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Sierra Monitor Corporation Announces Financial Results
for the First Quarter Ended March 31, 2011
Record First Quarter Sales of $4.2 Million; a 44% Increase Year over Year
Earns Record First Quarter Net Income of $316,623 or $0.03 per Share
Milpitas, California – April 26, 2011 – Sierra Monitor Corporation (OTC: SRMC.OB), a company that designs, manufactures and sells electronic safety and environmental instrumentation, today announced financial results for the first quarter ended March 31, 2011.
Financial Highlights
First quarter sales of $4.2 million, an increase of 44% over sales of $2.9 million in the first quarter of 2010
First quarter income from operations of $527,413, compared to a loss of $122,199 in the same period of 2010
First quarter net income increased to $316,623 or $0.03 per share (basic and diluted), compared to net loss of $73,106 or $0.01 per share (basic and diluted) in the same prior year period
Ended first quarter with a strong balance sheet, approximately $1.5 million of cash on hand and no bank debt
Business Highlights
Continued expansion of applications for FieldServer by shipping protocol gateways that enable building automation systems to interface with intelligent power strips used in energy management applications controlling computers in server farms
Experienced increasing demand for FieldServer communication bridges that enable data protocol interface for building automation systems to communicate with lighting control and window shade controls

Continued international adoption of our gas detection systems through shipments to unique locations including Uganda, Niger and Kenya
Doubled the capacity of our South Africa based Engineering Development Center
Initiated corporate IT system upgrades including server expansion, disaster recovery redundancy, enhanced Enterprise Recourse Planning (ERP), and advanced remote desktop functionality
First Quarter 2011 Financial Results
Total sales for the quarter ended March 31, 2011 were $4,168,417, an increase of 44%, compared to $2,903,080 reported for the same period of 2010.
Sierra Monitor posted GAAP net income of $316,623, or $0.03 per share (basic and diluted), compared to a net loss of $73,106, or $0.01 per share (basic and diluted), for the quarter ended March 31, 2010.
Sierra Monitor posted non-GAAP net income of $426,276, or $0.04 per share (basic and diluted), compared to a net loss of $22,267, or $0.00 per share (basic and diluted), for the quarter ended March 31, 2010.
“Continuing the solid momentum we built in the fourth quarter of 2010, we grew our 2011 first quarter sales by 44% generating 8% net income, a significant improvement over the first quarter of 2010,” said Gordon R. Arnold, chairman and chief executive officer. “While all our product groups contributed double digit increases, we are particularly pleased with the continued growth of our ProtoCessor product line which achieved 96% year over year growth.  Our ProtoCessor and FieldServer teams are focused on developing product sales opportunities with several major customers in the building management and energy space.”
Cash Position
Sierra Monitor had $1,477,933 in cash and no debt at March 31, 2011.  Receivables at March 31, 2011 were $2,005,321.  The Company’s Days Sales Outstanding in Accounts Receivable (DSOs) was 45 days.

About Sierra Monitor Corporation
Sierra Monitor Corporation designs, manufactures and sells electronic safety and environmental instrumentation.  The company’s unique protocol translator product lines enable communication between disparate electronic systems overcoming protocol language barriers.  By enabling communication between central building automation systems and many electronic subsystems, such as fire panels, chillers and air handlers, Sierra Monitor assists with the integration of energy saving building automation systems.  The company’s products improve the safety and comfort of workers while contributing to climate and natural resource protection.  Sierra Monitor’s intelligent hazardous gas detection systems can be found in a broad range of applications including US Navy ships, wastewater treatment facilities, refineries, offshore oil platforms, chemical plants, parking garages and underground telephone vaults providing 24/7 protection of personnel and facilities.
The Company’s vision is to capitalize on the expanding worldwide demand for knowledge-based products and services that improve operational performance, productivity, efficiency and safety in building automation, industrial and military applications, while reducing demands on resources and energy consumption.

Sierra Monitor Investor Relations Contact:
Steve Polcyn
408-262-6611 ext. 1341


Table A
Condensed Statements of Operations
For the three months ended
March 31,
Net sales   $ 4,168,417     $ 2,903,080  
Cost of goods sold
    1,659,274       1,224,042  
Gross profit
    2,509,143       1,679,038  
Operating expenses
Research and development
    545,074       483,022  
Selling and marketing
    884,439       831,976  
General and administrative
    552,217       486,239  
      1,981,730       1,801,237  
Income (loss) from operations
    527,413       (122,199 )
Interest income
    292       1,047  
Income (loss) before income taxes
    527,705       (121,152 )
Income tax provision (benefit)
    211,082       (48,046 )
Net  income (loss)
  $ 316,623     $ (73,106 )
Net income (loss) available to common shareholders per common share                
  $ 0.03     $ (0.01 )
  $ 0.03     $ (0.01 )
Weighted average number of common shares used in per share computations:
    9,896,942       11,438,212  
    10,102,942       11,438,212  


Table B
Balance Sheets
March 31,
December 31,
Current assets:
Cash and cash equivalents
  $ 1,477,933     $ 1,645,433  
Trade receivables, less allowance for doubtful accounts  of approximately $85,000 and $82,000 respectively
    2,005,321       1,708,886  
Inventories, net
    2,531,992       2,115,003  
Prepaid expenses
    164,348       178,819  
Income tax deposit
Deferred income taxes - current
    298,410       298,410  
Total current assets
    6,481,704       5,946,551  
Property and equipment, net
    396,105       294,424  
Other assets
    179,322       154,816  
Total assets
  $ 7,057,131     $ 6,395,791  
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable
  $ 804,136     $ 704,539  
Accrued compensation expenses
    404,751       432,127  
Other current liabilities
    116,591       72,888  
Income taxes payable
    222,087       20,879  
Total current liabilities
    1,547,565       1,230,433  
Deferred tax liability
    54,095       54,095  
Total liabilities
    1,601,660       1,284,528  
Commitments and contingencies
Shareholders’ equity:
Common stock, $0.001 par value; 20,000,000 shares authorized; 9,896,942 shares issued and outstanding
    9,897       9,897  
Additional paid-in capital
    2,722,479       2,694,894  
Retained earnings
    2,723,095       2,406,472  
Total shareholders’ equity
    5,455,471       5,111,263  
Total liabilities and shareholders’ equity
  $ 7,057,131     $ 6,395,791  


The accompanying news release dated April 26, 2011 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 non-GAAP financial measures should be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated.  Sierra Monitor believes that these non-GAAP financial measures provide meaningful supplemental information regarding its operating results primarily because they exclude amounts the Company does not consider part of ongoing operating results when assessing the 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.

Stock-Based Compensation Expense

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


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, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated. 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.

In the following reconciliation of non-GAAP measures the amounts reported for the period ended March 31, 2010 have been restated to reflect corrected reporting of the provision for bad debt expense and the resulting Non-GAAP Net Income (Loss) for the period.



Table C
Reconciliation of GAAP to Non-GAAP Operating Results
For the three months ended
March 31
GAAP Net Income (Loss)
  $ 316,623     $ (73,106 )
Depreciation and amortization
    64,068       64,882  
Provision for bad debt expense
    3,000       13,000  
Provision for inventory losses
Deferred income taxes
          (54,253 )
Stock based compensation expense
    27,585       27,210  
Total adjustments to GAAP net income
    109,653       50,839  
Non-GAAP Net Income (Loss)
  $ 426,276     $ (22,267 )
Non GAAP Net Income (Loss) Per Share:
  $ 0.04     $ 0.00  
  $ 0.04     $ 0.00  
Weighted-average number of shares used in per share computations:
    9,896,942       11,438,212  
    10,102,942       11,438,212