Sierra Monitor Corporation Announces Financial Results
for the Third Quarter Ended September 30, 2012

Reports Third Quarter Sales of $4.0 Million, Up 6% Year over year

Record Nine Months Sales Up 25% to $14.9 Million
With Net Income Increasing 46% to $1.1 Million Year over year

Milpitas, California – October 30, 2012 – Sierra Monitor Corporation (OTC: SRMC.OB), a company that designs, manufactures and sells electronic safety and environmental instrumentation, today announced financial results for the third quarter and nine months ended September 30, 2012.

Financial Highlights

Business Highlights 

• Supplied flame detectors through a new channel partner for installation on an offshore platform owned by Mexico’s state oil company.
• Provided gas detection and communication systems to support the modernization of a transit bus maintenance facility allowing dual use between diesel and propane powered vehicles. Sierra Monitor was selected because of its detection and controller technology and its ability to interface into both the HVAC control system and fire alarm system.
• Received a design/build order from a major international instrument company to supply a custom FieldServer gateway platform for ultra-sonic flow meters used in a broad range of industrial applications such as oil and gas production and distribution, hydrocarbon distribution and waste water treatment.

   

  Third Quarter and First Nine Months

  Net sales for the quarter ended September 30, 2012 were $4,040,406, an increase of 6% from $3,803,336 reported for the same period of 2011. For the nine months ended September 30, 2012, sales increased 25% to $14,907,621 compared to $11,956,114 for the same period of 2011.

  Sierra Monitor posted GAAP net income of $152,395 or $0.02 per share (basic and diluted), for the quarter ended September 30, 2012, compared to GAAP net income of $181,736 or $0.02 per share (basic and diluted), for the same period of 2011. Sierra Monitor posted GAAP net income of $1,060,326, or $0.11 per share basic and $0.10 per share diluted, for the nine months ended September 30, 2012, compared to GAAP net income of $725,560, or $0.07 per share basic and diluted, for the same period of 2011.

  Sierra Monitor posted non-GAAP net income of $274,322 or $0.03 per share (basic and diluted), for the quarter ended September 30, 2012 compared to non-GAAP net income of $293,711 or $0.02 per share (basic and diluted), for the same period of 2011. Sierra Monitor posted non-GAAP net income of $1,403,638, or $0.14 per share basic and diluted, for the nine months ended September 30, 2012, compared to non-GAAP net income of $1,046,479, or $0.11 per share basic and $0.10 per share diluted, for the same period of 2011.

   

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  “In the face of continued challenges in the economy the Sierra Monitor team has produced another year over year sales increase for the third quarter. Our domestic gas detection sales team has increased its focus on clean energy projects such as alternate fuel fleet maintenance facilities while our international team continues to focus on oil and gas projects in areas where infrastructure funding remains vibrant.” said Gordon R. Arnold, president and chief executive officer. “Our FieldServer sales team has continued to produce higher bookings through more focus on OEM and repeat customer accounts including unique applications such as the integration project on a Navy destroyer and a process measurement application in the industrial market.”

  Cash Position

  Sierra Monitor had $2,408,327 in cash at September 30, 2012 with no bank borrowings. Trade receivables were $2,089,078 at September 30, 2012 while the Company’s Days Sales Outstanding was 43 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. For more information visit: http://www.sierramonitor.com/

  Sierra Monitor Investor Relations Contact:

   

  Steve Polcyn

  408-262-6611 ext. 1341

  spolcyn@sierramonitor.com

   

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  Table A

  SIERRA MONITOR CORPORATION

  Statements of Operations

  (Unaudited)

   

    

  			For the three months ended September 30,								For the nine months ended September 30,
  			2012				2011				2012				2011
  Net sales		$	4,040,406			$	3,803,336			$	14,907,621			$	11,956,114
  Cost of goods sold			1,700,007				1,563,419				6,703,287				4,851,546
  Gross profit			2,340,399				2,239,917				8, 204,334				7,104,568
  Operating expenses
  Research and development			523,310				552,950				1,641,118				1,648,016
  Selling and marketing			1,012,646				857,828				3,101,386				2,659,782
  General and administrative			550,572				526,508				1,694,828				1,588,368
  			2,086, 528				1,937,286				6,437,332				5,896,166
  Income from operations			253,871				302,631				1,767,002				1,208,402
  Interest income			119				262				208				864
  Income before income taxes			253,990				302,893				1,767,210				1,209,266
  Income tax provision			101,595				121,157				706,884				483,706
  Net  income		$	152,395			$	181,736			$	1,060,326			$	725,560
  Net income available to common shareholders per common share Basic		$	0.02			$	0.02			$	0.11			$	0.07
  Diluted		$	0.02			$	0.02			$	0.10			$	0.07
  Weighted average number of common shares used in per share computations:
  Basic			9,905,761				9,901,177				9,902,705				9,898,354
  Diluted			10,118,790				10,113,651				10,148,227				10,122,507

   

   

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  Table B

  SIERRA MONITOR CORPORATION

  Balance Sheets

   

    

  Assets			September 30,				December 31,
  			2012				2011
  			(unaudited)
  Current assets:
  Cash and cash equivalents		$	2,408,327			$	1,212,426
  Trade receivables, less allowance for doubtful accounts  of approximately $80,000 and $65,000 respectively			2,089,078				1,647,948
  Inventories, net			2,942,670				3,918,161
  Prepaid expenses			198,478				223,362
  Income tax deposit			181,287				10,655
  Deferred income taxes			366,618				366,618
  Total current assets			8,186,458				7,379,170
  Property and equipment, net			334,143				399,558
  Other assets			116,364				140,558
  Total assets		$	8,636,965			$	7,919,286
  Liabilities and Shareholders’ Equity
  Current liabilities:
  Accounts payable		$	794,936			$	918,706
  Accrued compensation expenses			434,280				497,197
  Other current liabilities			107,376				323,114
  Income taxes payable			—				11,362
  Total current liabilities			1,336,592				1,750,379
  Deferred tax liability			108,337				108,337
  Total liabilities			1,444,929				1,858,716
  Commitments and contingencies
  Shareholders’ equity:
  Common stock, $0.001 par value; 20,000,000 shares authorized; 10,004,311 and 9,901,177 shares issued and outstanding, respectively			10,004				9,901
  Additional paid-in capital			2,846,287				2,775,250
  Retained earnings			4,335,745				3,275,419
  Total shareholders’ equity			7,192,036				6,060,570
  Total liabilities and shareholders’ equity		$	8,636,965			$	7,919,286

   

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  NON-GAAP FINANCIAL MEASURES

  The accompanying news release dated October 30, 2012 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 from operations and related non-GAAP profit as a percentage of revenue, non-GAAP net profit and basic and diluted non-GAAP net profit 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 that 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.

  Deferred Income Taxes

  The effect of changes in deferred tax balances is non-cash and is not comparable across periods or with other companies. We exclude these amounts from our internal measures for budget and planning purposes. There are no deferred income taxes reported in the current reporting periods.

   

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  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 stocks using the methods required by GAAP for both GAAP and non-GAAP diluted net income 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.

   

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  Table C

  SIERRA MONITOR CORPORATION

  Reconciliation of GAAP to Non-GAAP Operating Results

  (Unaudited)