SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
(Mark One)
(X) Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended September 30, 1995.
or
( ) 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 0-744
SIERRA MONITOR CORPORATION
(Exact name of registrant as specified in its charter)
California 95-248194
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
Number)
1991 Tarob Court
Milpitas, California 95035
(address and zip code of principal executive offices)
(408) 262-6611
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes__x__ No _____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of September 30, 1995.
Common Stock: 10,276,888
Page 1 of 8
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SIERRA MONITOR CORPORATION
Balance Sheets
September 30, December 31,
1995 1994
-------------- ------------
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 878,481 990,908
Trade receivables, less allowance
for doubtful accounts
of $45,206 in 1995 and $50,873
in 1994 907,263 598,559
Inventories 539,189 654,052
Prepaid expenses 128,786 34,199
Deferred income taxes 198,000 198,000
----------- -----------
Total current assets 2,651,719 2,475,718
Property and equipment, net 114,664 143,456
Other assets 37,726 45,923
----------- -----------
$ 2,804,109 2,665,097
=========== ==========
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 191,929 225,542
Accrued expenses 272,273 171,422
Other current liabilities 86,035 55,662
Income taxes payable 9,514 41,117
----------- -----------
Total current liabilities 559,751 493,743
----------- -----------
Shareholders' equity
Common stock 2,903,270 2,897,570
Accumulated deficit (645,010) (714,155)
Notes receivable from
shareholders (13,902) (12,061)
----------- -----------
Total shareholders' equity 2,244,358 2,171,354
----------- -----------
$ 2,804,109 2,665,097
=========== ==========
See accompanying notes.
Page 2 of 8
<PAGE>
<TABLE>
SIERRA MONITOR CORPORATION
Statements of Operations
(Unaudited)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------------------- --------------------------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $ 1,347,256 1,652,773 3,559,052 4,644,328
Cost of goods sold 540,042 677,386 1,378,844 1,937,706
------------ ---------- ---------- ----------
Gross profit 807,214 975,387 2,180,208 2,706,622
------------ ---------- ---------- ----------
Operating expenses
Research and development 100,657 113,512 304,745 304,807
Selling and marketing 413,514 363,442 1,224,696 1,134,338
General and administrative 204,977 194,520 595,410 633,139
------------ ---------- ---------- ----------
719,148 671,474 2,124,851 2,072,284
------------ ---------- ---------- ----------
Income from operations 88,066 303,913 55,357 634,338
Interest expense -- (1,896) -- (1,922)
Interest income 7,074 1,081 23,303 2,293
------------ ---------- ---------- ----------
Income before
income taxes 95,140 303,098 78,660 634,709
Income Taxes 9,514 76,890 9,514 192,536
------------ ---------- ---------- ----------
Net income $ 85,626 226,208 69,146 442,173
============ ========== ========== ==========
Net income per share $ 0.01 0.02 0.01 0.04
============ ========== ========== ==========
Weighted average common
shares outstanding 10,436,718 10,321,415 10,464,067 10,237,848
============ ========== ========== ==========
<FN>
See accompanying notes.
</FN>
</TABLE>
Page 3 of 8
<PAGE>
<TABLE>
SIERRA MONITOR CORPORATION
Statements of Cash Flows
(Unaudited)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1995 1994 1995 1994
--------- ------- ------- -------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 85,626 226,208 69,146 442,173
Adjustments to reconcile net
income to net
cash provided by (used in)
operating activities:
Depreciation & amortization 32,727 31,976 99,592 87,252
Allowance for doubtful accounts (7,403) 1,993 (5,667) 4,376
Changes in items affecting
operations:
Trade receivables 11,973 593,082 (303,037) (142,279)
Costs and estimated
earnings in excess
of billings on uncompleted
contract -- -- -- 154,067
Inventories 25,779 (44,566) 114,863 (152,839)
Prepaid expenses 16,757 (19,518) (94,587) (31,666)
Accounts payable (67,523) (270,728) (33,613) (14,682)
Accrued expenses 16,078 (62,398) (24,380) (70,566)
Other current liabilities -- -- -- 141,115
Income taxes payable -- -- 124,000 --
--------- ------- ------- -------
Net cash provided by (used in)
operating activities 114,014 456,049 (53,683) 416,951
--------- ------- ------- -------
Cash flows from investing activities:
Capital expenditures (9,515) (12,441) (62,503) (98,912)
Other (100) -- (100) --
--------- ------- ------- -------
Net cash used in investing activities (9,615) (12,441) (62,603) (98,912)
--------- ------- ------- -------
Cash flows from financing activities:
Proceeds from exercise of stock options,
net of notes receivable 1,798 50,839 3,859 52,690
--------- ------- ------- -------
Net cash provided by
financing activities 1,798 50,839 3,859 52,690
--------- ------- ------- -------
Net increase (decrease) in cash and
cash equivalents 106,197 494,447 (112,427) 370,729
Cash and cash equivalents at
beginning of period 772,284 106,301 990,908 230,019
--------- ------- ------- -------
Cash and cash equivalents at
end of period $ 878,481 600,748 878,481 600,748
========= ======= ======= =======
<FN>
See accompanying notes.
</FN>
</TABLE>
Page 4 of 8
<PAGE>
SIERRA MONITOR CORPORATION
Notes to the Financial Statements
September 30, 1995
The unaudited financial statements have been prepared by the Company pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such SEC rules and regulations; nevertheless, the Company
believes that the disclosures are adequate to make the information presented not
misleading. These financial statements and the notes hereto should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K filed March 28, 1995. In the opinion of the
Company, all adjustments, including normal recurring adjustments necessary to
present fairly the financial position of Sierra Monitor Corporation as of
September 30, 1995 and the results of its operations and cash flows for the
quarter then ended, have been included. The results of operations for the
interim period are not necessarily indicative of the results for the full year.
Accounting Policies
There have been no changes in accounting policies used by the Company during the
quarter ended September 30, 1995.
Summary of Business
As the result of a merger which is fully described in the Joint Proxy Statement
dated July 7, 1989, UMF Systems Inc. acquired Sierra Monitor Corporation on
September 13, 1989 and changed its name to Sierra Monitor Corporation. The
continuing operations of the corporation are those of Sierra Monitor
Corporation.
The Company designs, manufactures and sells gas detection systems and industrial
controllers.
Inventories
A summary of inventories follows:
September 30, December 31,
1995 1994
---- ----
Raw materials $ 257,126 $ 280,528
Work-in-process 194,518 258,259
Finished goods 87,545 115,265
--------- ---------
$ 539,189 $ 654,052
========= =========
Page 5 of 8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
For the three months ended September 30, 1995, Sierra Monitor Corporation (the
"Company") reported net sales of $1,347,256 compared to $1,652,773 for the three
months ended September 30, 1994. For the nine month period ended September 30,
1995, net sales were $3,559,052 compared with $4,644,328 in the prior year nine
month period.
The net sales reported for the third quarter of 1994 included sales of $764,888
from the Company's contract to develop and manufacture systems for shipboard use
by the United States Navy. In the same quarter in 1995, sales to the Navy were
$101,900. With respect to non-Navy sales, the results for the third quarter
represent a 40% increase from the same period in the prior year. The net sales
reported for the first nine months of 1994 included non-recurring sales of
$1,492,593 resulting from the Navy contract. In the same period in 1995 sales to
the Navy were $206,200. With respect to non-Navy sales, the results for the
first nine months of 1995 represent a 6% increase from the same period in the
prior year.
Gross profit for the three month period ended September 30, 1995 was 59.9% of
sales compared to 59.0% in the same period in the previous year. The gross
profit for the nine month period ended September 30, 1995 was 61.3% compared to
58.3% in the same period in the previous year. In 1994, margins were lower due,
in part, to the effect of the Navy contract under which higher manufacturing
costs were partially offset by lower selling costs.
Expenses for research and development, which include new product development and
engineering to sustain existing products, were $100,657 for the three month
period ending September 30, 1995 compared to $113,512 in the comparable period
in 1994. In the nine month periods ending September 30, 1995 and September 30,
1994, research and development expenses were $304,745 and $304,807 respectively.
For the third quarter and year to date periods, there is no significant change
in the level of engineering activity.
Selling and marketing costs for the three-month period ended September 30, 1995
increased to $413,514 from $363,442 in the prior year period. For the nine month
periods ending September 30, 1995 and September 30, 1994, selling and marketing
costs were $1,224,696 and $1,134,338 respectively. The 13.8% increase in selling
expense for the third quarter 1995, compared to the same period in 1994, is due
to higher sales commission costs resulting from the 40% increase in commercial
product sales in that period. The 8% increase in selling expense for the first
nine months of 1995, compared to the first half of 1994, is also due to higher
sales commission expenses.
General and administrative costs increased to $204,977 for the three month
period ended September 30, 1995 from $194,520 in the three month period ended
September 30, 1994. General and administrative costs decreased to $595,410 for
the nine month period ended September 30, 1995 from $633,139 in the nine month
period ended September 30, 1994. General and administrative costs for the
current year are consistent with management's expectations for current sales
levels. The higher general and administrative costs in 1994 were related to the
Navy contract.
Page 6 of 8
<PAGE>
Net income, after interest and provision for income taxes, for the three months
ended September 30, 1995 was $85,626, or 6.4% of net sales, compared with
$226,208 or 13.7% of net sales, in the three months ended September 30, 1994.
Net income for the nine month period ended September 30, 1995 was $69,146
compared with income of $442,173 in the same period in the prior year.
The lower income for the three month and nine month periods ended September 30,
1995 is due to lower sales levels compared to the same periods in 1994, and the
lack of any significant reduction in the level of fixed expenses. The Company
believes that its efforts to increase sales levels contributed to the 40%
improvement in commercial sales the third quarter compared with the same period
in 1994.
Liquidity and Capital Resources
Working capital at September 30, 1995 was $2,091,968 compared to $1,981,975 at
December 30, 1994. In the first nine months of 1995, net accounts receivable
have increased $308,704. The present level of accounts receivable represents the
same number of days sales as the level at December 31, 1994. During the same
period, inventories have decreased $114,863 and cash and cash equivalents have
decreased $112,427.
The Company believes that the current capital resources, including cash and cash
equivalents and its line of credit with a commercial bank, are sufficient to
maintain anticipated business levels for the next twelve months.
Page 7 of 8
<PAGE>
PART II: OTHER INFORMATION
Item 1. Legal Proceedings - N/A
Item 2. Changes in Securities - N/A
Item 3. Defaults Upon Senior Securities - N/A
Item 4. Submission of Matters to a Vote of Security Holders N/A
Item 5. Other Information - N/A
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits.
11.1 Computation of earnings per share
27 Financial Data Schedule
b. Reports on Form 8-K - None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIERRA MONITOR CORPORATION
Registrant
Date: November 14, 1995 By:
-----------------------------------
Gordon R. Arnold
President
Chief Financial Officer
Page 8 of 8
<TABLE>
EXHIBIT 11.1
SIERRA MONITOR CORPORATION
NET EARNINGS PER SHARE COMPUTATIONS
(unaudited)
<CAPTION>
(All amounts in thousands except per share data)
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Weighted average shares outstanding
Common Stock 10,277 9,857 10,262 9,805
Common Stock equivalents -
options and warrants 160 464 202 433
------ ------ ------ ------
Total weighted average shares
outstanding 10,437 10,321 10,464 10,238
------ ------ ------ ------
Net income $ 85.6 $262.2 $ 69.1 $442.2
------ ------ ------ ------
Net income per share $ 0.01 $ 0.02 $ 0.01 $ 0.04
====== ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Article 5 Fin. Data Schedule for 3rd Qtr 10-Q
</LEGEND>
<CIK> 0000100625
<NAME> Sierra Monitor Corporation
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 879
<SECURITIES> 0
<RECEIVABLES> 952
<ALLOWANCES> 45
<INVENTORY> 539
<CURRENT-ASSETS> 2,652
<PP&E> 942
<DEPRECIATION> 827
<TOTAL-ASSETS> 2,804
<CURRENT-LIABILITIES> 560
<BONDS> 0
<COMMON> 2,903
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,804
<SALES> 3,559
<TOTAL-REVENUES> 3,559
<CGS> 1,379
<TOTAL-COSTS> 1,379
<OTHER-EXPENSES> 2,124
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (23)
<INCOME-PRETAX> 79
<INCOME-TAX> 10
<INCOME-CONTINUING> 69
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
