<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
Commission file number 0-5460
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STOCKER & YALE, INC.
(Name of small business issuer in its charter)
MASSACHUSETTS 04-2114473
(State of other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
32 HAMPSHIRE ROAD
SALEM, NEW HAMPSHIRE 03079
(Address of principal executive offices) (Zip Code)
(603) 893-8778
(Issuer's telephone number)
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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 April 30, 1999 there were 3,358,306 shares of the issuer's common stock
outstanding.
Transitional Small Business Disclosure Format (check one): ____Yes ___X_No
<PAGE>
PART I FINANCIAL STATEMENTS
ITEM 1.1 CONSOLIDATED BALANCE SHEETS
STOCKER & YALE, INC.
<TABLE>
<CAPTION>
March 31, 1999 December 31,1998
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(unaudited) (audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 12,357 $ 85,854
Marketable Securities 82,208 86,407
Accounts receivable, net of reserves of $208,016 and $209,000 in 1999 and 1998,
respectively 2,203,518 2,131,472
Prepaid taxes 368,979 373,039
Inventory 6,144,922 6,260,779
Prepaid expenses 328,280 276,565
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Total current assets 9,140,264 9,214,116
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PROPERTY, PLANT AND EQUIPMENT, NET 4,238,663 4,340,654
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GOODWILL, NET OF ACCUMULATED AMORTIZATION 2,421,484 2,470,796
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IDENTIFIED INTANGIBLE ASSETS 2,807,589 2,902,675
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OTHER ASSETS 52,546 52,546
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$ 18,660,546 $ 18,980,787
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LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Current portion of long-term debt $ 3,762,745 $ 4,420,085
Accounts payable 2,686,110 3,134,933
Accrued expenses 889,653 756,970
Short-term lease obligation
224,046 224,046
Total current liabilities 7,562,554 8,536,034
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LONG-TERM DEBT 4,543,247 3,691,140
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OTHER LONG-TERM LIABILITIES 564,688 564,688
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DEFERRED INCOME TAXES 1,505,254 1,501,925
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STOCKHOLDERS' INVESTMENT:
Common stock, par value $0.001
Authorized--10,000,000
Issued and outstanding--3,802,452 and 3,679,448 shares at March 31, 1999 and
December 31, 1998, respectively 3,803 3,679
Paid-in capital 14,424,720 14,224,841
Accumulated other comprehesive income 26,538 57,432
Accumulated deficit (9,970,258) (9,598,952)
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Total stockholders' investment 4,484,803 4,687,000
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$ 18,660,546 $ 18,980,787
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</TABLE>
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PART I FINANCIAL STATEMENTS
ITEM 1.2 CONSOLIDATED STATEMENTS OF OPERATIONS
STOCKER & YALE, INC.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
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1999 1998
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(unaudited) (unaudited)
<S> <C> <C>
NET SALES $ 3,420,827 $ 2,435,341
COST OF SALES 2,107,198 1,650,026
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Gross profit 1,313,629 785,315
SELLING EXPENSES 457,803 346,512
GENERAL AND ADMINISTRATIVE EXPENSES 808,498 553,727
RESEARCH AND DEVELOPMENT 222,214 189,745
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Operating loss (174,886) (304,669)
INTEREST EXPENSE 171,572 114,672
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Loss before income taxes (346,548) (419,341)
INCOME TAX EXPENSE/(BENEFIT) 24,848 (140,000)
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Net loss $ (371,306) $ (279,341)
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BASIC LOSS PER SHARE $ (0.10) $ (0.11)
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BASIC WEIGHTED-AVERAGE COMMON SHARES 3,680,816 2,569,894
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</TABLE>
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PART I FINANCIAL STATEMENTS
ITEM 1.3 CONSOLIDATED STATEMENTS OF CASH FLOWS
STOCKER & YALE, INC.
<TABLE>
<CAPTION>
Three Months Ended
March 31
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1999 1998
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(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (371,306) $ (279,341)
Adjustments to reconcile net loss to net cash used in/provided by operating
activities-
Depreciation and amortization 355,069 157,910
Deferred income taxes 3,329 (25,000)
Other changes in assets and liabilities-
Accounts receivable, net (72,046) 185,735
Inventories 115,857 (149,736)
Prepaid income taxes 4,060 --
Prepaid expenses (51,715) (359,279)
Accounts payable (448,823) 444,320
Accrued expenses 132,683 (42,644)
Other assets -- --
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Net cash used in operating activities (332,892) (68,035)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (108,681) (303,790)
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Net cash used in investing activities (108,681) (303,790)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock 200,003 10,121
Payments of bank debt (2,856,526) (85,516)
Proceeds from bank debt 3,051,293 522,794
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Net cash used in/provided by financing activities 394,770 447,399
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EXHANGE RATE EFFECTS ON CASH (26,694) --
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NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (73,497) 75,574
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 85,854 73,520
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 12,357 $ 149,094
----------- -----------
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest 158,035 103,498
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Cash paid for taxes 5,456 --
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</TABLE>
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PART 1. FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
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 31,1999 and March 31,1998, (b) the financial position at March
31,1999, and (c ) the cash flows for the three month periods ended March
31,1999 and March 31,1998. Interim results are not necessarily indicative of
results for a full year.
The consolidated balance sheet presented as of December 31,1998, 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.
On May 13, 1998, the Company acquired Lasiris, Inc. The acquisition was
accounted pursuant to the purchase method of accounting and accordingly, the
Company's financial statements include the results of operations for Lasiris
since the acquisition date.
2. Earnings per Share
The Company has reported a net loss for the three months ended March 31, 1999
and 1998. Accordingly, all options, warrants and convertible securities have
been excluded from diluted earnings per share as they would be antidilutive.
3. Segment Information
The Company's operations were conducted primarily within the following
industry segments for the three months ended March 31, 1999 and 1998:
<TABLE>
<CAPTION>
Three Months Ended March 31, 1999
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Measuring and Machine
Inspection Components and
Instruments Accessories Total
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<S> <C> <C> <C>
Net sales $ 2,718,179 $ 702,648 $ 3,420,827
Operating income (loss) (123,290) (51,596) (174,886)
Three Months Ended March 31, 1998
----------------------------------------------------
Measuring and Machine
Inspection Components and
Instruments Accessories Total
------------ --------------- ------------
Net sales $ 1,446,773 $ 988,568 $ 2,435,341
Operating income (loss) (167,335) (137,334) (304,669)
</TABLE>
<PAGE>
4. Comprehensive Income/(loss)
For the year ended December 31, 1998, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income." This pronouncement sets forth requirements
for disclosure of the Company's comprehensive income and accumulated other
comprehensive items. In general, comprehensive income combines net income and
"Other comprehensive items includes certain amounts that are reported as
components of shareholders' investment in the accompanying balance sheet,
such as foreign currency translation adjustments and unrealized, net of tax,
gains and losses from available-for-sale investments.
During the three month periods ended March 31, 1999 and 1998, the Company's
comprehensive loss was $402,200 and $279,341, respectively.
<PAGE>
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 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, 1998.
On May 13, 1998, the Company acquired Lasiris, Inc. The acquisition was
accounted pursuant to the purchase method of accounting and accordingly, the
Company's financial statements include the results of operations for Lasiris
since the acquisition date.
FISCAL QUARTERS ENDED MARCH 31, 1999 AND 1998
Net sales for the three months ended March 31, 1999 were $3,420,827 compared
to $2,435,341 in the comparable period in the prior year, which represents an
increase of approximately 40.5% or $985,486. Sales from the Company's
lighting products were $2,334,005 compared to $988,372 in the comparable
period in 1998, an increase of $1,345,633 or 136.2%. This increase was
largely due to the addition of laser lighting sales contributed by Lasiris,
Inc., microscope lighting sales from the Company's Singapore subsidiary,
Radiant Asiatec Pte., Ltd. and increased fiber optic lighting sales from the
Company's Salem division. These increases reflect the Company's strategic
business decision to shift its focus over the last two years toward
industrial lighting products and away from other products with lower gross
margins. Net sales from military products, largely compasses and watches,
were $111,360 compared to $97,570 in the first quarter in 1998, an increase
of 14%. Net sales from the Company's printer and recorder products declined
approximately 24.4% to $272,817 from $360,831 in the prior year mostly due to
lower unit sales of older, mature products. Net sales of machine components
and accessories were $702,648 or 28.9% lower than the previous years' sales
of $988,568.
Gross profit for the three months ended March 31, 1999 was $1,313,629
compared to $785,315 for the comparable period in 1998, and improved as a
percentage of net sales to 38.4% compared to 32.3% for the same period in the
prior year. The increase in gross profit was mainly due to the increase in
sales from the Company's lighting products which carry a higher gross margin.
Loss from operations for the three months ended March 31, 1999 was $174,886
compared to loss of $304,669 for the three months ended March 31, 1998. The
lower operating loss reflects higher gross profit on increased sales, which
was partially offset by higher operating expenses. Operating expenses for the
three months ended March 31, 1999 increased $398,531 to $1,488,515 compared
to $1,089,984 for the corresponding period in the prior year but decreased as
a percentage of net sales to 43.5% in the period ended March 31, 1999 from
44.8% of net sales for the corresponding period in the prior year. The
increase in operating expenses were mostly due to the integration of Lasiris,
Inc and higher banking fees associated with transfer of the Company's credit
facility. Selling expenses were $457,803 or 13.4% of net sales in the period
ended March 31, 1999 compared to $346,512 or 14.2% of net sales in the
comparable period. General and administrative expenses were $808,498 or 23.6%
of net sales compared to $553,727 or 22.7% of net sales in the prior year.
Engineering expenses were
<PAGE>
$222,214 or 6.5% of net sales compared to $189,745 or 7.8% of net sales in
the comparable period of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has financed its operations primarily through third
party credit facilities and cash from operations. Net cash used in operations
was $332,892 for the three months ended March 31, 1999 which resulted
primarily from a decrease in accounts payable of $448,823 and a net loss of
$371,306, which was partially offset by non-cash charges of $355,069 of
depreciation and amortization expenses.
On February 11, 1999 the Company entered in a new credit agreement with Wells
Fargo Business Credit, Inc., formerly Norwest Business Credit, Inc., ("Wells
Fargo") with total borrowing availability up to $3,500,000. Initial proceeds
were used to payoff the credit agreement between the Company and Fleet
National Bank of Massachusetts, N.A. This new credit facility with Wells
Fargo consists of a $500,000 term loan that requires 60 monthly principal
payments of $8,334, beginning April 1, 1999. The credit facility also
provides for a revolving line of credit of up to $3.5 million less the amount
of the term loan. The amount available for borrowing under this facility is
also subject to a defined borrowing base consisting of eligible accounts
receivable and inventory. As of April 30, 1999, $2,375,680 was outstanding
under the term loan and revolving credit line and $151,307 was available for
additional borrowings. The outstanding principal balance of all advances
under this credit facility bear interest at a floating rate of the bank's
base rate plus 2.5%. The Company's obligation under the Wells Fargo credit
agreement is evidenced by a demand note and may be terminated at any time by
Wells Fargo in its sole discretion, prior to the stated maturity date of
March 1, 2002. The Company's obligations under this credit facility are
secured by substantially all of the Company's assets other than real
property. In addition, Mark W. Blodgett, the Company's Chief Executive
Officer, has unconditionally guaranteed all amounts outstanding. The Credit
and Security Agreement between the Company and Wells Fargo require the
Company to comply with certain affirmative and negative covenants.
On January 21, 1999, the Company entered into an $824,000 mortgage loan with
Comerica Bank, which matures on January 1, 2004 and is secured by a first
mortgage on the Fraser, Michigan property. The loan bears interest at
Comerica's prime rate. Payments are amortized over a 15-year period assuming
a 7.75% rate of interest.
In connection with the Lasiris acquisition, the stockholders of Lasiris
received cash in an aggregate amount of approximately $3.3 million and
444,146 shares of capital stock of LHI, which are exchangeable for shares of
the Company's common stock on a one for one basis. The aggregate value of the
shares was deemed to be $1,732,167 as of May 13, 1998.
On May 13, 1998, the Company entered into a $750,000 second mortgage loan
with Danvers Savings Bank (the "Danvers Loan"). This loan bears interest at a
rate of 11%, requires monthly payments of interest only, and its original
maturity date of May 13, 1999 has been extended 90 days. The Danvers Loan
generated net proceeds after expenses of $731,196, which were used to finance
a portion of the Lasiris acquisition. The balance at March 30, 1999 is
$750,000.
Also on May 13, 1998, Lasiris entered into a credit agreement with Toronto
Dominion Bank ("TD Bank"). The credit agreement provides for (i) a $1,000,000
CDN Operating Line of Credit (the "TD Line of Credit"); (ii) a $1,000,000 CDN
Term Loan (the "TD Four Year Term Loan"); (iii) an $83,333 CDN Term Loan (the
"TD Two Year Term Loan"); and (iv) a $4,461 CDN Letter of Guarantee of (the
"Letter of Guarantee"). The TD Line of Credit bears interest at 1% over the
TD Bank prime rate, requires monthly payments of interest only, and is
<PAGE>
payable on demand. As of March 31, 1999, borrowings on the TD Line of Credit
were $907,957 CDN ($601,794 US). The TD Four Year Term Loan bears interest at
2% over the TD Bank prime rate, matures on May 13, 2002, and requires monthly
principal payments of $20,833 CDN (approximately $14,500 US) plus interest.
As of March 31, 1999, the outstanding balance on the TD Four-Year Term Loan
was $791,667 CDN ($524,717 US). The TD Two Year Term Loan bears interest at
2% over the TD Bank prime rate, matures on May 13, 2000, and requires monthly
principal payments of $4,167 CDN (approximately $2,900 US) plus interest. As
of March 31, 1999, the outstanding balance on the TD Two-Year Term Loan was
$41,667 CDN ($27,617 US).
On May 20, 1997 the Company entered into an equipment line of credit
agreement with Granite Bank to finance capital equipment related to new
product development. The line of credit 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, 1999, the Company had borrowed $299,669 against such line of
credit.
The Company has issued and outstanding Subordinated Notes in an original
principal amount of $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.
From time to time, the Company contemplates raising additional capital by the
issuance of equity securities, the proceeds of which may be used, among other
things, in connection with refinancing existing indebtedness. Although the
Company has no reason to believe that Wells Fargo will do so, the structure
of the Company's credit facility with Wells Fargo allows the lender to
terminate the facility and demand payment of the Company's obligations at any
time. In addition, the availability for borrowing under the Wells Fargo
credit facility is limited by a defined borrowing base of eligible accounts
receivable and inventory, which fluctuates from time to time. The Danvers
Loan maturity date has been extended 90 days to August 11, 1999 and. while
the Company is in discussions with lenders regarding extending or refinancing
the loan, the Company can give no assurance as to whether a refinancing will
be in place prior to the maturity date. Assuming Wells Fargo does not
terminate the Wells Fargo credit facility and demand repayment, the Company's
borrowing base remains at its current level or higher and that the Danvers
Loan is refinanced prior to maturity, the Company believes that its available
financial resources are adequate to meet foreseeable working capital, debt
service and capital expenditure requirements through the next twelve months.
If these factors do not continue as expected, then the Company's lenders may
declare a default and the Company would not be able to continue to operate.
YEAR 2000 READINESS
THE STATEMENTS IN THE FOLLOWING SECTION INCLUDE "YEAR 2000 READINESS
DISCLOSURE" WITHIN THE MEANING OF THE YEAR 2000 INFORMATION AND READINESS ACT.
The Company has undertaken a plan to address the potential impact to
its business of "Year 2000 issues" (i.e., issues that may arise as a result
of computer programs that use only the last two, rather than all four, digits
of the year). The plan addresses Internal Matters, which relate to the
Company's operations and over which the Company exercises some control, and
External Matters, which are outside the Company's control and influence. The
Company is well under way in its plans to review internal matters and has
begun to review external matters related to its customer and supplier base.
Internal Matters
<PAGE>
Review of Internal Matters is the first phase of the Company's Year 2000
Compliance Program and is broken down into five categories; each are
identified and addressed separately below.
1) Mission critical hardware, operating system, and associated equipment such
as terminals and printers.
The Company utilizes an IBM AS/400 hardware platform to support its
mission critical software. The hardware, operating system, and related
software components were upgraded to a RISC-based architecture with
operating system version 3.7 in 1997. All hardware and software listed
above have been represented to be Year 2000 Compliant by IBM.
All associated peripherals including terminals, printers, and modems
have been confirmed compliant by suppliers with the exception of 5
terminals which will be eliminated or replaced at an approximate cost of
$2,000 or less.
2) Mission Critical Software
The Company's primary information systems software have been reviewed
and have been, or will be, upgraded as follows:
a) Integrated Manufacturing Software, MACPAC written by Andersen
Consulting and supported by The Development Center, Inc.
MACPAC was upgraded in 1997 so that it would function with the
Company's upgraded computer system hardware. The cost for the new
software was approximately $80,000. The company completed
installation of MACPAC Year 2000 compliant Version 10.2 in March of
1998. This software is represented by Andersen Consulting to be Year
2000 compliant.
b) Payroll Software, MAPICS supported by MARCAM
The MAPICS Payroll software was upgraded to the Year 2000 Compliant
Version DB Mod 4, PTF 4000 in November 1997. This software is
represented by Marcam to be Year 2000 compliant. As of April 1,
1999, the Company elected to utilize an outsource payroll processing
company which has represented to the Company that it is fully Year
2000 compliant.
c) Marketing Sales Management (MSM) Software supported by IMA
The Year 2000 compliant version of MSM became available in November
1998. The Company installed Year 2000 Compliant Version 6.5A in
February 1999. This software is represented by IMA to be Year 2000
compliant.
3. Personal Computer Hardware and Software
The Company also utilizes a number of personal computers which are
operated independently (i.e., not linked by a network). These computers
use a wide variety of software packages and are of various ages. The
Company has compiled an inventory of these personal computers, their
hardware, as well as their operating systems and installed application
software packages. This information will be assessed initially to
determine if suppliers represent that they are Year 2000 compliant. The
Company estimates that it has completed approximately 85% of this
assessment (preliminary results indicate compliance for the majority,
with minor
<PAGE>
issues relating to Windows 95). Following the assessment phase, the
Company will undertake to upgrade and replace software and, if
necessary, replace personal computers so that all equipment and software
is represented compliant by the providers. The Company estimates that
the cost for such upgrades and replacements will not exceed $30,000. The
Company is in the process of obtaining written certification of Year
2000 testing and performing our own in-house Year 2000 tests.
The Company intends to fund Year 2000 upgrades and changes through operating
cash flow and indebtedness. Software upgrades related to Year 2000 are
captured as part of the individual software's annual upgrade charge; hardware
upgrades are budgeted at $30,000.
4. The Products and Product Components manufactured by the Company
Comprehensive review and testing has been completed for all of the
Company's products. As a part of this process, the Company's engineers
have compiled a Product Compliance Listing (the "List") to inform
customers regarding "year 2000 compliance readiness" of products
manufactured by the Company. A copy of the List is available from the
Company upon request and will be posted on the Company's Web site at
www.stkr.com. The List denotes those products that are "Year 2000
Compliant", those that are not affected by "Year 2000 Compliance", and
those that do not meet the definition "Year 2000 Compliant" set forth
below.
YEAR 2000 COMPLIANT: The Company's products identified on the List
as "Compliant" will be able to accurately process date
(including leap year); provided that, at the commencement of
the Year 2000; (1) the products were functioning normally as
specified in their operator's manuals; (2) the products have
been used and will continue to be used in accordance with the
terms of the limited warranty and operator's manual given with
the products at the time of original purchase, regardless of
whether this warranty has expired; and (3) any products which
are connected or integrated to the products listed on the List
are also Year 2000 Compliant.
NOT APPLICABLE: Certain of the Company's products indicated on the
List do not have a date function and, therefore, do not present
any Year 2000 readiness issues. These products are identified
by the phrase "Not Applicable" on the List.
NON-COMPLIANT: Company products which have a date function and which
do not meet the definition of Year 2000 Compliant set forth
above are identified as "Non-Compliant" on the List.
A letter along with the List are available by request and can be viewed
on the Company's Web site as a convenience for our customers. The
information in this letter will be subject to, and will not supplement,
extend or modify any agreement between the Company and the customer
relating to the applicable product, including the period, terms,
conditions or scope of any warranty given with respect to the Products
at the time of original purchase. The Company makes no representation or
warranty as to, and will not address, the Year 2000 readiness of any
hardware, firmware, software (such as any BIOS or operating system),
services protocols, data, interfaces to third party systems, or user
customized functions or features that may be used with the Company
software other than those Company products listed on the List. Products
that it has manufactured, distributed or sold over the course of its
fifty year history but which the Company is not currently manufacturing
or servicing are not included on the List and have not been tested for
Year 2000 compliance. The Company does not plan to test any products
other than those listed on the List and will not provide Year 2000
support for any products other than those identified on the list so that
the Company can focus its efforts on those products about which its
customers will be most concerned. The Company also will
<PAGE>
not be assessing the Year 2000 compliance of any products manufactured
or sold by third parties. The Company's current products should not be
affected by the potential failure of such third party products because
all of its products function independently of other equipment. The
information contained on the List is based on data available to Stocker
& Yale at the time of its preparation. From time to time, Stocker & Yale
may change the information in the List without notice to the customer.
The information contained in the List is provided "as is", without
warranties or guarantees of any kind.
As a result of the product review and testing process, the Company has
determined that Year 2000 compliance exposure is limited to certain
older model Printer products that incorporate date functionality which
does not interfere with normal operation of the printers. Those printers
will not be made Year 2000 Compliant. However, this will not preclude
the customer(s) from utilizing the product. Surveys of the primary
customers indicated that they are not using the date functionality.
Therefore, management believes the risk of potential impact to revenue
to be less than $25,000 per year, and that the current customer base
will probably continue to purchase the product(s) regardless of the
Non-Compliant designation.
5. Ancillary systems such as test equipment, communications equipment and
security systems
The Company's ancillary systems are largely provided by third parties,
most of which have not yet completed their own assessments of Year 2000
exposure. The Company will continue to solicit such information from
these third parties. Due to the incompleteness of this information,
contingency plans have not yet been finalized. The following is a list
of known Year 2000 issues:
Stilson Division Telephone System $3,000 to Upgrade for
Year 2000 Compliance
Salem Division Telephone System Manual Clock Date Set Required
The Company estimates that it has completed approximately 75% of its year
2000 Plan regarding Internal Matters. The Internal Matter review process is
planned for completion by the end of the second quarter 1999.
External Matters
The Company has commenced a review of External Matters that are outside the
Company's control and influence. This process comprised of a review and
assessment of the customer and supplier relationships that could have a
potential material impact upon the Company and its ongoing operations by
means of analysis of response to questionnaires sent to these parties. As a
result of the preliminary nature of the Company's review of External Matters,
a contingency plan has not yet been developed and there can be no assurance
that Year 2000 problems resulting from customer or supplier relationships
will not have a material adverse impact on the Company. The Company
anticipates completion of this process by the first half of 1999.
The Company estimates that it has completed approximately 60% of its overall
Year 2000 plan. Although the Company believes that it has an effective plan
in place that will resolve any Year 2000 issues in a timely manner, the
Company may be adversely impacted by Year 2000 issues if its proposed
updates, modifications or replacements are not completed on schedule. In the
event that third parties do not complete the necessary remediation, the
Company could be subject to interruption of its normal business activities,
including its ability to take customer orders, manufacture and ship products,
invoice customers, collect payments or engage in similar business activities.
Such an event could result in a material adverse effect on the Company's
revenues or in litigation surrounding such business interruptions. In
addition, disruptions in the economy generally resulting from the Year 2000
issue could materially adversely affect the Company. The amount of potential
liability and revenues cannot reasonably be estimated at this time.
<PAGE>
PART II
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 17, 1999 /S/ MARK W. BLODGETT
--------------------
Mark W. Blodgett,
Chairman and Chief Executive Officer
May 17, 1999 /S/ GARY B. GODIN
-----------------
Gary B. Godin,
Senior Vice President-Finance and Treasurer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 12,357
<SECURITIES> 82,208
<RECEIVABLES> 2,203,518
<ALLOWANCES> 208,016
<INVENTORY> 6,144,922
<CURRENT-ASSETS> 9,140,264
<PP&E> 9,817,491
<DEPRECIATION> 5,578,828
<TOTAL-ASSETS> 18,660,546
<CURRENT-LIABILITIES> 7,562,554
<BONDS> 4,543,247
0
0
<COMMON> 3,803
<OTHER-SE> 4,481,000
<TOTAL-LIABILITY-AND-EQUITY> 18,660,546
<SALES> 3,420,827
<TOTAL-REVENUES> 3,420,827
<CGS> 2,107,198
<TOTAL-COSTS> 2,107,198
<OTHER-EXPENSES> 1,488,515
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 171,572
<INCOME-PRETAX> (346,548)
<INCOME-TAX> 24,848
<INCOME-CONTINUING> (371,306)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (371,306)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
