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**U.S. SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

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**FORM 10-Q**

**QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF**

**THE SECURITIES EXCHANGE ACT OF 1934**

**FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003**

**Commission File Number:  0-****27372**

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| **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

As of April 30, 2003 there were 12,696,633 shares of the issuer's common stock  outstanding.

 

 

**STOCKERYALE, INC.**

**INDEX TO FORM 10-Q**

** **

**PART I -     FINANCIAL INFORMATION** 	         	     Item 1    Financial Statements (Unaudited) 	      	         	         	      	        Unaudited Condensed Consolidated Balance Sheets at March 31, 2003            and December 31, 20021 	         	         	      	        Unaudited Condensed Consolidated Statement    of Operations for the three months ended March 31, 2003 and 2002 2 	         	         	      	        Unaudited    Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2003 and 20023 	         	         	      	        Notes to Unaudited Condensed Consolidated Financial Statements4 	         	         	     Item 2Management's Discussion and    Analysis of Financial Condition and Results of Operations7   Item 3Quantitative and Qualitative    Disclosure About Market Risk   11 	         	          Item 4Controls & Procedures11    	     
**PART II -     OTHER INFORMATION** 	         	         	     Item 1Legal    Proceedings11 	         	         	     Item 2Changes in Securities11 	         	         	     Item 3Defaults Upon Senior Securities11 	         	         	     Item 4Submission of Matters to a Vote of Security Holders11 	         	         	     Item 5Other    Information11 	         	         	     Item 6Exhibits and Reports on Form    8-K11 	         	         	      	        Signature (s)12 
 

 
i  /  STKR    2003 Form 10-Q Table of Contents Part I Item 1
ITEM 1.        FINANCIAL STATEMENTS

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
**In thousands**     	         
**March 31, 2003**     
**December 31, 2002**Assets      ** **** **         Current assets:      ** **** **         Cash and cash equivalents      **$****674**     $ 3,070 Restricted cash      ** ****2,000**       2,000 Accounts receivable, less       reserves of approximately $95 in 2003 and $155 in 2002      ** ****2,479**       2,200 Inventories      ** ****4,871**       4,478 Prepaid expenses and other       current assets      ** ****625**       747 Total current assets      ** ****10,649**       12,495 Property, plant and equipment,       net      ** ****23,332**       23,650 Goodwill, net of accumulated       amortization      ** ****2,677**       2,677 Identified intangible assets,       net      ** ****1,705**       1,785 Officer note receivable      ** ****249**       249 Other long-term assets      ** ****363**       464 Total assets      **$****38,975**     $ 41,320 Liabilities and stockholders'       equity      ** **** **         Current liabilities:      ** **** **         Current portion of long-term       debt, including obligations in default, net of unamortized discount of $239 in 2003 and $269 in 2002      **$****6,175**     $ 5,306 Short-term debt      ** ****6,329**       7,446 Accounts payable      ** ****1,646**       2,050 Accrued expenses      ** ****1,292**       1,399 Short-term portion of capital       lease obligation      ** ****65**       61 Total current liabilities      ** ****15,507**       16,262 Long-term debt and capital lease       obligations      ** ****81**       96 Commitments and contingencies     ** **** **         Stockholders' equity:      ** **** **         Common stock, par value $0.001-shares authorized 100,000,000;         Shares issued and outstanding         12,782,070 and 12,771,524 at March 31, 2003         and December 31, 2002, respectively      ** ****13**       13 Paid-in capital      ** ****68,650**       68,637 Accumulated other comprehensive           income (loss)     ** ****283**       (266) Accumulated deficit      ** ****(45,559)**    (43,422) Total stockholders' equity      ** ****23,387**       24,962 Total liabilities and       stockholders' equity      **$****38,975**     $ 41,320 
*See notes to unaudited condensed consolidated financial statements.*
     1  /  STKR    2003 Form 10-Q Table of Contents Part I Item 1
UNAUDITED         CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
**In thousands, except earnings per share**     	      	 
**Quarter Ended March 31,**     	      	         **2003**       **2002**  Net sales      **$****3,584**** **     $ 2,908   Cost of sales   ** ****2,635**** **    2,584   Gross profit      ** ****949**** **       324   Operating expenses:      ** **** **** **           Selling expenses      ** ****776**** **       1,034   General and administrative      ** ****1,228**** **       1,857   Amortization expense      ** ****80**** **       88   Research and development      ** ****890**** **       1,764   Total operating expenses      ** ****2,974**** **       4,743   Operating loss      ** ****(2,025****)**       (4,419 ) Interest and other income/(expense)     ** ****(78****)**       9   Interest expense      ** ****184**** **       85   Loss from continuing           operations before income tax provision (benefit)      ** ****(2,287****)**       (4,495 ) Income tax expense (benefit)      ** ****(150****)**       0   Net loss      **$****(2,137****)**     $ (4,495 ) Basic and diluted loss per           share:      ** **** **** **           Net loss per share      **$****(0.17****)**     $ (0.36 ) Weighted average shares           outstanding:      ** **** **** **           Basic and diluted      ** ****12,782**** **       12,475    *See notes to unaudited condensed consolidated financial statements.* 
 

 

 

 

 

 

 

 

 
  2  /  STKR    2003 Form 10-Q Table of Contents Part I Item 1
UNAUDITED CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS
**In thousands**
**Quarter Ended March 31,**     	        **2003**    **2002**Operations    ** **** **** **       Net loss    **$****(2,137****)**    $(4,495)     ** **** **** **       Adjustments to reconcile net loss to net cash used in operating activities:    ** **** **** **       Depreciation and amortization    ** ****730**** **     618 Deferred                 income taxes and other charges    ** ****-**** **     (55)Other changes in assets and liabilities:    ** **** **** **       Accounts receivable, net    ** ****(279****)**     (456)Inventories    ** ****(393****)**     215 Prepaid expenses and other current assets    ** ****122**** **     315 Accounts payable    ** ****(404****)**     (1,670)Accrued expenses    ** ****(108****)**     30 Other assets and liabilities    ** ****49**** **     (49)Net cash used in operating activities    ** ****(2,420****)**     (5,547)Financing    ** **** **** **       Proceeds from sale of common stock    ** ****13**** **     9,724 Proceeds from term note    ** ****985**** **             - Repayments of bank debt    ** ****(1,265****)**     330 Decrease in note receivable ** ****31**** **   -Net cash provided by financing activities    ** ****(236****)**     10,054 Investing    ** **** **** **       Proceeds from land sale    ** ****306**** **       -  Purchases of property, plant and equipment    ** ****(56****)**     (188)Net                 investment in joint venture    ** ****-**** **     141 Net cash used for investing    ** ****250**     	         (47)Effect of exchange rates    ** ****10**** **     159 Net change in cash and equivalents    ** ****(2,396****)**     4,619 Cash and                 equivalents, beginning of year    ** ****3,070**** **     1,576 Cash and equivalents, end of year    **$****674**** **    $6,195 Supplemental disclosure of cash flow information:    ** **** **** **       Interest paid    ** ****184**** **     85 Taxes paid    ** ****-**** **     52 
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