708   1,336,351
   Selling and marketing       693,801     562,855   2,031,697   1,860,360
   General and
    administrative             450,041     311,945   1,257,341     998,662
                            ----------  ----------  ----------  ----------
                             1,668,510   1,341,790   4,842,746   4,195,373
                            ----------  ----------  ----------  ----------
      Income from
       operations              387,880     346,593     898,389     579,445
Interest expense                (5,276)     (3,704)     (8,679)    (12,429)
                            ----------  ----------  ----------  ----------
      Income before income
       taxes                   382,604     342,889     889,710     567,016

Income tax provision           154,451     136,802     357,293     226,807
                            ----------  ----------  ----------  ----------

      Net income            $  228,153  $  206,087  $  532,417  $  340,209
                            ==========  ==========  ==========  ==========
Net income per share:
   Basic                    $     0.02  $     0.02  $     0.05  $     0.03
                            ==========  ==========  ==========  ==========
   Diluted                  $     0.02  $     0.02  $     0.05  $     0.03
                            ==========  ==========  ==========  ==========
Weighted average number of
 shares used in per share
 computations:
   Basic                    11,075,192  11,050,539  11,055,192  11,048,988
                            ==========  ==========  ==========  ==========

   Diluted                  11,742,979  11,479,136  11,580,243  11,542,967
                            ==========  ==========  ==========  ==========



                        SIERRA MONITOR CORPORATION
                              Balance Sheet
                            September 30, 2007
                                (unaudited)

                        Assets
Current assets:
   Cash                                                         $   604,177
   Trade receivables, less allowance for doubtful accounts of
    approximately $80,000                                         2,091,481
   Inventories, net                                               2,099,566
   Prepaid expenses                                                 271,786
   Deferred income taxes - current                                  244,933
                                                                -----------
      Total current assets                                        5,311,943

Property and equipment, net                                         283,324
Deferred income taxes                                                50,921
Other assets                                                        240,467
                                                                -----------

      Total assets                                              $ 5,886,655
                                                                ===========

             Liabilities and Shareholders' Equity
Current liabilities:
   Accounts payable                                             $   648,839
   Accrued compensation expenses                                    451,444
   Income taxes payable                                             359,669
   Other current liabilities                                         86,056
                                                                -----------
      Total current liabilities                                   1,546,008

Commitments and contingencies

Shareholders' equity:
   Common stock, $0.001 par value; 20,000,000 shares
    authorized; 11,155,192 shares issued and outstanding             11,155
   Additional paid-in capital                                     3,343,838
   Retained earnings                                                985,654
                                                                -----------
      Total shareholders' equity                                  4,340,647
                                                                -----------

      Total liabilities and shareholders' equity                $ 5,886,655
                                                                ===========

NON-GAAP FINANCIAL MEASURES

The accompanying release dated October 25, 2007 contains non-GAAP financial measures. Table C reconciles the non-GAAP financial measures in that news release to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP). These non-GAAP financial measures include non-GAAP operating expenses, non-GAAP profit (loss) from operations and related non-GAAP profit (loss) as a percentage of revenue, non-GAAP net profit (loss) and basic and diluted non-GAAP net profit (loss) per share.

Sierra Monitor continues to provide all information required in accordance with GAAP and does not suggest or believe that non-GAAP financial measures should be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Sierra Monitor believes that non-GAAP financial measures provide meaningful supplemental information regarding its operating results primarily because they exclude amounts that the company does not consider part of ongoing operating results when assessing overall company performance.

We believe that our non-GAAP financial measures facilitate the comparison of results for current periods with results for past periods. We exclude the following items from non-GAAP financial measures:

Depreciation and Amortization of Tangible and Intangible Assets

In accordance with GAAP, depreciation and amortization of tangible and intangible assets includes depreciation of purchased capital assets and amortization of intangible assets including third party approval fees. We exclude these amounts from our internal measures for budget and planning purposes.

Provision for Bad Debt Expense

We maintain an allowance for doubtful accounts which is analyzed on a periodic basis to ensure that it is adequate to the best of management's knowledge. We exclude these amounts from our internal measures for budget and planning purposes.

Provision for Inventory Losses

We evaluate our inventories for excess or obsolescence on a quarterly basis. Inventories identified as slow moving or obsolete are determined based on historical experience and current product demand. The quarterly analysis is used to adjust the provision for inventory losses. We exclude the provision for inventory losses from our internal measures for budget and planning purposes.

Share-based Compensation Expense

Our non-GAAP financial measures exclude share-based compensation expenses, which consist of expenses for stock options. While share-based compensation is an expense affecting our results of operations, management excludes share-based compensation from our budget and planning process. For these reasons, we exclude share-based compensation expenses from our non-GAAP financial measures. We compute weighted average dilutive shares using the methods required by SFAS 128 and SFAS 123(R) for both GAAP and non-GAAP diluted net income per share.

Interest Expense

We evaluate our operating results in a manner that focuses on what management believes to be our ongoing business operations. Our non-GAAP financial measures exclude interest expense as it is not considered to be a part of operating expenses.

Sierra Monitor refers to these non-GAAP financial measures in evaluating and measuring the performance of our ongoing operations and for planning and forecasting in future periods. These non-GAAP financial measures also facilitate our internal comparisons to historical operating results. We are reporting non-GAAP financial measures because we believe that the inclusion of comparative numbers provides consistency in our financial reporting. We compute non-GAAP financial measures using the same consistent method from quarter-to-quarter and year-to-year.

Sierra Monitor believes that non-GAAP measures have significant limitations in that they do not reflect all of the amounts associated with Sierra Monitor's financial results as determined in accordance with GAAP and that these measures should only be used to evaluate Sierra Monitor's financial results in conjunction with the corresponding GAAP measures. Because of these limitations, Sierra Monitor qualifies the use of non-GAAP financial information in a statement when non-GAAP information is presented. In addition, the exclusion of the charges and expenses indicated above from the non-GAAP financial measures presented does not indicate an expectation by Sierra Monitor management that similar charges and expenses will not be incurred in subsequent periods.

                        Sierra Monitor Corporation
              Reconciliation of Non-GAAP Financial Measures
            to Most Directly comparable GAAP Financial Measures
                                (Unaudited)

                             For the three months     For the nine months
                              ended September 30,     ended September 30,
                            ----------------------  ----------------------
                               2007        2006        2007        2006
                            ----------  ----------  ----------  ----------
GAAP Gross Profit           $2,056,390  $1,688,383  $5,741,135  $4,774,818
   GAAP Operating Expenses   1,668,510   1,341,790   4,842,746   4,195,373
                            ----------  ----------  ----------  ----------
GAAP Income from Operations    387,880     346,593     898,389     579,445
   Non-GAAP Operating Expenses
      Depreciation and
       amortization             54,846      33,843     127,276     104,876
      Provision for bad
       debt expense              4,500       4,500      16,619       6,834
      Provision for
       inventory losses              -       6,000           -     (25,984)
      Stock based
       compensation expense     29,844      10,929      69,234      32,787
                            ----------  ----------  ----------  ----------
Non-GAAP Income from
 operations                    477,080     401,866   1,111,518     697,958
      Interest expense          (5,276)     (3,704)     (8,679)    (12,429)
                            ----------  ----------  ----------  ----------
Non-GAAP Income before
 income taxes                  471,804     398,162   1,102,839     685,529
      Income tax provision     154,451     136,802     357,293     226,807
                            ----------  ----------  ----------  ----------
Non-GAAP Net income         $  317,353  $  261,360  $  745,546  $  458,722
                            ==========  ==========  ==========  ==========
Non-GAAP Net income per share:
   Basic                    $     0.03  $     0.02  $     0.07  $     0.04
                            ==========  ==========  ==========  ==========
   Diluted                  $     0.03  $     0.02  $     0.06  $     0.04
                            ==========  ==========  ==========  ==========
Weighted average number of
 shares used in per share
 computations:
   Basic                    11,075,192  11,050,539  11,055,192  11,048,988
                            ==========  ==========  ==========  ==========
   Diluted                  11,742,979  11,479,136  11,580,243  11,542,967
                            ==========  ==========  ==========  ==========

Contact Information

  • Sierra Monitor Investor Relations Contact:
    Steve Polcyn
    (925) 548 3516
    Email Contact