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 September 30, 1998.

                                       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 September
30, 1998 was: 10,967,588.

Transitional Small Business Disclosure Format: Yes___ No _ x _


                                                                    Page 1 of 10
<PAGE>




                          PART I: FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS

<TABLE>

                           SIERRA MONITOR CORPORATION

                                 Balance Sheets
<CAPTION>

                                                                            September 30,             December 31,
                                                                                 1998                     1997
                                                                           -----------------        -----------------
<S>                                                                        <C>                      <C>              
                                  Assets                                     (Unaudited)     
Current assets
        Cash and cash equivalents                                          $      267,102                  297,485
        Short-term investments                                                    446,440                  441,833
        Trade receivables, less allowance for doubtful accounts                 1,107,498                  833,344
           of $42,271 in 1998 and $41,003 in 1997
        Notes receivable                                                           36,757                   39,422
        Inventories                                                               990,040                  797,546
        Prepaid expenses                                                          109,339                  138,210
        Deferred income taxes                                                     299,172                  299,172
                                                                           -----------------        -----------------
           Total current assets                                                 3,256,348                2,847,012
Property and equipment, net                                                       256,305                  137,914
Other assets                                                                      342,773                   47,562
                                                                           -----------------        -----------------
                                                                           $    3,855,426                3,032,488
                                                                           =================        =================

                   Liabilities and Shareholders' Equity
Current liabilities
        Accounts payable                                                   $      361,451                  153,916
        Accrued expenses                                                          251,709                  224,762
        Other current liabilities                                                  58,473                   54,804
        Income taxes payable                                                      135,814                   43,855
                                                                           -----------------        -----------------
           Total current liabilities                                              807,447                  477,337
                                                                           -----------------        -----------------
Shareholders' equity
        Common stock                                                            3,159,944                2,937,035
        Accumulated deficit                                                       (55,840)                (357,497)
        Notes receivable from shareholders                                        (56,125)                 (24,387)
                                                                           -----------------        -----------------
           Total shareholders' equity                                           3,047,979                2,555,151
                                                                           -----------------        -----------------
                                                                           $    3,855,426                3,032,488
                                                                           =================        =================
<FN>

See the accompanying notes to the financial statements.

</FN>

</TABLE>

                                                                    Page 2 of 10
<PAGE>

<TABLE>

                           SIERRA MONITOR CORPORATION

                            Statements of Operations

                                   (Unaudited)
<CAPTION>

                                                  Three months ended                     Nine months ended
                                                    September 30,                          September 30,
                                               1998                1997               1998               1997
                                               -----------    ---------------    ---------------    ---------------
<S>                                            <C>                <C>                <C>                <C>        
Net sales                                      $1,732,956          1,474,040          5,330,495          3,805,016 

Cost of goods sold                                655,452            521,627          2,191,764          1,404,488
                                               -----------    ---------------    ---------------    ---------------

        Gross profit                            1,077,504            952,413          3,138,731          2,400,528
                                               -----------    ---------------    ---------------    ---------------

Operating expenses
    Research and development                      187,117            115,625            476,948            296,446
    Selling and marketing                         525,859            424,587          1,472,365          1,262,372
    General and administrative                    260,351            217,204            816,687            688,049
                                               -----------    ---------------    ---------------    ---------------
                                                  973,327            757,416          2,766,000          2,246,867
                                               -----------    ---------------    ---------------    ---------------
        Income from operations                    104,177            194,997            372,731            153,661

Other Income                                            -                  -             38,349                  -
Interest income                                    10,209              9,331             26,103             20,958
                                               -----------    ---------------    ---------------    ---------------

        Income before income taxes                114,386            204,328            437,183            174,619

Income tax expense                                 35,459             16,239            135,526             16,239
                                               -----------    ---------------    ---------------    ---------------

        Net income                             $   78,927            188,089            301,657            158,380S
                                               ===========    ===============    ===============    ===============

Net income per share - basic                   $     0.01               0.02               0.03               0.02
Net income per share - diluted                 $     0.01               0.02               0.03               0.01
                                               ===========    ===============    ===============    ===============
Weighted average number of shares
used in per share computations
                                     Basic:    10,690,038         10,556,263         10,700,038         10,436,402
                                   Diluted:    11,124,810         10,745,878         11,099,772         10,721,562
                                               ===========    ===============    ===============    ===============


<FN>

See the accompanying notes to the financial statements.

</FN>
</TABLE>
                                                                    Page 3 of 10
<PAGE>

<TABLE>

                           SIERRA MONITOR CORPORATION

                            Statements of Cash Flows

                                   (Unaudited)
<CAPTION>
                                                                   Three months ended             Nine months ended
                                                                     September 30,                   September 30
                                                                  1998            1997           1998            1997
                                                              -------------   -------------  -------------   -------------
<S>                                                           <C>                <C>            <C>             <C>       
Cash flows from operating activities:
  Net income                                                  $    78,927         188,089        301,657         158,380
  Adjustments to reconcile net income to net
    cash provided by operating activities:
        Depreciation & amortization                                40,253          29,754         96,427          86,937
        Allowance for doubtful accounts                            (2,938)         (1,476)         1,268           1,844
        Changes in items affecting operations:
          Trade receivables and notes receivable                   52,125        (252,919)      (272,757)         11,835
          Inventories                                             (46,635)         (4,928)      (192,494)       (105,988)
          Prepaid expenses                                        122,763         (43,582)        28,871         (58,819)
          Accounts payable                                        (38,331)         24,497        207,536          (2,195)
          Accrued expenses                                        (12,634)         43,792         26,947          36,213
          Other current liabilities                               (12,354)         23,232          3,669          13,334
          Income taxes payable                                     35,747          16,160         91,958           4,891
                                                              -------------   -------------  -------------   -------------
              Net cash provided by
                operating activities                              216,923          22,619        293,082         146,432
                                                              -------------   -------------  -------------   -------------
Cash flows from investing activities:
  Capital expenditures                                           (160,071)        (27,208)      (324,363)        (80,637)
  Short term investments                                               (4)       (293,962)        (4,607)       (293,449)
  Other assets                                                       (457)              -           (757)              -
                                                              -------------   -------------  -------------   -------------
              Net cash used in
                investing activities                             (160,532)       (321,170)      (329,727)       (374,086)
                                                              -------------   -------------  -------------   -------------
Cash flows from financing activities:
  Proceeds from exercise of stock options,
    net of notes receivable                                         3,343           1,968          6,262           8,346
                                                              -------------   -------------  -------------   -------------
              Net cash provided by financing
              activities                                            3,343           1,968          6,262           8,346
                                                              -------------   -------------  -------------   -------------
Net increase (decrease) in
  cash and cash equivalents                                        59,734        (296,583)       (30,383)       (219,308)
Cash and cash equivalents at beginning of period                  207,369         556,185        297,485         478,910
                                                              -------------   -------------  -------------   -------------
Cash and cash equivalents at end of period                    $   267,103         259,602        267,102         259,602
                                                              =============   =============  =============   =============
<FN>

See the accompanying notes to the financial statements.

</FN>
</TABLE>
                                                                    Page 4 of 10
<PAGE>


                           SIERRA MONITOR CORPORATION

                        Notes to the Financial Statements

                               September 30, 1998

Basis of Presentation

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-KSB for the year ended  December  31, 1997
which was filed March 30, 1998. In the opinion of the Company,  all adjustments,
consisting  of normal  recurring  adjustments  necessary  to present  fairly the
financial  position of Sierra  Monitor  Corporation as of September 30, 1998 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, 1998, except as discussed below:

Effective  January,  1 1998, the Company adopted the provisions of the Financial
Accounting  Standards Board's (FASB) Statement of Financial Accounting Standards
(SFAS) No. 130,  Reporting of  Comprehensive  Income.  SFAS No. 130  establishes
standards for the display of  comprehensive  income and its components in a full
set of financial statements. Comprehensive income includes all changes in equity
during a period except those  resulting from the issuance of shares of stock and
distributions to shareholders.  There were no differences between net income and
comprehensive income during the quarters ended September 30, 1998 and 1997.

In June 1997,  the FASB issued SFAS No. 131,  Disclosures  about  Segments of an
Enterprise and Related Information.  SFAS No. 131 establishes  standards for the
way public business  enterprises  report information about operating segments in
annual  financial  statements and requires those  enterprises to report selected
information  about  operating  segments in interim  financial  reports issued to
stockholders.  SFAS No. 131 is effective  for financial  statements  for periods
beginning  after  December 31, 1997.  The Company  does not  anticipate  it will
change its reporting methodology as a result of this pronouncement.

The FASB recently issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging  Activities.  SFAS No.  133  addresses  the  accounting  for  derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts.  Under SFAS No. 133,  entities are  required to carry all  derivative
instruments  in the balance sheet at fair value.  The  accounting for changes in
the fair value  (i.e.  gains or losses) of a  derivative  instrument  depends on
whether it has been  designated and qualifies as part of a hedging  relationship
and, if so, the reason for  holding  it. The Company  must adopt SFAS No. 133 by
October 1, 1999. The Company does not anticipate  that SFAS No. 133 will have an
impact on its financial statements.

                                                                    Page 5 of 10

<PAGE>

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:
                                            September 30,          December 31,
                                                1998                   1997
                                              ---------             ---------
                  Raw materials               $ 340,474             $ 323,237
                  Work-in-process               444,720               338,631
                  Finished goods                204,846               135,678
                                              ---------             ---------
                                              $ 990,040             $ 797,546
                                              =========             =========
<TABLE>
Net Income per share

Basic net income per share is  computed  using the  weighted  average  number of
common  shares  outstanding  during the period.  Diluted net income per share is
computed  using  the  weighted-average  number  of common  and  dilutive  common
equivalent  shares  outstanding  during the period.  Dilutive common  equivalent
shares consist of common stock issuable upon exercise of stock options using the
treasury  stock method.  No  adjustments to net income were made for purposes of
per share calculations.  The following is a reconciliation of the shares used in
the  computation  of basic and  diluted  net income for the three and nine month
periods ending September 30, 1998 and 1997 respectively:

<CAPTION>

                                                           3 months          9 months       3 months       9 months
                                                         ended 9/30/98     ended 9/30/98   ended 9/30/97  ended 9/30/97
<S>                                                        <C>              <C>             <C>            <C>         
  Basic net income per share - weighted-average            10,690,038       10,700,038      10,556,263     10,436,402
      number of common shares outstanding

  Effect of dilutive common equivalent shares - stock
      options outstanding
                                                              434,772          399,734         189,615        285,160
                                                           ----------       ----------      ----------     -----------

  Diluted net income per share - weighted-average of
      common shares and common equivalent shares
      outstanding                                          11,124,810       11,099,772      10,745,878     10,721,562
                                                           ----------       ----------      ----------     -----------
</TABLE>
                                                                    Page 6 of 10
<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, 1998,  Sierra Monitor  Corporation (the
"Company") reported net sales of $1,732,956 compared to $1,474,040 for the three
months ended  September 30, 1997. For the nine-month  period ended September 30,
1998,  net sales were  $5,330,495  compared  with  $3,805,016  in the prior year
nine-month  period.  The results for the third quarter of 1998  represent an 18%
increase from the same period in the prior year.  The results for the first nine
months of 1998  represent a 40% increase from the same period in the prior year.
The level of sales of Sentry systems,  the Company's  primary product group, was
higher than the third quarter in the prior year, and higher for the year to date
period. Sales of Sentry systems can be influenced by release of large orders for
construction projects.  Such projects accounted for a significant portion of the
increase  in Sentry  sales in 1998.  Sales of  products  for  telephone  company
applications  increased in both the quarter and year to date  periods  primarily
due to the shipment of a single large order to an international customer.

Gross profit of $1,077,504 for the  three-month  period ended September 30, 1998
was 62% of sales compared to $952,413 or 65% of sales, in the same period in the
previous year. The gross profit for the  nine-month  period ended  September 30,
1998 was $3,138,731 or 59% of sales, compared to $2,400,528, or 63% of sales, in
the same  period in the  previous  year.  The gross  margin for the year to date
period is lower than the comparable period last year primarily due to a discount
applied to a large  international  order which was shipped in the second quarter
of the year.

Expenses for research and development, which include new product development and
engineering to sustain existing products, were $187,117 or 11% of sales, for the
three-month  period ending  September  30, 1998  compared to $115,625,  or 8% of
sales,  in the  comparable  period in 1997.  In the  nine-month  periods  ending
September  30, 1998 and September 30, 1997,  research and  development  expenses
were $476,948 or 9% of sales, and $296,446, or 8% of sales, respectively. By the
end of the third  quarter of 1998, a total of six new products and an additional
eight  product   options  have  been  released  for  manufacture  and  sale.  In
comparison,  the Company normally releases less than six new products or options
in a full year.  The new products  released  include  devices which increase the
potential  applications  for the  Sentry  system  and add to the number of gases
which can be detected by certain  sensor  module types.  In addition,  extensive
engineering  time was invested into the  development of a new hardware  platform
for the Communications Bridge which is described later in this report.

Selling and marketing  expenses for the  three-month  period ended September 30,
1998 were $525,859 or 30% of sales,  compared to $424,587,  or 29% of sales,  in
the  comparable  period in the prior year.  For the  nine-month  periods  ending
September 30, 1998 and September 30, 1997,  selling and marketing  expenses were
$1,472,365 or 28% of sales, and $1,262,372, or 33% of sales, respectively. Sales
commissions to independent  representatives  and to sales managers  increased in
both periods.  Staffing expenses also increased due to an increase in the number
of professional sales employees.

General and  administrative  expenses increased to $260,351 or 15% of sales, for
the three-month period ended September 30, 1998 from $217,204,  or 15% of sales,
in the three-month  period ended September 30, 1997.  General and administrative
expenses increased to $816,687, or 15% of sales, for the nine-month period ended
September 30, 1998 from  $688,049,  or 18% of sales,  in the  nine-month  period
ended September 30, 1997.

                                                                    Page 7 of 10
<PAGE>

Net income,  after interest and provision for income taxes, for the three months
ended  September  30,  1998 was  $78,927,  or 4.6% of net sales,  compared  with
$188,089,  or 12.8% of net sales,  in the three months ended September 30, 1997.
Net income for the nine-month  period ended September 30, 1998 was $301,657,  or
5.7% of net sales,  compared with  $158,380,  or 4.2% of net sales,  in the same
period in the prior year.  The  decrease in income for the three month period is
due to the lower gross profit combined with significant increases in engineering
and selling  expenses.  The increase in income in the year to date period is due
to the higher  sales level  combined  with lower fixed  expenses as a percent of
sales.

On September 23, 1998 the Company  acquired the rights to manufacture and sell a
product  known as the  Communications  Bridge  (the  "Bridge").  The rights were
acquired from Edward Hague, the Company's  current Vice President of Engineering
who had  developed  the product  prior to his  employment.  The Bridge  provides
connectivity between various industrial control systems which would otherwise be
incompatible due to their unique communications  protocols. As an example, a gas
monitoring  system  may not be  able  to  deliver  information  to a plant  wide
information  system if the  communication  protocols are  incompatible,  but the
Bridge enables data transfer between the two systems.

A unique  aspect of the  Bridge  is the  software  program  which  enables  cost
effective  development  of Protocol  Drivers.  The Company  intends to develop a
library of Protocol Drivers. A Bridge sale will include a hardware package which
is a single board  computer  with the Bridge  software and one or more  Protocol
Drivers which are software add-ons.  During the negotiation  period, the Company
developed an improved  hardware platform for the Bridge which enables use of the
product on Ethernet based wide area computer networks. The Company believes that
the Bridge has the potential to become an important  product  family which could
enhance the Company's  ability to sell gas monitoring  devices and also generate
sales in markets outside the gas monitoring industry.

In consideration  for the acquisition of the Bridge,  the Company paid Mr. Hague
$130,000 cash and issued 211,325 shares of unregistered common stock.

Liquidity and Capital Resources

During the period  ended  September  30, 1998,  the  Company's  working  capital
increased by $79,226  compared to December 31, 1997.  At September 30, 1998 cash
and cash equivalents and short-term  investments,  totaled $713,542  compared to
$739,318 at December  31, 1997.  As a result of the higher  sales  level,  trade
accounts receivable have increased $274,154 since the beginning of the year, and
inventories have increased $192,494. In addition to these increases $324,363 has
been invested in capital assets,  mainly computer hardware and software,  during
the same time period.

Short-term  investments  consist  of  certain  Federal  Agency  Securities  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 its current
capital  resources are sufficient to support existing and anticipated  levels of
business.

Year 2000 Planning

Prior to December 31, 1997, management implemented an enterprise-wide program to
prepare for the year 2000. The program  includes  verification  of the Company's
Information Technology ("IT") system, all microprocessor based products,  vendor
capabilities  and various  internal  systems.  Because the IT system was already
scheduled to be replaced in 1998,  and was not  accelerated,  the Company is not
considering  the cost a separate year 2000 expense.  The cost of confirmation of
the new IT system,

                                                                    Page 8 of 10
<PAGE>

implemented in September 1998 is a year 2000 expense.  The Company believes that
it will be  ready  for  year  2000 and it has  completed  most of the  necessary
testing and verification.

The total cost of the preparation and implementation of the verification program
and corrective  action is estimated to be less than $100,000 and is being funded
through  operating cash flows.  A significant  proportion of these costs are not
likely  to be  incremental  costs to the  Company,  but  rather  will  represent
redeployment of existing technical and personnel resources.

As a result of testing the Company  anticipates  that its IT system will operate
correctly  through the year 2000 transition,  and that none of its products will
cause a year 2000 problem for users.  As the Company's  products are  frequently
employed  as  components  in larger  monitoring  and  control  systems it is not
possible for the Company to test customer systems for compatibility. The Company
has advised its  customers  that system level testing is beyond the scope of the
Company's   verification   and  that  customers   should   perform   independent
verification testing.

Although  there are  presently  no known year 2000  events  which  would have an
impact on the Company's  ability to continue its current  operations,  there are
unknown  factors,  such as loss of utility supplies or banking  problems,  which
could have a broad impact on the Company and its customers. The Company does not
believe it practical to develop contingency plans related to these risks.

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 9 of 10
<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.

                           10.4     Assignment of Intellectual Property and
                                     Transfer of Rights

                           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:      November 12, 1998                      By:   /S/ GORDON R. ARNOLD
                                                      --------------------------
                                                      Gordon R. Arnold

                                                      President

                                                      Chief Financial Officer


                                                                   Page 10 of 10