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, 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 August 7,
1998 was: 10,566,263.

Transitional Small Business Disclosure Format: Yes____; No __x__


                                      -1-
<PAGE>



                                           PART I: FINANCIAL INFORMATION

<TABLE>

                                           ITEM 1. FINANCIAL STATEMENTS

                                            SIERRA MONITOR CORPORATION

                                                  Balance Sheets

<CAPTION>
                                                                                                   June 30,             December 31,
                                                                                                     1998                    1997
                                                                                                 -----------            -----------
                                  Assets                                                         (Unaudited)
<S>                                                                                              <C>                        <C>    
Current assets
       Cash and cash equivalents                                                                 $   207,369                297,485
       Short-term investments                                                                        446,436                441,833
       Trade receivables, less allowance for doubtful accounts                                     1,154,670                833,344
           of $45,209 in 1998 and $41,003 in 1997
       Notes receivable                                                                               38,772                 39,422
       Inventories                                                                                   943,405                797,546
       Prepaid expenses                                                                              232,102                138,210
       Deferred income taxes                                                                         299,172                299,172
                                                                                                 -----------            -----------
                            Total current assets                                                   3,321,926              2,847,012
Property and equipment, net                                                                          259,869                137,914
Other assets                                                                                          34,026                 47,562
                                                                                                 -----------            -----------
                                                                                                 $ 3,615,821              3,032,488
                                                                                                 ===========            ===========

                   Liabilities and Shareholders' Equity
Current liabilities
       Accounts payable                                                                          $   399,782                153,916
       Accrued compensation                                                                          264,343                224,762
       Other current liabilities                                                                      70,827                 54,804
       Income taxes payable                                                                          100,067                 43,855
                                                                                                 -----------            -----------
                            Total current liabilities                                                835,019                477,337
                                                                                                 -----------            -----------
Shareholders' equity
       Common stock                                                                                2,937,035              2,937,035
       Accumulated deficit                                                                          (134,766)              (357,497)
       Notes receivable from shareholders                                                            (21,467)               (24,387)
                                                                                                 -----------            -----------
                            Total shareholders' equity                                             2,780,802              2,555,151
                                                                                                 -----------            -----------
                                                                                                 $ 3,615,821              3,032,488
                                                                                                 ===========            ===========
<FN>

See the accompanying notes to the financial statements.
</FN>
</TABLE>

                                                                    -2-
<PAGE>

<TABLE>


                                                     SIERRA MONITOR CORPORATION

                                                      Statements of Operations

                                                             (Unaudited)

<CAPTION>


                                                                    Three months ended June 30,          Six months ended June 30,
                                                                      1998             1997               1998               1997
                                                                  -----------       -----------       -----------       -----------
<S>                                                               <C>                 <C>               <C>               <C>      
Net sales                                                         $ 2,064,115         1,184,819         3,597,539         2,330,976

Cost of goods sold                                                    967,336           422,558         1,536,312           882,861
                                                                  -----------       -----------       -----------       -----------

        Gross profit                                                1,096,779           762,261         2,061,227         1,448,115
                                                                  -----------       -----------       -----------       -----------

Operating expenses
    Research and development                                          165,498            83,898           289,831           180,821
    Selling and marketing                                             494,119           422,563           946,505           837,785
    General and administrative                                        283,134           242,391           556,336           470,845
                                                                  -----------       -----------       -----------       -----------
                                                                      942,751           748,852         1,792,672         1,489,451
                                                                  -----------       -----------       -----------       -----------
        Income (loss) from operations                                 154,028            13,409           268,555           (41,336)

Other income                                                             --                --              38,349              --
Interest income                                                         5,350             6,425            15,894            11,627
                                                                  -----------       -----------       -----------       -----------

        Income (loss) before income taxes                             159,378            19,834           322,798           (29,709)

Income taxes                                                           49,407              --             100,067              --
                                                                  -----------       -----------       -----------       -----------

        Net income (loss)                                         $   109,971            19,834           222,731           (29,709)
                                                                  ===========       ===========       ===========       ===========

Net income (loss) per share - basic                               $      0.01              0.00              0.02              0.00
Net income (loss) per share - diluted                             $      0.01              0.00              0.02              0.00
                                                                  ===========       ===========       ===========       ===========

Weighted average number of shares used in
per share computations
                                                     Basic:        10,566,263        10,410,430        10,566,263        10,566,263
                                                   Diluted:        11,169,202        10,707,418        11,015,498        10,566,263
                                                                  ===========       ===========       ===========       ===========
<FN>

See the accompanying notes to the financial statements.
</FN>
</TABLE>

                                                               -3-
<PAGE>


<TABLE>

                                            SIERRA MONITOR CORPORATION

                                             Statements of Cash Flows

                                                    (Unaudited)

<CAPTION>

                                                                          Three months ended                  Six months ended
                                                                               June 30,                           June 30
                                                                         1998              1997            1998             1997
                                                                       ---------        ---------        ---------        ---------
<S>                                                                    <C>                 <C>             <C>              <C>     
Cash flows from operating activities:
  Net income (loss)                                                    $ 109,971           19,834          222,731          (29,709)
  Adjustments to reconcile net income (loss) to net
    cash provided by (used in) operating activities:
       Depreciation and amortization                                      33,777           30,580           56,173           57,183
       Allowance for doubtful accounts                                       641            1,070            4,206            3,320
       Changes in items affecting operations:
         Trade receivables and notes receivables                        (132,107)         114,754         (324,882)         264,754
         Inventories                                                      92,356          (95,469)        (145,859)        (101,060)
         Prepaid expenses                                                (52,824)         (14,304)         (93,892)         (15,237)
         Accounts payable                                                (14,035)          34,246          245,866          (26,692)
         Accrued compensation expenses                                    49,666          (26,656)          39,581           (7,579)
         Other current liabilities                                         6,682           (6,827)          16,023           (9,898)
         Income taxes payable                                             49,407             --             56,212          (11,269)
                                                                       ---------        ---------        ---------        ---------
             Net cash provided by
               Operating activities                                      143,534           57,228           76,159          123,813
                                                                       ---------        ---------        ---------        ---------
Cash flows from investing activities:
  Capital expenditures                                                  (129,554)         (10,820)        (164,292)         (53,429)
  Short term investments                                                      20            2,419           (4,903)             513
                                                                       ---------        ---------        ---------        ---------

             Net cash used in investing activities                      (129,534)          (8,401)        (169,195)         (52,916)
                                                                       ---------        ---------        ---------        ---------
Cash flows from financing activities:
  Proceeds from exercise of stock options,
    net of notes receivable                                                1,358            4,824            2,920            6,378
                                                                       ---------        ---------        ---------        ---------
             Net cash provided by financing activities                     1,358            4,824            2,920            6,378
                                                                       ---------        ---------        ---------        ---------
Net increase (decrease) in
  cash and cash equivalents                                               15,358           53,651          (90,116)          77,275

Cash and cash equivalents at beginning of period                         192,011          502,534          297,485          478,910
                                                                       ---------        ---------        ---------        ---------

Cash and cash equivalents at end of period                             $ 207,369          556,185          207,369          556,185
                                                                       =========        =========        =========        =========

<FN>
See the accompanying notes to the financial statements.
</FN>
</TABLE>

                                                               -4-
<PAGE>




                           SIERRA MONITOR CORPORATION

                        Notes to the Financial Statements

                                  June 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 June 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 June 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 June 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.



                                      -5-
<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:
                                           June 30,            December 31,
                                            1998                   1997
                                          ---------             ---------
                  Raw materials           $ 370,067             $ 323,237
                  Work-in-process           436,297               338,631
                  Finished goods            137,041               135,678
                                          ---------             ---------
                                          $ 943,405             $ 797,546
                                          =========             =========

<TABLE>

Net Income per share

Basic net income (loss) per share is computed using the weighted  average number
of common shares  outstanding  during the period.  Diluted net income (loss) 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 / (loss)
were  made  for  purposes  of  per  share  calculations.   The  following  is  a
reconciliation  of the shares using in the  computation of basic and diluted net
income (loss) for the three and six month periods  ending June 30, 1998 and 1997
respectively:


<CAPTION>

                                                                        3 months          6 months       3 months      6 months
                                                                          ended             ended          ended         ended 
                                                                         6/30/98           6/30/98        6/30/97       6/30/97

<S>                                                                   <C>               <C>            <C>            <C>       
        Basic net income (loss) per share - weighted - average
            number of common shares outstanding                       10,566,263        10,566,263     10,410,430     10,371,471

        Effect of dilutive common equivalent shares - stock
            options outstanding                                          602,939           449,235        296,988       See note
                                                                      ----------        ----------     ----------     ----------

        Diluted net income (loss) per share - weighted - average 
            of common shares and common equivalent shares
            outstanding                                               11,169,202        11,015,498     10,410,430     10,566,263
                                                                      ==========        ==========     ==========     ==========

<FN>
Note:  Common stock equivalents of 324,274 were excluded from the net loss per share computations due to the
           antidilutive effect.
</FN>
</TABLE>


                                      -6-
<PAGE>



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

Results of Operations

For the three  months  ended June 30,  1998,  Sierra  Monitor  Corporation  (the
"Company") reported net sales of $2,064,115 compared to $1,184,819 for the three
months ended June 30, 1997.  For the six-month  period ended June 30, 1998,  net
sales were  $3,597,539  compared  with  $2,330,976  in the prior year  six-month
period. The results for the second quarter of 1998 represent a 74% increase from
the same  period in the  prior  year.  The  results  for the first  half of 1998
represent a 54% increase from the same period in the prior year. Sales increased
in each of the  Company's  product  groups  including  a 62%  increase in Sentry
systems  and a 73%  increase  in  military  sales.  The level of sales of Sentry
systems,  the Company's  primary product group,  can be influenced by release of
orders  for  construction   projects.   Construction   projects  account  for  a
significant  portion of the increase in Sentry sales in 1998. Military sales are
higher  due to  stocking  orders  for spare and  replacement  parts.  During the
three-month period ended June 30, 1998, a single order for gas sensor modules to
an international customer accounted for approximately 22% of net sales.

Gross profit of $1,096,779  for the  three-month  period ended June 30, 1998 was
53% of sales  compared to  $762,261  or 64% of sales,  in the same period in the
previous year. The gross profit for the six-month period ended June 30, 1998 was
$2,061,227 or 57% of sales, compared to $1,448,115, or 62% of sales, in the same
period in the  previous  year.  The gross margin for the  three-month  period is
lower than historical  levels  primarily due to a discount  applied to the large
international order.

Expenses for research and development, which include new product development and
engineering to sustain existing products,  were $165,498 or 8% of sales, for the
three-month period ending June 30, 1998 compared to $83,898,  or 7% of sales, in
the comparable period in 1997. In the six-month periods ending June 30, 1998 and
June 30, 1997, research and development expenses were $289,831 or 8.1% of sales,
and  $180,821,  or  7.8%  of  sales,  respectively.   Research  and  development
activities,  related to development of new products and upgrades and options for
existing products, have been increased in 1998.

Selling and marketing  expenses for the  three-month  period ended June 30, 1998
were  $494,119 or 24% of sales,  compared to  422,563,  or 36% of sales,  in the
comparable  period in the prior year. For the six-month  periods ending June 30,
1998 and June 30, 1997,  selling and marketing  expenses were $946,506 or 26% of
sales, and $837,785, or 36% of sales,  respectively.  Commissions to independent
sales representatives  increased in both periods in 1998 due to the higher sales
level.  There  were no  other  significant  changes  in  selling  and  marketing
expenses.

General and  administrative  expenses increased to $283,135 or 14% of sales, for
the  three-month  period ended June 30, 1998 from $242,391,  or 20% of sales, in
the three-month period ended June 30, 1997. General and administrative  expenses
increased to $556,336 or 15% of sales,  for the six-month  period ended June 30,
1998 from  $470,845,  or 20% of sales,  in the  six-month  period ended June 30,
1997.

Net income,  after interest and provision for income taxes, for the three months
ended June 30, 1998 was $109,970 or 5.3% of net sales,  compared with $19,834 or
1.7% of net sales,  in the three months ended June 30, 1997.  Net income for the
six-month  period ended June 30, 1998 was $222,730  compared  with a net loss of
$29,709 in the same period in the prior year. The higher income is the result of
a significant  increase in sales combined with lower fixed expenses as a percent
of sales.



                                      -7-
<PAGE>

At June 30, 1998, net trade receivables were $1,154,670, an increase of $321,326
compared to December 31, 1997. The higher trade  receivables are consistent with
the  higher  level  of  sales  in  the   preceding   three  months  and  reflect
approximately the same number of days outstanding. At June 30, inventory on hand
was  $943,405,  an increase of $145,859  compared  to  December  31,  1997.  The
increased inventory is necessary to support the current sales level.

Liquidity and Capital Resources

During the period ended June 30, 1998, the Company's  working capital  increased
by  $117,232  compared  to  December  31,  1997.  At June 30, 1998 cash and cash
equivalents and short-term investments, totaled $653,805 compared to $739,318 at
December  31,  1997.  As a result of the  higher  sales  level,  trade  accounts
receivable  have  increased  $321,326  since  the  beginning  of the  year,  and
inventories have increased $145,859. In addition to these increases $164,292 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.

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.


                                      -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

           The Annual Meeting of  Shareholders  was held on May 19, 1998. At the
           meeting the following directors were elected:

                                             Number of Common Shares Voted
                                             -----------------------------

             Directors                     For                         Withheld
             ---------                     ---                         --------

             Gordon R. Arnold           6,983,243                         0

             C. Richard Kramlich        6,983,243                         0

             Jay T. Last                6,983,243                         0

             Robert C. Marshall         6,983,243                         0

<TABLE>
           In addition, the shareholders approved the following proposal:
<CAPTION>

                                                                        Number of Common Shares Voted
                                                                        -----------------------------

             Proposal                                           For                Against              Abstain
             --------                                           ---                -------              -------

<S>                                                          <C>                      <C>                  <C>
             Ratify the appointment of KPMG Peat             6,983,243                0                    0
             Marwick LLP as the Company's  independent
             public accountants for the fiscal year
             ending December 31, 1998.
</TABLE>

           There were no broker non-votes for any of the proposals.

Item 5.    Other Information - N/A

Item 6.    Exhibits and Reports on Form 8-K

           a.     Exhibits.

                      3.1  Bylaws of Registrant, restated as of May 19, 1998

                      27.0/1 Financial Data Schedule

           b. Reports on Form 8-K.

                           None.


                                      -9-
<PAGE>

                                    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  14, 1998                 By:   /s/ Gordon R. Arnold
                                             -----------------------------------
                                               Gordon R. Arnold
                                               President
                                               Chief Financial Officer




                                      -10-