U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10 - QSB

(Mark One)

     (X)  Quarterly  report  pursuant  to section 13 or 15(d) of the  Securities
          Exchange Act of 1934.

                  For the quarterly period ended June 30, 2002

                                       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 0-7441

                           SIERRA MONITOR CORPORATION

        (Exact name of small business issuer as specified in its charter)

           California                                     95-2481914
 (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 _____

     The number of shares of the issuer's common stock outstanding, as of August
10, 2002 was 10,971,546.

     Transitional Small Business Disclosure Format: Yes ; No X___


                                                                    Page 1 of 13
<PAGE>

                          PART I: FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                           SIERRA MONITOR CORPORATION
                            Condensed Balance Sheets

                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                          June 30,        December 31,
                                                                            2002              2001
                                                                        -----------       -----------
                                   Assets
<S>                                                                     <C>               <C>
Current assets:
      Cash and cash equivalents                                         $   704,108       $   772,394
      Trade receivables, less allowance for doubtful accounts             1,493,117         1,500,611
          of $34,703 in 2002 and $28,026 in 2001
      Notes receivable                                                        4,214             8,258
      Inventories                                                         1,574,926         1,580,959
      Prepaid expenses                                                       82,892           156,785
      Income taxes receivable                                                  --             148,187
      Deferred income taxes                                                 324,734           179,864
                                                                        -----------       -----------

                        Total current assets                              4,183,991         4,347,058

Property and equipment, net                                                 255,636           310,622
Deferred income taxes                                                         4,741             4,741
Other assets                                                                294,501           308,949
                                                                        -----------       -----------
                        Total assets                                    $ 4,738,869       $ 4,971,370
                                                                        ===========       ===========

                Liabilities and Shareholders' Equity
Current liabilities:
      Accounts payable                                                  $   375,405       $   509,017
      Bank borrowings                                                       100,000              --
      Accrued compensation expenses                                         410,429           346,429
      Other current liabilities                                              79,078           129,518
                                                                        -----------       -----------

                        Total current liabilities                           964,912           984,964

Commitments

Shareholders' equity:
      Common stock, $0.001 par value; 20,000,000 shares
      authorized 10,971,546 shares issued and outstanding                    10,972            10,972
      Additional paid-in capital                                          3,151,189         3,151,189
      Retained earnings                                                     619,058           836,043
      Notes receivable from shareholders                                     (7,262)          (11,798)
                                                                        -----------       -----------

                        Total shareholders' equity                        3,773,957         3,986,406
                                                                        -----------       -----------

                        Total liabilities and shareholders' equity      $ 4,738,869       $ 4,971,370
                                                                        ===========       ===========
</TABLE>

See accompanying notes to the condensed financial statements.


                                                                    Page 2 of 13
<PAGE>

                           SIERRA MONITOR CORPORATION
                       Condensed Statements of Operations

                                   (Unaudited)
<TABLE>
<CAPTION>
                                                               Three months ended June 30,              Six months ended June 30,
                                                                 2002                2001               2002               2001
                                                             ------------        ------------       ------------        ------------
<S>                                                          <C>                 <C>                <C>                 <C>
Net sales                                                    $  2,079,204        $  2,732,785       $  4,314,836        $  5,359,082
Cost of goods sold                                                824,411             996,847          1,758,637           2,018,027
                                                             ------------        ------------       ------------        ------------
        Gross profit                                            1,254,793           1,735,938          2,556,199           3,341,055
                                                             ------------        ------------       ------------        ------------
Operating expenses
    Research and development                                      375,585             339,524            801,484             633,060
    Selling and marketing                                         659,886             652,402          1,457,453           1,331,592
    General and administrative                                    310,182             347,714            657,667             686,760
                                                             ------------        ------------       ------------        ------------
                                                                1,345,653           1,339,640          2,916,604           2,651,412
                                                             ------------        ------------       ------------        ------------
        Income (loss) from operations                             (90,860)            396,298           (360,405)            689,643
Interest income (expense)                                          (1,226)              5,620               (631)             16,362
                                                             ------------        ------------       ------------        ------------
        Income (loss) before income taxes                         (92,086)            401,918           (361,036)            706,005
Income tax expense (benefit)                                      (37,284)            160,767           (144,051)            282,478
                                                             ------------        ------------       ------------        ------------
        Net income (loss)                                    $    (54,802)       $    241,151       $   (216,985)       $    423,527
                                                             ============        ============       ============        ============
Net income (loss) per share - basic                          $      (0.00)       $       0.02       $      (0.02)       $       0.04
                                                             ============        ============       ============        ============
Net income (loss) per share - diluted                        $      (0.00)       $       0.02       $      (0.02)       $       0.04
                                                             ============        ============       ============        ============

Weighted average number of shares used in per
share computations
                                        Basic:                 10,971,546          10,968,907         10,971,546          10,968,248
                                                             ============        ============       ============        ============
                                      Diluted:                 10,971,546          11,566,759         10,971,546          11,551,169
                                                             ============        ============       ============        ============
</TABLE>

See accompanying notes to the condensed financial statements.


                                                                    Page 3 of 13
<PAGE>

                           SIERRA MONITOR CORPORATION
                       Condensed Statements of Cash Flows

                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                      Three months ended                   Six months ended
                                                                            June 30,                            June 30
                                                                     2002              2001             2002              2001
                                                                 -----------       -----------       -----------       -----------
<S>                                                              <C>               <C>               <C>               <C>
Cash flows from operating activities:
        Net income (loss)                                        $   (54,802)      $   241,151       $  (216,985)      $   423,527
        Adjustments to reconcile net income (loss) to
        net cash used in operating activities
           Depreciation & amortization                                77,201            75,470           154,829           147,012
           Provision for doubtful accounts                             4,427             2,250             6,677             4,499
           Change in deferred income taxes                           (40,274)             --            (144,870)             --
                 Changes in operating assets and liabilities:
             Trade receivables                                       283,231           (49,052)              817          (165,508)
             Inventories                                              89,279            (4,680)            6,033          (134,681)
             Prepaid expenses                                         18,814           (23,867)           73,893           (80,938)
             Income taxes receivable                                 148,187              --             148,187              --
             Accounts payable                                       (237,746)         (142,318)         (133,612)          (51,767)
             Accrued compensation expenses                             7,392            83,477            64,000            60,012
             Other current liabilities                               (57,308)            7,029           (50,440)            9,623
             Income taxes payable                                       --                (913)             --            (211,403)
                                                                 -----------       -----------       -----------       -----------
               Net cash provided by (used in)
              operating activities                                   238,401           188,547           (91,471)              376
                                                                 -----------       -----------       -----------       -----------
Cash flows from investing activities:
        Capital expenditures                                         (34,529)         (159,821)          (84,795)         (228,953)
        Other assets                                                    (600)          (31,359)             (600)          (31,359)
                                                                 -----------       -----------       -----------       -----------
           Net cash used in investing activities                     (35,129)         (191,180)          (85,395)         (260,312)
                                                                 -----------       -----------       -----------       -----------
Cash flows from financing activities:
        Proceeds from bank borrowings, net                           100,000              --             100,000              --
        Repayment of notes receivable                                  3,828             4,568             8,580            10,888
        Proceeds from exercise of stock options                         --               2,217              --               2,217
                                                                 -----------       -----------       -----------       -----------
           Net cash provided by financing activities                 103,828             6,785           108,580            13,105
                                                                 -----------       -----------       -----------       -----------
Net increase (decrease) in cash and cash equivalents                 307,100             4,153           (68,286)         (246,831)
Cash and cash equivalents at beginning of period                     397,008           915,312           772,394         1,166,296
                                                                 -----------       -----------       -----------       -----------
Cash and cash equivalents at end of period                       $   704,108       $   919,465       $   704,108       $   919,465
                                                                 ===========       ===========       ===========       ===========
Supplemental cash flow information
    Cash paid for interest expense                               $     1,663       $      --         $     1,663       $      --
                                                                 ===========       ===========       ===========       ===========
    Cash paid for income taxes                                   $     3,790       $   161,680       $     5,188       $   491,639
                                                                 ===========       ===========       ===========       ===========
</TABLE>

See accompanying notes to the condensed financial statements.


                                                                    Page 4 of 13
<PAGE>

                           SIERRA MONITOR CORPORATION
                   Notes to the Condensed Financial Statements

                                  June 30, 2002

Basis of Presentation

      The unaudited  condensed  financial  statements  have been prepared by the
Company,  pursuant to the rules and  regulations  of the Securities and Exchange
Commission (SEC). 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-KSB for the year ended  December 31, 2001 which was filed March 28, 2002.  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 June 30, 2002 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.

Summary of Business

      Sierra Monitor  Corporation  (the "Company") was founded in 1978 to design
and develop  hazardous gas  monitoring  devices for  protection of personnel and
facilities in industrial work places. In addition to gas monitoring systems, the
Company also  manufactures  microprocessor-based  systems  known as  Environment
Controllers  used to monitor  and  control  environmental  conditions  in small,
remote,  structures  used for cellular and hard wire  telephone  equipment.  The
Company also  manufactures a line of products known as  Communications  Bridges.
These products  provide a means for many  industrial  instruments to communicate
with  each  other  even  when  they  have  different   communications  protocol.
Communications  Bridges are sold under the name  FieldServer by the  FieldServer
Technologies Division of the Company.

      Gas monitoring products  manufactured by the Company are sold primarily to
oil and gas  drilling  and  refining  companies,  chemical  plants,  waste-water
treatment plants,  semiconductor  industry and other  applications which involve
the handling or generation of hazardous gases.  Environment Controllers are sold
to telecommunications companies and their suppliers.  FieldServers are typically
sold to  integration  companies  that  service  building  and  plant  automation
projects.

Accounting Policies

a)    Revenue Recognition

      Revenue related to gas detection and monitoring  devices and Environmental
Controllers is recognized when all of the following  criteria have been met: (1)
persuasive evidence of an arrangement exists; (2) the fee for the arrangement is
fixed or determinable; (3) delivery has occurred or services have been rendered;
and (4) collectibility is reasonably assured.

      The Company recognizes revenue from the sale of FieldServers in accordance
with Statement of Position (SOP) 97-2, Software Revenue Recognition, as amended.
Revenue is  recognized  upon  shipment of the product when all of the  following
criteria have been met: persuasive  evidence of an arrangement exists;  delivery
has occurred; the fee is fixed or determinable; and collectibility is probable.

b)    Reclassifications

      Certain  amounts  presented  in the  financial  statements  for  the  2001
comparative  period have been  reclassified  to conform to the current  period's
presentation.


                                                                    Page 5 of 13
<PAGE>

c)    Recent Accounting Standards

      In July 2001,  the  Financial  Accounting  Standard  Board  (FASB)  issued
Statement of Financial  Accounting  Standards (SFAS) No. 142, Goodwill and Other
Intangible  Assets.  SFAS No. 142 requires  that  goodwill and other  intangible
assets  with  indefinite  useful  lives no longer be  amortized,  but instead be
tested for  impairment at least  annually in accordance  with the  provisions of
SFAS No. 142. SFAS No. 142 also requires  that  intangible  assets with definite
useful lives be amortized over their  respective  estimated useful lives, and be
reviewed for  impairment in  accordance  with SFAS No. 121,  Accounting  for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.

      The Company  adopted the  provisions of SFAS No. 142 effective  January 1,
2002. As of the date of adoption of SFAS No. 142, the Company had no goodwill or
unidentified  intangible  assets  and had  unamortized  identifiable  intangible
assets of $214,480. The Company has identifiable  intangible assets of $169,811,
net of accumulated  amortization of $544,296, as of June 30, 2002.  Amortization
expense for the second quarter of fiscal 2002 was $27,215.  The Company  expects
that its annual amortization expense will be approximately $110,000.

      In  August  2001,  the FASB  issued  SFAS No.  143,  Accounting  for Asset
Retirement  Obligations.   SFAS  No.  143  addresses  financial  accounting  and
reporting for obligations  associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The purpose of SFAS No. 143 is
to develop  consistent  accounting of asset  retirement  obligations and related
costs in the financial  statements and to provide more information  about future
cash outflows,  leverage, and liquidity regarding retirement obligations and the
gross investment in long-lived  assets.  SFAS No. 143 is effective for financial
statements issued for fiscal years beginning after June 15, 2002. The Company is
required to adopt SFAS No. 143 effective  January 1, 2003.  The Company does not
anticipate  that the adoption of SFAS No. 143 will have a material effect on its
financial statements.

      In  October  2001,  the FASB  issued  SFAS  No.  144,  Accounting  for the
Impairment or Disposal of Long-Lived  Assets.  SFAS No. 144 addresses  financial
accounting  and reporting for the  impairment or disposal of long-lived  assets.
SFAS No. 144 requires that long-lived assets be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be  recoverable.  The  Company  adopted the  provisions  of SFAS No. 144
effective  January 1, 2002. The adoption of SFAS No. 144 did not have a material
effect on the Company's financial statements.

      In June  2002,  FASB  issued  Statement  No.  146,  Accounting  for  Costs
Associated with Exit or Disposal  Activities.  This Statement requires recording
costs  associated  with exit or disposal  activities at their fair values when a
liability has been incurred.  Under previous  guidance,  certain exit costs were
accrued upon management's  commitment to an exit plan, which is generally before
an actual  liability has been incurred.  The new  requirements of this Statement
are effective  prospectively  for exit or disposal  activities  initiated  after
December 31, 2002;  however,  early  application of the Statement is encouraged.
The Company has not yet  determined  what impact the adoption of  Statement  146
will have on its financial position or results of operations.

Inventories

A summary of inventories follows:

                            June 30, 2002   December 31, 2001
                            -------------   -----------------
        Raw Materials        $  793,257      $    712,891
        Work-in-process         538,345           575,150
        Finished goods          243,324           292,918
                            -------------   -----------------
                             $1,574,926      $  1,580,959
                            =============   =================


                                                                    Page 6 of 13
<PAGE>

Line of Credit

      In June 2002, the Company  entered into an agreement to renew its existing
$500,000  line of credit  facility  with a financial  institution.  This line of
credit  will expire on June 14,  2003 and is to be used to fund  operating  cash
flow requirements.

Net Income (loss) per share

      Basic  earnings  per share (EPS) is computed  using the  weighted  average
number of common shares outstanding  during the period.  Diluted EPS is computed
using the weighted average number of common and dilutive potential common shares
outstanding  during the period.  Dilutive  potential  common  shares  consist of
common stock  issuable upon  exercise of stock options using the treasury  stock
method.  No  adjustments  to  earnings  were  made  for  purposes  of per  share
calculations.

      The  Company  has  reported  a net loss for both the  three  and six month
periods  ended  June 30,  2002.  As a result  1,314,500  shares of common  stock
issuable upon exercise of stock options have been excluded from the  calculation
of  diluted  loss  per  share  for  both  the  three  and  six  month   periods,
respectively, because the inclusion of such stock options would be antidilutive.
In the three and six month  periods  ended June 30, 2001,  options to purchase 0
and 325,000  shares of common  stock,  respectively,  were  outstanding  but not
included  in the  computation  of diluted EPS  because  the  exercise  price was
greater than the average market price of common shares.

      The following is a reconciliation of the shares used in the computation of
basic and  diluted EPS for the three and six month  periods  ended June 30, 2002
and 2001, respectively:
<TABLE>
<CAPTION>
                                                                     3 months         6 months          3 months           6 months
                                                                      ended             ended             ended             ended
                                                                    6/30/2002         6/30/2002         6/30/2001         6/30/2001
<S>                                                                 <C>               <C>               <C>               <C>
Basic EPS - weighted-average number of common
    shares outstanding                                              10,971,546        10,971,546        10,968,907        10,968,248
Effect of dilutive potential common shares - stock
    options outstanding                                                     --                --           597,852           582,921
                                                                    ----------        ----------        ----------        ----------
Diluted EPS - weighted-average of common shares and
    potential common shares outstanding                             10,971,546        10,971,546        11,566,759        11,551,169
                                                                    ==========        ==========        ==========        ==========
</TABLE>

Comprehensive Income

      The Company has no significant  components of other  comprehensive  income
and,  accordingly,  comprehensive  income  is the  same  as net  income  for all
periods.

Segment Information

      The  Company  operates in one  segment,  industrial  instrumentation.  The
Company's chief operating decision maker, the Chief Executive Officer, evaluates
the performance of the Company and makes operating  decisions based on financial
data consistent with the presentation in the accompanying financial statements.


                                                                    Page 7 of 13
<PAGE>

      This Form 10-QSB contains forward-looking statements within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities Exchange Act of 1934, as amended.  Statements that are not statements
of historical  fact may be deemed to be  forward-looking  statements.  The words
"believe,"  "expect,"  "intend," "plan," "project," "will" and similar words and
phrases as they relate to the Company also identify forward-looking  statements.
Such statements reflect the current views and assumptions of the Company and are
not guarantees of future  performance.  These  statements are subject to various
risks and  uncertainties.  The Company's actual results could differ  materially
from those  anticipated in these  forward-looking  statements as a result of the
risk factors  described in this Form 10-QSB,  including  those under the heading
"Certain  Factors That May Affect  Future  Results"  and those issues  described
under  the  heading  "Critical  Accounting  Policies".   The  Company  expressly
disclaims  any  obligation  to release  publicly any updates or revisions to any
forward-looking statement to reflect any changes in expectations,  or any change
in events or circumstances on which those statements are based, unless otherwise
required by law.

ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

Results of Operations

      For the three  months  ended June 30,  2002,  Sierra  Monitor  Corporation
("Sierra Monitor" or the "Company") reported net sales of $2,079,204 compared to
$2,732,785  for the three months ended June 30, 2001.  For the six-month  period
ended June 30, 2002 net sales were  $4,314,836  compared with  $5,359,082 in the
prior year six-month period.  The sales results for the second quarter of fiscal
2002  represent  a 24%  decrease  from the same  period in the prior  year.  The
results for the first six months of fiscal 2002  represent a 20%  decrease  from
the same period in the prior year.

      The sales decline is primarily the result of changes in the market for the
Company's  environment  controllers  used  by the  telecommunications  industry.
During the approximate two year period through the middle of calendar year 2001,
major  telephone  companies  undertook  extensive  infrastructure  expansion  to
deliver broadband Internet capacity to their customers. The expansion was slowed
dramatically in the second half of 2001 resulting in substantial inventory build
up throughout the  telecommunications  equipment supply chain.  Sierra Monitor's
customers,  manufacturers of remote telecommunications  structures,  experienced
significant inventory build up and, as a result, cancelled or delayed deliveries
of our  products.  As a result  of these  actions,  the  Company's  sales to the
telecommunications  industry  in the  first  and  second  quarters  of 2002 were
approximately  $900,000 and $700,000 lower than in the first and second quarters
of  2001,   respectively.   Increased  sales  of  gas  detection   products  and
FieldServers  during the first three  months of 2002  compared to the prior year
period offset a portion of the lower Environment  Controller sales. Sales of gas
detection  products and  FieldServers  were  approximately  unchanged during the
three-month period ended June 30, 2002 compared to the same period in 2001.

      Gross profit of $1,254,793 for the three-month  period ended June 30, 2002
was 60% of sales compared to $1,735,938,  or 64% of sales, in the same period in
the previous year. The gross profit for the six-month period ended June 30, 2002
was $2,556,199 or 59% of sales, compared to $3,341,055,  or 62% of sales, in the
same  period  in the  previous  year.  Gross  margin  can vary due to the mix of
products  shipped in a given  period and the  discounts  which may be applied to
those  shipments.  The lower  gross  margins  in the  first  six  months of 2002
compared to 2001 are,  in part,  due to product  mix that was  weighted  towards
lower  margin  gas  detection  products.  In  addition,  for  most of the  first
six-month period in 2002, various manufacturing  expenses,  including management
costs and facility rents, remained at previous levels while net sales decreased.


                                                                    Page 8 of 13
<PAGE>

      Expenses  for  research  and   development,   which  include  new  product
development and engineering to sustain existing products,  were $375,585, or 18%
of sales, for the three-month  period ending June 30, 2002 compared to $339,524,
or 12% of sales,  in the  comparable  period in 2001. In the  six-month  periods
ending June 30, 2002 and June 30, 2001,  research and development  expenses were
$801,484,  or 19% of sales,  and $633,060,  or 12% of sales,  respectively.  The
higher research and development  expenses were undertaken in a continuing effort
to increase the number of software  drivers  available for sale in  FieldServers
and to develop a new microprocessor based air conditioning controller for remote
buildings  located on cell sites.  The new controller will be introduced  during
the second half of 2002.  The higher  percentage of net sales is a result of the
shortfall of revenues relative to budget expectations.  Subsequent to the end of
the first quarter of 2002, the Company  implemented  actions to reduce the level
of research  and  development  expenses.  These  actions  included  reduction of
employees,  salary reductions and re-negotiated  rates for outside  contractors.
Partly as a result  of the cost  reduction  actions,  research  and  development
expenses in the quarter  ended June 30, 2002 were  $50,314  lower than the prior
quarter in 2002.

      Selling and  marketing  expenses,  which  consist  primarily  of salaries,
commissions  and  promotional  expenses  were  $659,887  or 32% of sales for the
three-month period ended June 30, 2002,  compared to $652,402,  or 24% of sales,
in the comparable  period in the prior year..  For the six-month  periods ending
June 30, 2002 and June 30, 2001, selling and marketing expenses were $1,457,453,
or 34% of sales, and $1,331,592, or 25% of sales, respectively.  The increase in
selling and  marketing  expenses is due in part to addition of  personnel to the
professional sales staff including a Vice President of Sales, a Regional Manager
for Latin America, and a direct sales person.

      General and  administrative  expenses,  which consist  primarily of salary
expenses,  building rent and insurance expenses, were $310,182, or 15% of sales,
for the three-month  period ended June 30, 2002 compared to $347,714,  or 13% of
sales, in the three-month  period ended June 30, 2001. For the six-month periods
ending June 30, 2002 and June 30, 2001, general and administrative expenses were
$657,667, or 15% of sales, and $686,760, or 13% of sales,  respectively.  In the
current  quarter and  year-to-date  periods,  lower  salary  expenses  and lower
professional  services  expenses  were offset by increases in costs for rent and
liability insurance.

      Net loss for the  three-month  period  ended  June  30,  2002 was  $54,802
compared to net income of $241,150 in the same period of 2001.  Net loss for the
six-month  period  ended June 30,  2002 was  $216,985  compared to net income of
$423,527 in the same period of 2001. The net loss is the result of significantly
lower sales in both the current  quarter  and the current  year to date  period.
Subsequent  to the end of the  first  quarter  of 2002 the  Company  implemented
actions to reduce  operating  costs through  reduction of  employees,  temporary
salary  reductions  and other short term cost  reductions.  The lower  operating
costs in the second  quarter are  reflected in the lower net loss for the period
of $54,802  compared to the loss of  $162,183 in the first  quarter of the year.
The Company's  salary  reductions will remain in effect for, at least,  the next
three months as efforts remain focused on growth of net sales.

Liquidity and Capital Resources

      Working  capital  consists,  primarily,  of cash,  inventory  and accounts
receivables. The Company's working capital was $3,219,080 as of June 30, 2002, a
decrease of $143,015 from December 31, 2001. The decrease in working  capital is
primarily due to the net loss  generated in the period.  At June 30, 2002,  cash
and cash  equivalents,  totaled  $704,108,  a decrease of $68,286 from the prior
quarter.  Trade  receivables and  inventories,  components of working capital at
June 30, 2002 were $3,068,043, approximately the same as their December 31, 2001
levels.

      During the second  quarter of 2002,  the  Company  implemented  actions to
improve collections of accounts and to control,  and lower,  inventory levels as
strategies to improve the cash position. Partially as a


                                                                    Page 9 of 13
<PAGE>

result of those actions,  cash on hand increased by $307,100 compared to the end
of the first  quarter.  The Company has borrowed  $100,000  against its $500,000
line of credit  with its  commercial  bank and  remains in  compliance  with the
borrowing covenants.

      The company believes that its current  resources are sufficient to support
existing and anticipated levels of business for at least the next twelve months.

Certain Factors That May Affect 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 yet competitive price.

      The industry in which the Company  operates is highly  competitive and the
Company  expects  such  competition  to  continue  in the  future.  Most  of the
Company's competitors are larger than the Company and have substantially greater
financial,  technical,  marketing and manufacturing resources. While the Company
has invested in new products,  there can be no assurance that it can continue to
introduce  new products on a timely  basis or that certain of its products  will
not be rendered non-competitive or obsolete by its competitors.

      Our  operations  are  concentrated  in  a  single  building  in  Milpitas,
California,  and a small assembly plant in Fort Myers,  Florida.  Our operations
could be interrupted by fire, earthquake, power loss, telecommunications failure
and other events beyond our control. We do not have a detailed disaster recovery
plan.  Our  facilities  in  California  are  potentially  subject to  electrical
blackouts as a consequence of a shortage of available  electrical  power. In the
event these blackouts  continue or increase in severity,  they could disrupt our
operations.  In  addition,  we do not  carry  sufficient  business  interruption
insurance to  compensate  us for losses that may occur and any losses or damages
incurred by us could have a material adverse effect on our business.

      The Company's short term liquidity is dependent upon our ability to manage
collection cycles, control inventory levels, expenses and cash distribution.  We
must also maintain  compliance to the covenants of our bank line of credit or we
may have difficulty funding operations.

Critical Accounting Policies.

      In December 2001, the SEC requested that all registrants  list their three
to five most "critical  accounting policies" in the MD&A. The SEC indicated that
a "critical  accounting  policy" is one which is both important to the portrayal
of the Company's financial condition and results and requires  management's most
difficult,  subjective  or complex  judgments,  often as a result of the need to
make  estimates  about the effect of matters that are inherently  uncertain.  We
believe that our following  accounting policies fit this definition:

      a) Revenue Recognition

      Our net sales  consist of  revenue  from  sales of  products  net of trade
discounts.  We generally obtain oral or written purchase authorizations from our
customers  for a specified  amount of product at a specified  price and consider
delivery to have  occurred at the time of shipment.  We  recognize  revenue when
evidence of an arrangement exists,  contractual obligations have been satisfied,
title and risk of loss have been  transferred  to the customer and collection of
the resulting  receivable is reasonably  assured.  We recognize revenue from the
sale of  FieldServers  in  accordance  with  Statement  of Position  (SOP) 97-2,
Software Revenue Recognition, as amended. Management's ability to determine that
such conditions have been met is based on market  experience and judgment of the
specific economic and contractual conditions that exist at the time of


                                                                   Page 10 of 13
<PAGE>

shipment. The Company does not enter into multiple-element  arrangements related
to the sales of FieldServers.

      b) Accounts Receivable and Related Allowances

      Our domestic  sales are  generally  made on an open  account  basis unless
specific  experience  or  knowledge  of the  customer's  potential  inability or
unwillingness  to  meet  the  payment  terms  dictate  secured   payments.   Our
international  sales are generally made based on secure payments  including cash
wire  advance  payments and letters of credit.  International  sales are made on
open account terms where sufficient  historical  experience justifies the credit
risks involved.  Many of our large orders are sold to  construction  contractors
who are required to pay their  invoices in full before they are able to purchase
any additional products or services.  Management's  ability to manage the credit
terms  and take  advantage  of the  leverage  of the need  for our  services  is
critical  to the  effective  application  of credit  terms and  minimization  of
accounts receivable losses.

      We maintain an  allowance  for  doubtful  accounts  which is analyzed on a
periodic  basis  to  insure  that it is  adequate  to the  best of  management's
knowledge.  We believe that we have  demonstrated the ability to make reasonable
and reliable  estimates of allowances for doubtful accounts based on significant
historical experience. c) Inventories

      Inventories  are  stated  at the  lower  of cost  or  market,  cost  being
determined on the  first-in,  first-out  method.  The Company uses an Enterprise
Resource  Planning  ("ERP")  software  system  which  provides  data upon  which
management can rely to determine  inventory  trends and identify  excesses.  The
carrying  value of  inventory  is reduced to market for slow moving and obsolete
items based on historical experience and current product demand. We evaluate the
carrying  value of inventory  quarterly.  The carrying  amount is dependent upon
management's  ability to forecast  demands  accurately,  manage product  changes
efficiently, and interpret the data provided by the ERP system.


                                                                   Page 11 of 13
<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

           The Annual Meeting of the  shareholders of the Company was held on
           May 16, 2002.

               1. At the Annual Meeting, the following directors were elected to
               serve  for the  ensuing  year  and  until  their  successors  are
               elected:

                                  For             Against          Abstain
                                  ---             -------          -------
       Gordon R. Arnold           7,317,833       0                0
       C. Richard Kramlich        7,317,833       0                0
       Jay T. Last                7,317,833       0                0
       Robert C. Marshall

               2. At the Annual  Meeting,  KPMG was  ratified  as the  Company's
               independent public accountants for the fiscal year ended December
               31, 2002 by the following votes:

       For:                       7,317,833
       Against:                   0
       Abstain:                   0

Item 5.           Other Information - N/A

Item 6.           Exhibits and Reports on Form 8-K

                       (a)   Exhibits.
                                99.1      Certification   of   Chief   Executive
                                          Officer  and Chief  Financial  Officer
                                          pursuant to 18 U.S.C.  Section 350, as
                                          adopted pursuant to Section 906 of the
                                          Sarbanes-Oxley Act of 2002.

                       (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:  August 9, 2002                  By:    /s/ Gordon R. Arnold
                                              --------------------------------
                                              Gordon R. Arnold
                                              President
                                              Chief Financial Officer


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