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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004

Commission File Number:  000-27372

 

STOCKERYALE, INC.

(Exact name of registrant as specified in its charter)

Massachusetts

04-2114473

(State of Incorporation)

(I.R.S. Employer Identification Number)

32 Hampshire Road,  Salem, New Hampshire 03079

(Address of registrant's principal executive office)

(603) 893-8778

(Registrant's telephone number)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the 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.  x  Yes  o  No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  o  Yes  x  No

As of November 4, 2004, there were 21,570,238 shares of the issuer's common stock outstanding.

 

 

STOCKERYALE, INC.

INDEX TO FORM 10-Q

 

PART I - FINANCIAL INFORMATION

 
Item 1 Financial Statements  
 
Unaudited Condensed Consolidated Balance Sheets at September 30, 2004 and December 31, 2003 1
 
Unaudited Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2004 and 2003 2
 
Unaudited Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2004 and 2003 3
 
Notes to Unaudited Condensed Consolidated Financial Statements 4
 
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 12
 
Item 3 Quantitative and Qualitative Disclosure About Market Risk    18
 
Item 4 Controls & Procedures 18
 
 

PART II - OTHER INFORMATION

 
Item 1 Legal Proceedings 19
 
Item 2 Changes in Securities 19
 
Item 3 Defaults Upon Senior Securities 19
 
Item 4 Submission of Matters to a Vote of Security Holders 19
 
Item 5 Other Information 19
 
Item 6 Exhibits 19
 
Signature (s) 20
 
i  /  STKR
  
2004 Form 10-Q
Table of Contents
 Part I 
Item 1

ITEM 1.    FINANCIAL STATEMENTS

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

In thousands
 
    
September 30, 2004
    
December 31, 2003
Assets
    
 
 
    
 
 
Current assets:
    
 
 
    
 
 
Cash and cash equivalents
    
$
1,210
    
$
1,008
Accounts receivable, less reserves of approximately $108 at September 30, 2004 and $103 at December 31, 2003
    
 
3,444
    
 
2,102
Inventories
    
 
3,679
    
 
3,799
Prepaid expenses and other current assets
    
 
452
    
 
188
Total current assets
    
 
8,785
    
 
7,097
Property, plant and equipment, net
    
 
19,128
    
 
20,550
Goodwill
    
 
2,677
    
 
2,677
Identified intangible assets, net
    
 
1,224
    
 
1,463
Officer note receivable
    
 
-
    
 
263
Other long-term assets
    
 
609
    
 
639
Total assets
    
$
32,423
    
$
32,689
Liabilities and stockholders' equity
    
 
 
    
 
 
Current liabilities:
    
 
 
    
 
 
Current portion of long-term debt
    
$ 2,556
    
$ 3,365
Short-term debt, net of unamortized discount of $0 at September 30, 2004 and $155 at December 31, 2003
    
 
1,965
    
 
5,091
Accounts payable
    
  2,380
    
2,061
Accrued expenses
    
 
1,325
    
 
943
Short-term portion of capital lease obligation
    
 
43
    
 
47
Total current liabilities
    
 
8,269
    
 
11,507
Long-term debt and capital lease obligations, net of unamortized discount of $2,156 at September 30, 2004 and $957 at December 31, 2003 - less current portion
    
 
4,403
    
 
3,934
Other long-term liabilities 17
    
 
17
Stockholders' equity:
    
 
 
    
 
 
Common stock, par value $0.001-shares authorized 100,000,000; Shares issued and outstanding 21,655,107 and 14,791,123 at September 30, 2004 and December 31, 2003, respectively
    
 
22
    
 
15
Paid-in capital
    
 
81,813
    
 
70,948
Accumulated other comprehensive income (loss)
    
 
1,436
    
 
1,340
Accumulated deficit
    
 
(63,537)
 
(55,072)
Total stockholders' equity
    
 
19,734
    
 
17,231
Total liabilities and stockholders' equity
    
$
32,423
    
$
32,689

See notes to unaudited condensed consolidated financial statements.

 
1  /  STKR
  
2004 Form 10-Q
Table of Contents
 Part I 
Item 1

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

In thousands, except per share data
          
Three Months Nine Months
Ended September 30, Ended September 30,
2004 2003 2004
    
2003
Net sales
    
$
4,852
 
    
$
3,670

$

 13,466 $ 10,840
Cost of sales
 
 
3,392
 
 
 
2,724 9,568
    
8,159
Gross profit
    
 
1,460
 
    
 
946 3,898
    
2,681
Operating expenses:
    
 
 
 
    
 
 
 
    
 
Selling expenses
    
 
676
 
    
 
585 2,076
    
2,134
General and administrative
    
 
1,666
 
    
 
1,009 4,068
    
3,343
Research and development
    
 
832
 
    
 
831 2,445
    
2,647
Intangible asset amortization
    
 
80
 
    
 
80 239
    
239  
Asset Impairment
    
 
0
 
    
 
605 0
    
605
Total operating expenses
    
 
3,254
 
    
 
3,110 8,828
    
8,968
Operating loss
    
 
(1,794
)
    
 
(2,164 ) (4,930 )
    
(6,287 )
Interest and other income/(expense)
    
 
(24 )
    
 
15   (28 )
    
  (115
Debt acquisition and discount amortization expense     516       44       2,957       132  
Interest expense
    
 
196  
    
 
246 550
    
595
Loss before income tax benefit
    
 
(2,530 )
    
 
(2,439 ) (8,465 )
    
(7,129 )
Income tax provision (benefit)
    
 
0
    
 
14 0  
    
(136
Net loss
    
$
(2,530
)
    
$
(2,453 )

$

 (8,465 )
    
$ (6,993 )
Basic and diluted loss per share:
    
 
 
 
    
 
 
 
    
 
Net loss per share
    
$
(0.12 )     
$
(0.17 )

$

 (0.43 )
    
$ (0.52 )
Weighted average shares outstanding:
    
 
 
 
    
 
 
 
    
 
Basic and diluted
    
 
21,651
 
    
 
14,401 19,658 13,501
 
See notes to unaudited condensed consolidated financial statements.
 
2  /  STKR
  
2004 Form 10-Q
Table of Contents
 Part I 
Item 1

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

In thousands

Nine Months Ended
September 30,

 
    
2004
    
2003
Operations
    
    
Net loss
    
$
(8,465
)
    
$
(6,993
)
    
    
Adjustments to reconcile net loss to net cash used in operating activities:
    
    
Depreciation and amortization
    
2,379
    
2,113
Accretion of original issue discount
    
2,335  
    
-  
Asset impairment
    
-
    
605
Loss on disposal of assets
    
24
    
-
Other changes in assets and liabilities:
    
    
Accounts receivable, net
    
(1,342
)
    
(391
)
Inventories
    
120  
    
98  
Prepaid expenses and other current assets
    
(1 )
    
174  
Accounts payable
    
319
 
    
61
 
Accrued expenses
    
382
    
(56 )
Other assets and liabilities
    
38  
    
(180 )
Net cash used in operating activities
    
(4,211
)
    
(4,569
)
Financing
    
    
Proceeds from sale of common stock
    
3,143
    
1,197
Proceeds from long term debt
9,550 6,247
Principal repayment of long-term debt
    
(7,272 )
    
(2,210 )
Net repayments (borrowings) revolving lines of credit
    
(406 )
    
(3,673 )
Restricted cash related to Merrill Lynch
    
 
-
    
 
2,000
Other
(628 )
(102 )
Net cash provided by financing activities
    
4,387
    
3,459
Investing
    
    
Purchases of property, plant and equipment
    
(299 )
    
 
(91 )
Proceeds from asset sales
    
200  
    
503  
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