U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________________________________________
FORM 10-QSB
ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1998
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 (I.R.S. employer
or organization) identification no.)
32 Hampshire Road
Salem, New Hampshire 03079
(Address of principal executive offices) (Zip Code)
(603) 893-8778
(Issuer's telephone number)
___________________________
Securities registered under Section 12(b) of the Act:None
Securities registered under Section 12(g) of the Act:
Common Stock, $0.001 par value
(Title of class)
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 filing such requirements for the past 90 days. ___X__Yes _____No
As of May 11, 1998 there were 2,569,894.6 shares of the issuers common stock
outstanding.
Transitional Small Business Disclosure Format: ________Yes ____x____No
<PAGE>
PART 1 FINANCIAL STATEMENTS
ITEM 1.1 CONSOLIDATED BALANCE SHEETS
STOCKER & YALE, INC.
ASSETS
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
<S> (unaudited) (unaudited)
Current Assets:
Cash 149,094 73,520
Accounts Receivable 1,674,889 1,860,624
Prepaid income taxes 735,328 579,332
Inventories 5,106,831 4,957,095
Prepaid Expenses 320,637 117,354
_________ _________
Total current assets 7,986,779 7,587,925
Property, Plant and Equipment, Net 4,079,422 3,857,504
--------- ---------
Note Receivable 1,000,000 1,000,000
--------- ---------
Goodwill, Net of Accumulated Amortization 8,385,800 8,453,000
--------- ---------
Debt Issuance Costs, Net of Accumulated
Amortization 30,938 39,776
--------- ---------
Cash Value Life Insurance 52,546 52,546
_________ _________
$ 21,535,485 $ 20,990,751
LIABILITIES AND STOCKHOLDER'S INVESTMENT
<S>
Current Liabilities: <C> <C>
Current Portion of long-term debt $ 418,033 $ 443,334
Accounts Payable 2,303,251 1,858,936
Accrued Expenses 499,024 541,668
Short Term Lease Obligation 115,072 89,771
_________ _________
Total current liabilities 3,335,380 2,933,709
--------- ---------
Long Term Debt and Capital Lease Obligations 5,820,516 5,383,233
--------- ---------
Other Long Term Liabilities 564,688 564,688
--------- ---------
Deferred Income Taxes 851,904 876,904
_________ _________
Commitments and Contingencies
Stockholder's Investment: Common stock, par value $0.001
Authorized -- 10,000,000 shares at December
31, 1997 and 1996
Issued and outstanding -- 2,569,894 shares
at March 31, 1998 and 2,567,894 shares at
December 31, 1997 2,570 2,568
Paid-in capital 10,832,824 10,822,705
Retained earnings 127,603 406,944
---------- ----------
Total stockholder's investment 10,962,997 11,232,217
---------- ----------
$ 21,535,485 $ 20,990,751
</TABLE>
<PAGE>
STOCKER & YALE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
Net Sales $ 2,435,341 $ 2,733,662
Cost of Sales 1,650,026 1,642,445
___________ ___________
Gross Profit 785,315 1,091,217
Selling Expenses 346,512 428,910
General and Administrative Expenses 553,727 384,785
Research and Development 189,745 174,284
___________ ___________
Operating Loss (304,669) 103,238
Interest Expense (114,672) (77,433)
----------- -----------
Income/(Loss) before income (419,341) 25,805
tax expense/(benefit)
Income Tax Benefit (140,000) 37,500
___________ ___________
Net Loss $ (279,341) $ (11,695)
=========== ===========
Basic Loss Per Share $ (0.11) $ (0.00)
=========== ===========
Basic Diluted Weighted-Average 2,569,894 2,567,894
Common Shares =========== ===========
</TABLE>
<PAGE>
STOCKER & YALE, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31
1998 1997
<S>
Cash Flows from Operating Activities: <C> <C>
Net loss $ (279,341) $ (11,695)
Adjustments to reconcile net loss to
net cash provided by operating
activities
Depreciation and amortization 157,910 140,222
Deferred income taxes (25,000) (30,000)
Other changes in assets and liabilities
Accounts receivable, net 185,735 (214,219)
Inventories (149,736) (299,833)
Prepaid expenses (359,279) (163,141)
Accounts payable 444,320 186,057
Accrued expenses (42,644) (15,158)
Other assets - (52,166)
--------- ---------
Net cash (used in)/provided by operating (68,035) (459,933)
activities --------- ---------
Cash Flows Used for Investing Activities:
Purchases of property, plant and equipment (303,790) (77,296)
--------- --------
Net cash used in investing activities (303,790) (77,296)
--------- --------
Cash Flows from Financing Activities:
Net proceeds from sale of common stock 10,121 -
Payments of bank debt (85,516) (85,195)
Line of Credit Advances 522,794 -
-------- --------
Net cash provided by financing 447,399 (85,195)
activities -------- --------
Net Increase/(Decrease) in Cash and 75,574 (622,424)
Cash Equivalents
Cash and Cash Equivalents, Beginning of Year 73,520 1,244,418
-------- ---------
Cash and Cash Equivalents, End of Year $ 149,094 $ 621,994
---------- ---------
---------- ---------
</TABLE>
<PAGE>
PART 1. FINANCIAL STATEMENTS
Item 1.4 Notes to Financial Statements
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 months ended March 31, 1998 and March 31, 1997, (b) the financial
position at March 31, 1998, and (c) the cash flows for the three month
periods ended March 31, 1998 and March 31, 1997. Interim results are not
necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 31, 1997, 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 included herein should be read in conjunction with the
financial statements and notes included in the Company's Annual Report on
Form 10K-SB.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND OPERATING RESULTS
This Quarterly Report on Form 10-QSB contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 amd 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, 1997.
Fiscal Quarters Ended March 31, 1998 and 1997
Revenues decreased $298,321 from $2,733,662 in the three months ended March 31,
1997, to $2,435,341 in the three months ended March 31, 1998,in spite of an
increase in sales of the Company's Industrial Lighting Products. Industrial
Lighting product revenues increased to $988,732 in the three months ended
March 31, 1998 from $962,224 in the comparable period in 1997, led by sales
of Fiber Optic Lighting products which increased from $48,233 in the first
quarter of 1997 to $184,710 in the first quarter of 1998 and which offset
decreased orders from customers in Southeast Asia resulting from the
devaluation and destabilization of currencies in that region. Substantially
all of the overall decrease in revenues is attributable to the Company's
strategic decision to shift resources to higher margin products such as
Industrial Lighting Products and to de-emphasize its less profitable lines.
In particular, sales of military products (watches and compasses) declined
from $371,641 to $97,568 as the direct result of the conclusion of a
contract with a mail order marketing firm as well as the closing of the
Company's subsidiary in Hong Kong, and sales of Recorder/Printer Products
decreased from $403,273 to $360,831 as customers continue to turn to newer
technology. Sales by the Company's Stilson-Die Draulic Division remained
relatively flat at $996,524 in the three months ended March 31, 1997 and
$988,568 in the first three months of 1998.
Gross Profit decreased from $1,091,217 in the first three months of 1997
to $785,315 in the comparable period in 1998, largely as a result of
reduced absorption of fixed costs caused by lower revenues. The Company
recorded a pretax loss of $(419,341) for the period ended March 31, 1998
which was a decrease from the reported net income of $25,805 for
the period ended March 31, 1997. Contributing factors to the Company's
decreased income included an increase in interest expense of approximately
$37,000 as a result of an increase in the Company's outstanding debt and an
increase in General and Administrative expenses by approximately $170,000
largely attributable to transactions reported in 1997, including a one time
reduction in fringe benefit expense and favorable foreign exchange. Selling
expenses decreased by approximately $82,000 from the period ended March 31,
1997 to the period ended March 31, 1998. Research and development costs
remained generally unchanged between the two periods.
Liquidity and Capital Resources
The Company has historically financed its operations primarily through third
party credit facilities and cash from operations. Net cash used in
operations was $(68,035) for the quarter ended March 31, 1998 and $(459,933)
for the quarter ended March 31, 1997.
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 (the "Credit
Agreement"), provided for a short term loan (the "Short Term Loan") due
August 1, 1995, a revolving Line of Credit Loan (the "Revolving Loan") and a
term loan (the "Term Loan") both due March 31, 1998. The Short Term Loan
was paid as agreed in August 1995. On March 30, 1998, the Company entered
into an agreement to extend the maturity dates of its revolving line of credit
and term loan to January 2, 1999. The Revolving Loan and the Term Loan
bear interest at the Bank's base rate plus 1% through June 30, 1998 and
at the Bank's base rate plus 2% from July 1, 1998 through the maturity
date. The Company will pay quarterly extension fees of $10,000 on March 31,
1998 and $20,000 on June 30, 1998, and monthly extension fees of $7,000
payable on the last days of July, August and September and $10,000 payable
on the last day of October, November and December. At March 31, 1998 there
was a total of $2,965,532 outstanding under the Credit Agreement, of which
$1,829,846.87 pertained to the Revolving Loan. The Company is exploring
financing alternatives and intends to refinance before maturity. At this
time, the terms of such refinancing cannot be determined by the Company.
Under the terms of the Credit Agreement, the Company is required to comply
with a minimum net income test. For the period ended March 31, 1998, the
Company was in compliance with the covenant.
The Company has issued and outstanding Subordinated Notes outstanding totaling
$1,350,000. These notes mature on May 1, 2001. They bear interest at 7.25%
and are convertible into shares of the Company's common stock at a price
of $7.375 per share.
On May 20, 1997 the Company entered into an equipment line of credit
agreement with Granite State Bank to finance capital equipment related to
new product development. The facility provides that equipment purchases
will be converted quarterly into a series of five year notes, not to exceed
$500,000 in the aggregate, bearing interest at the prime rate plus .75%.
As of March 31, 1998, the Company had outstanding debt of $200,985 against
this line of credit.
The Company's accounts payable increased 24% from the period ended December
31, 1997 to the period ended March 31, 1998. Professional fees accounted
for most of this increase, for services primarily relating to the pending
acquisition described below.
Company expenditures for capital equipment were $303,790 in the first quarter
of 1998 as compared to $77,296 in the same period of 1997. The majority
of the 1998 expenditures related to the purchase of new CNC machinery at the
Company's Stilson Die-Draulic division.
The Company contemplates that it may seek to raise additional capital by the
issuance of equity, the proceeds of which may be used, among other things, in
connection with refinancing its senior credit facility. The Company believes
that its available financial resources are adequate to meet its foreseeable
working capital, debt service and capital expenditure requirements through
January 1, 1999.
Acquisitions
On March 16, 1998, the Company entered into an agreement to acquire Lasiris,
a Canadian company that manufactures and distributes lasers and related
products for the machine vision industry. The purchase price is approximately
$5.4 million and the acquisition is expected to close in May 1998. The
acquisition will be financed in part through the issuance of additional equity
and in part through the incurrence of additional indebtedness.
PART II
ITEM. 5 OTHER INFORMATION
ITEM. 6 EXHIBITS, LISTS 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
- ------- -----------
27.1 Financial Data Schedule
(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.
- --------------------
May 14, 1998 /s/ Mark W. Blodgett
--------------------
Mark W. Blodgett, Chairman and Chief Executive Officer
May 14, 1998 /s/ Susan A. H. Sundell
-----------------------
Susan A. H. Sundell, Senior Vice President-Finance and Treasurer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS FOR THE THREE
MONTH PERIOD ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CAPTION>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MARCH-31-1998
<CASH> 149,094
<SECURITIES> 0
<RECEIVABLES> 1,674,889
<ALLOWANCES> 0
<INVENTORY> 5,106,831
<CURRENT-ASSETS> 7,986,779
<PP&E> 4,079,422
<DEPRECIATION> 0
<TOTAL-ASSETS> 21,535,485
<CURRENT-LIABILITIES> 3,335,380
<BONDS> 0
0
0
<COMMON> 2,570
<OTHER-SE> 10,960,427
<TOTAL-LIABILITY-AND-EQUITY> 21,535,485
<SALES> 2,435,341
<TOTAL-REVENUES> 2,435,341
<CGS> 1,650,026
<TOTAL-COSTS> 1,089,984
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 114,672
<INCOME-PRETAX> (419,341)
<INCOME-TAX> (140,000)
<INCOME-CONTINUING> (279,341)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (279,341)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
