U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________________________________________________
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
Commission file number: 0 - 5460
____________________________________________________
STOCKER & YALE, INC.
(Name of small business issuer in its charter)
Massachusetts 04-2114473
(State or other jurisdiction of
incorporation or organization) (I.R.S. employer identification no.)
32 Hampshire Road
Salem, New Hampshire 03079
(Address of principal executive offices) (Zip Code)
(603) 893-8778
(Issuer's telephone number)
_____________________________________________________
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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. X Yes No
As of November 1, 1996 there were 2,562,914.6 shares of the issuer's
common stock outstanding after giving effect to the issuance of 850,000
shares in the public offering completed on October 25, 1996.
Transitional Small Business Disclosure Format (check one): Yes_____No X
Page 1 of 9
<PAGE>
PART I. FINANCIAL INFORMATION
STOCKER & YALE, INC. AND SUBSIDIARIES
ITEM 1.1-CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
(unaudited) (audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash 29,176 22,033
Accounts Receivable 1,706,792 1,897,943
Prepaid Taxes 323,963 323,963
Inventory 3,930,434 3,836,653
Prepaid Expenses 94,430 159,013
Total Current Assets 6,084,795 6,239,605
PROPERTY, PLANT & EQUIPMENT, NET 3,143,612 3,365,949
NOTE RECEIVABLE 1,000,000 1,000,000
GOODWILL, NET 8,791,498 9,005,729
DEBT ISSUANCE COSTS, NET 148,708 169,687
19,168,613 19,780,970
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current portion of long-term debt 299,756 266,358
Mortgage note payable 0 1,500,000
Subordinated notes payable 0 1,000,000
Accounts payable 1,814,831 1,527,468
Short-term lease obligation 17,073 58,560
Accrued expenses
Income taxes 13,515 265,918
Other 497,860 475,136
Total Current Liabilities 2,643,035 5,093,440
LONG TERM LEASE OBLIGATION 66,687 82,909
LONG TERM DEBT
Subordinated Convertible Notes 1,350,000 0
Mortgage Note 1,447,819 0
Senior Bank Debt 3,586,528 4,080,364
Total Long Term Debt 6,384,347 4,080,364
OTHER LONG TERM LIABILITIES 684,479 684,479
DEFERRED INCOME TAXES 1,110,280 1,215,280
10,888,828 11,156,472
STOCKHOLDER'S EQUITY
Common stock, .001 par value
Authorized - 10,000,000
Issued and Outstanding -1,712,914 1,713 1,713
Paid in capital 6,845,685 6,845,685
Retained Earnings 1,432,387 1,777,100
Total Stockholder's Equity 8,279,785 8,624,498
19,168,613 19,780,970
</TABLE>
<PAGE>
STOCKER & YALE, INC. AND SUBSIDIARIES
ITEM 1.2 CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
NET SALES 2,495,168 3,165,766 8,071,392 9,613,218
COST OF SALES 1,501,799 1,954,081 5,081,251 5,964,932
Gross profit 993,369 1,211,685 2,990,141 3,648,286
SELLING EXPENSES 362,370 386,302 1,193,497 1,248,380
GENERAL AND
ADMINISTRATIVE EXPENSES 561,778 505,607 1,517,345 1,485,183
RESEARCH AND
DEVELOPMENT EXPENSES 117,043 76,332 261,805 228,435
Operating income (47,822) 243,444 17,494 686,288
LOSS ON SALE OF REAL ESTATE 0 229,865 0 229,865
INTEREST EXPENSE 149,867 165,348 450,007 499,636
Loss before
income tax provision (197,689) (151,769) (432,513) (43,213)
INCOME TAX
PROVISION (BENEFIT) (51,700) (31,250) (87,800) 71,000
Net loss (145,989) (120,519) (344,713) (114,213)
LOSS PER SHARE (0.09) (0.07) (0.20) (0.07)
WEIGHTED AVERAGE COMMON
SHARES AND EQUIVALENTS 1,712,914 1,712,914 1,712,914 1,620,562
</TABLE>
<PAGE>
STOCKER & YALE, INC. AND SUBSIDIARIES
ITEM 1.3 - CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(unaudited)
Nine Months Ended
September 30,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ( 344,713) ( 114,213)
Adjustments to reconcile net income to net cash
provided by (used for) operating activities -
Depreciation and amortization 635,324 716,629
Net loss on sale of building 0 229,865
Deferred income taxes and other (105,000) (82,377)
Other changes in assets and liabilities -
Accounts receivable, net 191,151 (193,250)
Inventories ( 93,781) (688,534)
Prepaid expenses 64,583 ( 33,272)
Accounts payable 287,363 37,689
Accrued expenses 22,724 (123,333)
Accrued and refundable taxes (252,403) ( 60,921)
Net cash provided by (used for)
operating activities 405,248 (311,717)
CASH FLOWS FROM INVESTING ACTIVITIES
Sales of land and building 0 1,114,964
Purchases of property, plant and equipment (138,778) 1,311,843)
Net cash used for investing activities (138,778) ( 196,789)
CASH FLOWS FROM FINANCING ACTIVITIES
Sales of common stock 0 776,500
Repayment of Subordinated Note/ Bank Debt (2,500,000) (6,605,827)
Proceeds from Short Term Note 0 200,000
Proceeds from Term Loan 0 2,767,000
Proceeds from Line of Credit 0 2,766,357
Proceeds from Mortgage note 1,500,000 1,500,000
Proceeds from Subordinated Notes payable 1,350,000 1,000,000
Repayment of bank debt ( 512,618) (1,676,014)
Payments on capital lease ( 57,709) ( 35,943)
Deferred financing cost ( 39,000) ( 169,864)
Net cash provided by
(used for) financing activities ( 259,327) 522,209
NET INCREASE IN CASH 7,143 13,613
CASH, BEGINNING OF PERIOD 22,033 8,344
CASH, END OF PERIOD 29,176 21,957
</TABLE>
<PAGE>
STOCKER & YALE, INC. AND SUBSIDIARIES
Notes to Financial Statements
1. General
The interim consolidated financial statements presented have been prepared by
Stocker & Yale, Inc. (the "Company") without audit and, in the opinion of the
management, reflect all adjustments of a normal recurring nature necessary
for a fair statement of (a) the results of operations for the three month
and nine month periods ended September 30, 1996 and September 30, 1995,
(b) the financial position at September 30, 1996, and (c) the cash flows for
the nine month periods ended September 30, 1996 and September 30, 1995.
Interim results are not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 31, 1995, has been
derived from the consolidated financial statements that have been audited by
the Company's independent public accountants. The consolidated financial
statements and notes are condensed as permitted by Form 10-QSB and do not
contain certain information included in the annual financial statements and
notes of the Company. The consolidated financial statements and notes
included herein should be read in conjunction with the financial statements
and notes included in the Company's Annual Report on Form 10-KSB.
2. Debt
The 13.5% Subordinated Notes Payable of $1,000,000 which matured on May 6,
1996, were refinanced by a new issue of Subordinated Notes totaling
$1,350,000. The new notes mature on May 1, 2001, bear interest at 7.25%
and are convertible into shares of the Company's common stock at a price
of $7.375 per share.
The $1,500,000 Mortgage Note Payable, which was to mature on September 1, 1996,
was refinanced by a new Mortgage Note totaling $1,500,000. The new mortgage
note matures August 29, 2011 and bears interest at a fixed rate of 9.25% until
August 29, 1999. Thereafter the interest rate will be annually adjusted to
the Prime Rate plus 1%.
3. Subsequent Event
On October 25, 1996, the Company completed a public offering of 850,000
shares of the Company's common stock, par value $0.001 per share, at a price
of $5.00 per share, generating $4,250,000 in gross proceeds. All 850,000
shares of common stock in this public offering were offered directly by the
Company. After deducting commissions and offering expenses, the net proceeds
of the offering will be approximately $3,900,000. These net proceeds will be
used to provide funds for certain capital expenditures relating to the
development of the Company's fiber optic illumination product line and for
working capital, capital expenditures, possible acquisitions and general
corporate purposes. In order to reduce interest expense, the Company has
paid down its revolving line of credit, retaining an availability to borrow
an additional $2,577,299 as of November 6, 1996.
<PAGE>
ITEM 2. MANAGMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-QSB contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. The Company's actual results
could differ materially from those set forth in the forward-looking statements.
Results of Operations
The following discussion should be read in conjunction with the attached
consolidated financial statements and notes thereto and with the Company's
audited financial statements and notes thereto for the fiscal year ended
December 31, 1995.
Three-month periods ended September 30, 1996 and 1995
Revenues declined $670,598 from $3,165,766 in the quarter ended September 30,
1995 to $2,495,168 in the quarter ended September 30, 1996. Approximately 68%
of the decline was attributable to reduced sales to the U.S. government and
reduced sales of the Company's electronic ballasts. Sales to the U.S.
government declined $279,950 from $363,669 in the quarter ended September 30,
1995 to $83,719 in the quarter ended September 30, 1996, reflecting the
completion in August, 1995 of a contract for borescopes. Sales of the
Company's electronic ballasts declined $174,627 from $196,921 in the quarter
ended September 30, 1995 to $22,294 in the equivalent quarter in 1996, as a
result of the Company's withdrawal from the electronic ballast market. Also,
sales of the Company's printer and recorder products declined $172,060 from
$654,551 in the quarter ended September 30, 1995, to $482,491 in the quarter
ended September 30, 1996, as the Company's OEM customers are experiencing
economy-related lower volumes and inventory overstocks.
Gross Profit declined from $1,211,685 in the third quarter of 1995 to
$993,369 in the third quarter of 1996 due primarily to decreased revenues.
However, gross profit increased as a percentage of sales from 38.3% in third
quarter 1995 to 39.8% in third quarter 1996, reflecting reduced volume in
1996 of low-margin government sales. Operating costs increased from
$968,240 to $1,041,675, due primarily to increased personnel costs including
the addition of a Vice President of Engineering. Interest expense decreased
from $165,348 in 1995 to $149,867 in the comparable 1996 period. Operating
results for the third quarter of 1995 included a $229,865 loss on the sale of
real estate relating to the sale of the Company's former headquarters
facility.
In August, 1996, the $1,500,000 Mortgage Note Payable, which was to mature on
September 1, 1996, was refinanced by a new Mortgage Note totaling $1,500,000.
The new mortgage note matures August 29, 2011 and bears interest at a fixed
rate of 9.25% until August 29, 1999. Thereafter the interest rate will be
adjusted annually to the Prime Rate plus 1%.
Nine month periods ended September 30, 1996 and 1995
Revenues declined $1,541,826 from $9,613,218 in the nine months ended
September 30, 1995 to $8,071,392 in the nine months ended September 30, 1996.
Approximately 43% of the sales drop was experienced in the Company's printer
and recorder business, which declined $655,534 from $2,143,311 in the nine
months ended September 30, 1995 to $1,487,777 in the equivalent period in the
current year, largely due to the Company's OEM customers experiencing
economy-related lower volumes and inventory overstocks in 1996 and the fact
<PAGE>
that 1995 sales benefited from final deliveries gainst a large order from a
single customer. Another 38% of the revenue decline is attributable to reduced
sales of the Company's electronic ballasts which declined $579,264 to $282,367
in the first three quarters of 1996 from $861,631 in the first three quarters
of 1995. Reduced sales in this product line were the result of the Company's
deliberate withdrawal from this market, which has become increasingly
commodity price driven, to focus on sales of higher margin products.
Primarily as a result of the Company's increased focus on industrial lighting
products, sales of industrial task lighting products increased 12% from
$1,529,471 in the nine months ended September 30, 1995 to $1,706,996 in the
nine months ended September 30, 1996.
Gross Profit declined from $3,648,286 in the first three quarters of 1995 to
$2,990,141 in the first three quarters of 1996, primarily due to reduced cost
absorption associated with lower revenues. Operating costs increased from
$2,961,998 to $2,972,647 and interest expense decreased from $499,636 to
$450,007 in the comparable periods.
The 13.5% Subordinated Notes of $1,000,000 (the "13.5% Subordinated Notes"),
which matured on May 6, 1996, were refinanced by a new issue of Convertible
Subordinated Notes (the "7.25% Convertible Subordinated Notes") totaling
$1,350,000. The new notes mature on May 1, 2001, bear interest at 7.25% and
are convertible into shares of the Company's common stock at a price of
$7.375 per share.
The $1,500,000 Mortgage Note Payable, which was to mature on September 1,
1996, was refinanced by a new Mortgage Note totaling $1,500,000. The new
mortgage note matures August 29, 2011 and bears interest at a fixed rate of
9.25% until August 29, 1999. Thereafter the interest rate will be adjusted
annually to the Prime Rate plus 1%.
Liquidity and Capital Resources
The Company finances its operations primarily through third party credit
facilities and cash from operations. Net cash provided by operations was
$405,248 for the nine months ended September 30, 1996 compared to ($311,717)
for the nine months ended September 30, 1995.
The Company's primary third party financing relationship is with Fleet
National Bank of Massachusetts, N.A. (the "Bank"). The initial Credit
Agreement between the Company and the Bank, dated March 6, 1995, provided for
a Short Term Loan due August 1, 1995, a Revolving Line of Credit Loan (the
"Revolving Loan") due March 31, 1998, and a Long Term Loan due March 1, 2001.
The Short Term Loan was paid as agreed in August, 1995. The Revolving Loan
and the Long Term Loan bear interest at the Bank's base rate plus 1/2%. At
September 30, 1996, there was a total of $3,747,568 borrowed under the Credit
Agreement.
Under the terms of the Credit Agreement, the Company is required to comply
with a number of financial covenants including minimum equity, debt service
coverage ratios, debt to equity ratios and minimum net income tests. The
Company was in compliance with its debt covenants as of September 30, 1996.
Company expenditures for capital equipment were $138,778 in the first nine
months of 1996 as compared to $1,311,843 in the same period of 1995, which
was offset by dispositions of $1,114,964 in transactions related to the
purchase of a new headquarters facility and the sale of the former
headquarters building.
<PAGE>
The 13.5% Subordinated Notes were refinanced by the 7.25 % Convertible
Subordinated Notes which are convertible into shares of the Company's common
stock at a price of $7.375 per share. Proceeds of the issuance of the 7.25%
Convertible Subordinated Notes in excess of the amounts required to repay all
amounts which were outstanding under the 13.5% Subordinated Notes will be
used for general corporate purposes.
The $1,500,000 Mortgage Note, which was to mature on September 1, 1996, was
refinanced by a new Mortgage Note totaling $1,500,000. The new mortgage note
matures August 29, 2011 and bears interest at a fixed rate of 9.25% until
August 29, 1999. Thereafter the interest rate will be adjusted annually to
the (Bank of Boston) Prime Rate plus 1%.
On October 25, 1996, the Company completed a public offering of 850,000
shares of the Company's common stock, par value $0.001 per share, at a price
of $5.00 per share, generating $4,250,000 in gross proceeds. All 850,000
shares of common stock in this public offering were offered directly by the
Company. After deducting commissions and offering expenses, the net proceeds
of the offering will be approximately $3,900,000. These net proceeds will
be used to provide funds for certain capital expenditures relating to the
development of the Company's fiber optic illumination product line and for
working capital, capital expenditures,possible acquisitions and general
corporate purposes. In order to reduce interest expense, the Company has
paid down its revolving line of credit, retaining an availability to borrow
an additional $2,577,299 at November 6, 1996.
The Company believes that its available financial resources are adequate to
meet its foreseeable working capital, debt service and capital expenditure
requirements.
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A Special Meeting of Shareholders was held on September 17, 1996, to amend
the Company's Amended and Restated Articles of Organization to increase the
number of authorized shares of Common Stock, par value $0.001 per share, from
2,400,00 shares to 10,000,000 shares. Ofthe 1,712,914 shares outstanding and
eligible to vote, a total of 1,198,021 shares were voted "for" the amendment.
There were no votes "against" the amendment, and no abstentions or broker
non-votes. No other matters came before the meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following is a complete list of Exhibits filed as part of this
Form 10-QSB :
Exhibit
Number Description
3.1 Amended and Restated Articles of Organization of the Company,
incorporated by reference to the Company's Form SB-2, as amended,
File No.333-10655.
27.1 ** Financial Data Schedule
_______
** filed electronically only
b) There were no reports filed on Form 8-K
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereto
duly authorized.
Stocker & Yale, Inc.
November 13, 1996 /s/Mark W. Blodgett
Mark W. Blodgett
Chairman and Chief Executive Officer
November 13, 1996 /s/Susan A.H. Sundell
Susan A. H. Sundell
Sr. Vice President - Finance and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1996M AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 29,176
<SECURITIES> 0
<RECEIVABLES> 1,706,792
<ALLOWANCES> 0
<INVENTORY> 3,930,434
<CURRENT-ASSETS> 6,084,795
<PP&E> 3,143,612
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,168,613
<CURRENT-LIABILITIES> 2,643,035
<BONDS> 0
0
0
<COMMON> 1,713
<OTHER-SE> 8,278,072
<TOTAL-LIABILITY-AND-EQUITY> 19,168,613
<SALES> 8,071,392
<TOTAL-REVENUES> 8,071,392
<CGS> 5,081,251
<TOTAL-COSTS> 2,972,647
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 450,007
<INCOME-PRETAX> (432,513)
<INCOME-TAX> (87,800)
<INCOME-CONTINUING> (344,713)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (344,713)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
