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 March 31, 1996.
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 May 10, 1996.
Common Stock 10,300,013
Page 1 of 8
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SIERRA MONITOR CORPORATION
Balance Sheets
Assets March 31, December 31,
1996 1995
----------- ------------
(unaudited)
Current assets:
Cash and cash equivalents $ 486,406 310,554
Short-term investments 245,917 577,124
Trade receivables, less allowance for doubtful
accounts of $62,301 in 1996 and $61,156
in 1995, respectively 869,874 898,496
Inventories 679,580 605,480
Prepaid expenses 80,326 40,200
Deferred income taxes 188,000 188,000
----------- -----------
Total current assets 2,550,103 2,619,854
Property and equipment, net 100,634 101,463
Other assets 70,951 78,934
----------- -----------
$ 2,721,688 2,800,251
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 250,019 305,693
Accrued compensation expenses 283,066 265,565
Other current liabilities 56,256 23,342
Income taxes payable -- 11,115
----------- -----------
Total current liabilities 589,341 605,715
Shareholders' equity:
Common stock 2,905,993 2,903,270
Accumulated deficit (764,393) (696,131)
Note receivable from shareholders (9,253) (12,603)
----------- -----------
Total shareholders' equity 2,132,347 2,194,536
----------- -----------
$ 2,721,688 2,800,251
=========== ===========
See accompanying notes.
Page 2 of 8
<PAGE>
SIERRA MONITOR CORPORATION
Statements of Operations
(unaudited)
For the three months ended
---------------------------
March 31, March 31,
1996 1995
----------- -----------
Net sales $ 1,096,626 994,205
Cost of goods sold 427,562 380,111
----------- -----------
Gross profit 669,064 614,094
----------- -----------
Operating expenses
Research and development 110,051 90,107
Selling and marketing 402,472 365,018
General and administrative 228,860 191,125
----------- -----------
741,383 646,250
----------- -----------
Loss from operations 72,319 32,156
Interest income 4,057 8,367
----------- -----------
Net loss $ 68,262 23,789
=========== ===========
Net loss per share $ 0.01 0.00
=========== ===========
Weighted average common shares outstanding 10,276,888 10,246,388
=========== ===========
See accompanying notes.
Page 3 of 8
<PAGE>
<TABLE>
SIERRA MONITOR CORPORATION
Statements of Cash Flows
(Unaudited)
<CAPTION>
For the three months ended
--------------------------
March 31, March 31,
1996 1995
--------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ 68,262 23,790
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization 34,967 33,730
Allowance for doubtful accounts 1,145 2,250
Change in items affecting operations
Trade receivables 27,477 (118,151)
Inventories (74,100) 19,143
Prepaid expenses (40,126) (34,988)
Accounts payable (55,674) (21,386)
Accrued compensation expenses 17,501 47,242
Other current liabilities 32,914 (16,624)
Income taxes payable (11,115) -
--------- ---------
Net cash (used) in operating activities (135,274) (112,574)
--------- ---------
Cash flows from investment activities:
Capital expenditures 26,154 (15,778)
Short term investments 331,207 -
--------- ---------
Net cash provided (used) in investing activities 305,053 (15,778)
--------- ---------
Cash flows from financing activities:
Proceeds from exercise of stock options
net of notes receivable 6,073 866
--------- ---------
Net cash provided by financing activities 6,073 866
--------- ---------
Net increase (decrease) in cash and cash equivalents 175,852 (127,486)
Cash and cash equivalents at beginning of period 310,554 990,908
--------- ---------
Cash and cash equivalents at end of period $ 486,406 863,422
========= =========
<FN>
See accompanying notes.
</FN>
</TABLE>
Page 4 of 8
<PAGE>
SIERRA MONITOR CORPORATION
Notes to the Financial Statements
March 31, 1996
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 for the year ended December 31, 1995 and
filed March 28, 1996. 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 March 31, 1996 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 March 31, 1996.
Summary of Business
Sierra Monitor Corporation ("SMC" or the "Company") was founded in 1978 to
design and develop hazardous gas monitoring devices for protection of personnel
and facilities in industrial work places.
Products manufactured by the Company are sold primarily to oil and gas drilling
and refining companies, chemical plants, waste-water treatment plants,
telecommunications companies, parking garages and landfill rehabilitation
projects.
Inventories
A summary of inventories follows:
March 31, December 31,
1996 1995
-------- -----------
Raw Materials $ 320,936 264,754
Work-in-process 268,732 244,959
Finished goods 89,912 95,767
--------- --------
$ 679,580 605,480
======= =======
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 March 31, 1996 Sierra Monitor Corporation (the
"Company") reported net revenue of $1,096,626 compared to $994,205 for the three
months ended March 31, 1995. The results for the first quarter of 1996 represent
a 10% increase from the same period in the prior year. Higher sales of the
Company's multi-channel gas monitoring systems to various commercial customers
contributed to the increase. In addition, sales to telephone companies, which
were reported to be lower in the first quarter of 1995, returned to normal
levels in the first quarter of 1996.
Gross profit for the three month period ended March 31, 1996 was $669,064 or
61.0% of sales, compared to $614,094 or 61.7% of sales, in the same period in
the previous year. The general level of the margins are consistent with
historical results and reflect no material change in the cost of goods sold.
Expenses for research and development, which include new product development and
engineering to sustain existing products, were $110,051 for the three month
period ended March 31, 1996, compared with $90,107 in the comparable period in
1995. A project to develop an integrated gas detector and environment controller
for the telephone industry accounted for the increase in expenses. The new
product provides a broad array of monitoring and control functions, such as
temperature and humidity, in underground enclosures which previously used only
gas monitors. First production models of the new product have been delivered to
prospective customers for evaluation.
Selling and marketing costs for the three month period ended March 31, 1996 were
$402,472, or 36.7% of sales, compared to $356,018, or 35.8% of sales, in the
prior year period. Commissions to independent sales representatives increased by
1.5% of sales in the first quarter of 1996 compared to the same period in 1995.
Commission costs vary based on the product mix, regional mix, and discount level
of sales. Advertising expenses were also higher in the first quarter of 1996
compared with the same period in 1995.
General and administrative costs for the first quarter of 1996 were $228,860 or
20.9% of sales compared to $191.125, or 19.2% in the prior year period. The
general and administrative expenses for the current quarter include
approximately $25,000 of labor costs due to the overlap of certain labor
functions for training purposes which were completed by the end of the quarter.
There are no other significant changes in general and administrative expenses.
Net loss for the three month period ended March 31, 1996 was $68,262 or 6.2% of
sales, compared with a net loss of $23,789 or 2.4% of sales for the prior year
period. The loss is due to the higher level of expenses in each of the fixed
expense categories without correspondingly higher revenues.
Liquidity and Capital Resources:
During the period ended March 31, 1996, the Company's working capital decreased
by $53,377 compared to December 31, 1995. There were no significant balance
sheet changes.
At March 31, 1996, cash and cash equivalents and short term investments,
totalled $732,323. The short term investments consist of certain certificates of
deposit with original maturities greater than 90 days. The Company has not drawn
on its line of credit with its commercial bank. The Company believes that it
current capital resources are sufficient to support existing and anticipated
levels of business.
Page 6 of 8
<PAGE>
Future Results:
The Company's future operating results may be affected by a number of factors,
including general economic conditions in both foreign and domestic markets,
cyclical factors affecting the Company's industry, lack of growth in the
Company's end-markets, and the Company's ability to develop, manufacture, and
sell both new and existing products at a profitable but competitive price.
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
27.0 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: May 10, 1996 By:
/s/ Gordon R. Arnold
-----------------------------
Gordon R. Arnold
President
Chief Financial Officer
Page 8 of 8
EXHIBIT 11.1
SIERRA MONITOR CORPORATION
NET INCOME (LOSS) PER SHARE COMPUTATIONS
QUARTERS ENDED MARCH 31, 1996 AND 1995
(unaudited)
(All amounts in thousands except
per share amounts)
1996 1995
---- ----
Weighted average shares outstanding
Common Stock 10,277 10,246
====== ======
Total weighted average shares
outstanding 10,277 10,246
====== ======
Net loss $68 $24
====== ======
Net loss per share $0.01 $0.00
====== =======
Note: Common stock equivalents were excluded from the net loss per share
computations due to the antidilutive effect.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 486
<SECURITIES> 246
<RECEIVABLES> 932
<ALLOWANCES> 62
<INVENTORY> 680
<CURRENT-ASSETS> 2550
<PP&E> 943
<DEPRECIATION> 842
<TOTAL-ASSETS> 2722
<CURRENT-LIABILITIES> 589
<BONDS> 0
<COMMON> 2906
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2722
<SALES> 1096
<TOTAL-REVENUES> 1096
<CGS> 428
<TOTAL-COSTS> 428
<OTHER-EXPENSES> 741
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (4)
<INCOME-PRETAX> (68)
<INCOME-TAX> 0
<INCOME-CONTINUING> (68)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (68)
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
