Stocker & Yale Inc. is a diversified manufacturing company engaged primarily in the production of specialized illumination and photonics products for measuring and inspection equipment in the microscopy machine vision and telecommunications component manufacturing markets. In addition the company manufactures machine tool components and accessories for the automotive and related industries. The company operates in a company-owned facility in Salem New Hampshire and in three leased spaces in Roseville Michigan Singapore and Saint-Laurent Quebec. StockerYale Inc. has a market cap of $3.5 million; its shares were traded at around $0.13 with and P/S ratio of 0.11. StockerYale Inc. had an annual average earning growth of 0.4% over the past 10 years.
Highlight of Business Operations:Operating expenses totaled $2.7 million for the second quarter of 2009, decreasing 34% from $4.1 million for the second quarter of 2008. The decrease in expenses from the prior year was primarily due to acquisition costs for Virtek Vision International, Inc. of $307,000 in 2008, lower costs in 2009 due to cost reduction initiatives of approximately $560,000, and favorable foreign currency impact in 2009 of approximately $400,000.
Other expenses, which are comprised primarily of non-cash debt discount financing costs and foreign currency translation adjustments, resulted in income of $365,000 for the three months ended June 30, 2009, versus expenses of $778,000 in the three months ended June 30, 2008. The benefit arose from translation adjustments due to the weakening of the US dollar against the British Pound (GBP), Euro and the Canadian dollar (CAD) of approximately $1.4 million, a gain of approximately $109,000 from a valuation reduction of the warrant liability, offset by warrant and debt acquisition expenses of approximately $300,000.
Net loss including discontinued operations was $0.7 million or $0.02 per share. This compares to net loss of $2.3 million or $0.06 per share for the second quarter of 2008.
Other expenses, which are comprised primarily of non-cash debt discount financing costs and foreign currency translation adjustments, showed an expense of $0.5 million for the six months ended June 30, 2009, versus an expense of $1.5 million during the six months ended June 30, 2008. The change in expense was mainly from translation adjustments due to the weakening of the US dollar against the British Pound (GBP), Euro and the Canadian dollar (CAD), of approximately $1.3 million, a gain on the valuation of the warrant liability of approximately $145,000, offset by an increase in warrant and debt acquisition expenses of approximately $525,000.
As previously disclosed, on June 28, 2006, the Company entered into the Security Agreement with Laurus. Under the Security Agreement, a 3-year revolving line of credit was established. The Security Agreement provided for (i) a revolving line of credit not to exceed $4.0 million and (ii) a security interest in and lien upon all of the Company s assets in favor of Laurus. Under the Security Agreement, the Company may borrow a total amount at any given time up to $4.0 million, limited to qualifying receivables and inventories. On March 31, 2008, pursuant to the Overadvance Letter, Laurus granted the Company the ability to borrow up to $500,000 over the limit defined by qualified receivables and inventory for one year, expiring March 31, 2009, which was extended to June 28, 2009. On June 28, 2006, the Company issued the 2006 Note in the aggregate principal amount of $4.0 million, to Laurus to evidence the line of credit and the amounts outstanding thereunder. The outstanding principal under the 2006 Note accrued interest at an annual rate of 1% above the prime rate from time to time. All unpaid principal plus accrued but unpaid interest was due and payable on June 28, 2009.
Also, as previously disclosed, on December 28, 2007, the Company issued the Notes to Laurus and its assignees, pursuant to which the Company borrowed an additional $1.0 million from Valens. The Notes amended and restated the secured term notes issued by the Company to Laurus on December 30, 2005 (the “December Note”) and June 19, 2007 (the “June Note”). The terms of the Note issued to Valens (the “Valens Note”) were the same as the June Note, except that the principal amount of the Valens Note consisted of a $1.0 million portion, which was the amount borrowed by the Company from Valens on December 28, 2007, and a $764,684 portion, which was the amount owed to Valens prior to December 28, 2007 under the June Note. The $1.0 million portion of the Valens Note accrued interest at an annual rate of 10.5%. The other Notes amended and restated the December Note and the June Note and reduced the monthly principal payments of the Company by $50,000. The Notes, other than the $1.0 million portion of the Valens Note, accrued interest at an annual rate of 2% above the prime rate from time to time (but in no event less than 8%).
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