U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
            
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998

Commission file number 0-5460
____________________________________________


STOCKER & YALE, INC.
(Name of small business issuer in its charter)


Massachusetts                          
(State or other jurisdiction of incorporation or organization)      

04-2114473
(I.R.S. employer identification no.)

32 Hampshire Road
Salem, New Hampshire                                 03079
(Address of principal executive offices)           (Zip Code)

(603) 893-8778
(Issuer's telephone number)

____________________________________________
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 
uch 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 November 13, 1998 there were 3,364,340 shares of the issuer's common 
stock outstanding.

Transitional Small Business Disclosure Format (check one):  
_______Yes     ____X___No


Page 1 of 13


<PAGE>




                              PART I FINANCIAL STATEMENTS
                        Item 1.1  CONSOLIDATED BALANCE SHEETS
                                 STOCKER & YALE, INC.

                                      ASSETS
<TABLE>
<CAPTION>

                                 September 30,1998    December31,1997       
                                    (unaudited)          (audited)
<S>
CURRENT ASSETS:
                                  <C>                  <C>       
Cash                              $      133,713       $	    73,520
Accounts Receivable                    2,085,692          1,860,624
Prepaid Taxes                            503,022            579,332
Inventory                              5,961,724          4,957,095
Prepaid expenses                         332,894            117,354
Total current assets                   9,017,045          7,587,925

PROPERTY, PLANT AND EQUIPMENT, NET 	   4,242,537          3,857,504

NOTE RECEIVABLE                                -		        1,000,000

GOODWILL, NET OF ACCUMULATED           2,560,534 	        8,453,000
AMORTIZATION

IDENTIFIED INTANGIBLE ASSETS           2,961,361                 -

OTHER ASSETS                              76,457             92,322   

                                    $	18,857,934       $	20,990,751

                LIABILITIES AND STOCKHOLDERS' INVESTMENT
<S>
CURRENT LIABILITIES:
                                    <C>                <C>
Current portion of long-term debt   $    215,912      	$    443,334
Short Term Debt                          746,796                  -
Accounts payable                       2,975,221          1,858,936
Accrued expenses                         810,570 	          541,668
Accrued Taxes                            129,038	                 -
Current Lease Obligations                197,062             89,771
Total current liabilities              5,074,599         	2,933,709

LONG-TERM DEBT	                        5,357,436          3,809,658

LONG TERM LEASE OBLIGATIONS              634,246            223,575
OTHER LONG-TERM LIABILITIES              564,688            564,688
SUBORDINATED NOTES                     1,350,000          1,350,000
DEFERRED INCOME TAXES                  1,870,567            876,904

STOCKHOLDERS' INVESTMENT:
Common stock, par value $0.001             3,364              2,568

Authorized-10,000,000 
Issued and outstanding-3,364,340 
shares at September 30, 1998 and  
2,567,894 shares at December 31, 1997

Cumulative Translation AdjustmenT        (30,537)                 -
Paid-in capital                       13,688,913         10,822,705
Retained earnings                     (9,655,342)	          406,944

Total stockholders' investment         4,006,398 	       11,232,217

                                   $  18,857,934       $	20,990,751
</TABLE>
<PAGE>

                        PART I FINANCIAL STATEMENTS
            Item 1.2  CONSOLIDATED STATEMENTS OF OPERATIONS
                           STOCKER & YALE, INC.
                               (UNAUDITED)

<TABLE>
<CAPTION>

                   Three Months Ended                  Nine Months Ended
                     September 30,                       September  30,
                 1998             1997               1998            1997


<S>           <C>            <C>                 <C>            <C>         
NET SALES     $	3,563,158    $  2,689,583        $	9,058,439    $ 8,227,525

COST OF SALES   2,240,701       1,882,681 	        5,791,668      5,139,564

Gross profit    1,322,457         806,902 	        3,266,771      3,087,961

SELLING EXPENSES  553,126         594,870	         1,318,652      1,434,227

GENERAL AND       850,266         635,895          2,362,233      1,488,138
ADMINISTRATIVE EXPENSES

ACQUIRED IN             -               -          1,087,914             -
PROCESS R&D

Goodwill Impairment     -               -          7,365,662             -

RESEARCH AND      256,697          222,415           643,397       553,940   
DEVELOPMENT

Operating loss   (337,632)        (646,278)       (9,511,087)     (388,344)
 
INTEREST EXPENSE	(177,000)        (107,913)       	 (427,806)     (272,217)   

Loss before      (514,632)        (754,191)       (9,938,893)     (660,561)
income taxes

INCOME TAX        101,921         (277,000)          123,391      (185,000)
EXPENSE/BENEFIT

Net loss      $  (616,553)       $(477,191)   $  (10,062,284)    $(475,561)  

PER SHARE INFORMATION

(1):Basic net     $	(0.18)        $ ( 0.19)   $       (	3.38)      $(0 .19)
loss per 
common share

Weighted average 
number of common shares 
outstanding     3,364,340        2,567,894         2,980,096     2,567,894

(2):Diluted net 
loss per common and 
dilutive potential 
common shares outstanding
                  $	(0.18)         $( 0.19)         $(	3.38)      $(0 .19)

Weighted Average 
Number of Common 
and dilutive potential 
common shares outstanding
                3,364,340        2,567,894         2,980,096     2,567,894

</TABLE>
<PAGE>

                      PART I  FINANCIAL STATEMENTS
             Item 1.3 CONSOLIDATED STATEMENTS OF CASH FLOWS
                         STOCKER & YALE, INC.
                             (UNAUDITED)
<TABLE>
<CAPTION>
                                                 Nine  Months Ended
                                                   September  30
                                               1998              1997


<S>
CASH FLOWS FROM OPERATING ACTIVITIES:
                                           <C>                <C>
Net loss                                   $  (10,062,284)    $ (475,561)
Adjustments to reconcile net loss to net 
cash used in/provided by operating 
activities-

Acquired in Process Research and Development    1,087,914              -
Goodwill Impairment                             7,365,662              -
Depreciation and amortization                     573,725  	     429,750
Deferred income taxes                            (260,369)	      (40,000)	
Other changes in assets and liabilities-
Accounts receivable, net                          449,176       (411,356)
Inventories                                      (201,017)    (1,109,190)
Prepaid expenses                                 (207,160)      (295,372)
Prepaid taxes                                     201,215              -
Accounts payable                                  583,173        (23,236)
Accrued expenses                                  146,041            419
Other assets                                            -        (52,166)
Accrued and refundable taxes                      129,034              -
Net cash used in operating activities            (194,890)    (1,976,712)

CASH FLOWS FROM INVESTING ACTIVITIES:
 
Purchases of property, plant and equipment       (435,650)     	(791,196)
Acquisition of Lasiris                         (3,815,234)             -
Net cash used in investing activities          (4,250,884)     	(791,196)

CASH FLOWS FROM FINANCING ACTIVITIES:

Danvers Savings Bank Financing                    750,000              -
Toronto Dominion Financing                        798,675              -
Proceeds - Equipment Lease Financing              503,365        387,027
Advances/(Payments) of bank debt                  349,627      1,311,593
Issuance of Common Stock                           10,121              -
Private Placement of Common Stock               1,124,716              -
Receipt of Beverly Hospital note receivable     1,000,000              - 
Net cash provided by financing activities       4,536,504      1,698,620

EFFECT OF EXCHANGE RATE ON CHANGES IN CASH        (30,537)             -
NET INCREASE/(DECREASE) IN CASH AND CASH           60,193     (1,069,288)
EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD     73,520      1,244,418

CASH AND CASH EQUIVALENTS, END OF PERIOD        $	133,713      $	175,130

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES
Cash paid for interest                            308,924        299,229
Cash paid for taxes                                 7,961         26,592

</TABLE>
<PAGE>


PART 1. FINANCIAL STATEMENTS

Notes to Financial Statements

Note 1.  General

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 month and nine month periods ended September 30,1998 and September 
30,1997 (b) the financial position at September 30,1998 and (c ) the cash 
flows for the nine month periods ended September 30,1998 and September 
30,1997.  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 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.

Note 2. Acquisition of Lasiris and Purchase Price Allocation 

Overview

On May 13, 1998, the Company acquired Lasiris, Inc. ("Lasiris"),  a Canadian 
manufacturer of industrial lasers for the machine vision and industrial 
inspection industries.  The Company acquired Lasiris through Lasiris 
Holdings, Inc., a newly formed New Brunswick corporation ("LHI") and a 
subsidiary of the Company.  Lasiris will be operated as a wholly-owned 
Canadian subsidiary of LHI.

In connection with the acquisition, the stockholders of Lasiris received an 
aggregate of approximately $3.2 million in cash and 444,146 shares of LHI's 
capital stock which are exchangeable for shares of the Company's common 
stock on a one for one basis.  The Company financed the cash portion of the 
consideration through (i) a private placement of 350,000 shares of the 
Company's common stock at a price of $3.50 per share; (ii) a loan in the 
amount of $750,000 from a bank which is secured by a second mortgage 
interest in the Company's headquarters; (iii) a loan of approximately 
$800,000 pursuant to a credit agreement between the Toronto Dominion Bank 
and Lasiris; and (iv) cash in the amount of  $950,000 received pursuant to 
the prepayment of a note receivable due to the Company.

Allocation of Purchase Price 

The acquisition was accounted for as a purchase, and accordingly, the 
initial purchase price and acquisition costs aggregating approximately 
$5.5 million have preliminarily been allocated to the assets acquired, 
which consist of approximately $4.0 million in identifiable assets, 
approximately $0.4 million in goodwill, and approximately $1.1 million of 
in-process research and development which was charged to operations in the 
second quarter of 1998.    The purchase price allocations represent the fair 
values determined by an independent appraisal. 

The following outlines the allocation of purchase price for the acquisition 
of Lasiris. 
<TABLE>
<S>                                            <C>
Purchased in-process research and
development   	                                 $ 1,087,914   
Developed Patented Technology     	               2,364,122
Trademarks/Tradenames			                            470,732 
Assembled workforce			 	                            240,596 
Goodwill and Deferred Taxes		                     1,669,530                                                 
                                                  ---------
	                                                 5,832,894
Net book value of assets acquired                   944,686	
			                                               ---------                  
								                                          6,777,580
Less deferred taxes		                            (1,230,180)
                                                 ----------                  
                                                  5,547,400
</TABLE>
<PAGE>

In connection with the acquisition of Lasiris, the Company allocated $1.088 
million of the purchase price to incomplete research and development 
projects.  This allocation represents the estimated fair value based on 
risk-adjusted cash flows related to the incomplete products.  At the date 
of acquisition, the development of these projects had not reached 
technological feasibility and the research and development in progress had 
no alternative future uses.  Accordingly, these costs were expensed as of 
the acquisition date.

Lasiris' acquired research and development value is comprised of research 
and development programs designed to significantly enhance the Company's 
current product line, as well as to develop new laser products and 
technologies.  Management expects that the projects will be completed during 
the period from the fourth quarter  of 1998 through the end of the calendar 
year 2000.  At the acquisition date, programs ranged in completion from 10% 
to 80%, and aggregate continuing research and development commitments to 
complete the projects are expected to be approximately $1.5 million.  
The acquired research and development represents developmental efforts 
associated with the introduction of new and enhanced laser systems.  
Remaining development activities for these programs included the research, 
development and testing of advanced electronic, optical, and thermal 
technologies.  Expenditures to complete these projects are expected to 
total approximately $400,000 in 1998, $500,000 in 1999, and $500,000 in 
2000.  These estimates are subject to change, given the uncertainties of 
the development process, and no assurance can be given that deviations from 
these estimates will not occur.  

As evidenced by the continuation of these projects, management believes the 
Company has a reasonable chance of successfully completing each of the major 
research and development programs.  However, there is substantial risk 
associated with the completion of the projects and there is no assurance 
that any will achieve either technological or commercial success.  If none 
of the research and development projects is successfully completed, the 
sales and profitability of the combined company would be adversely affected 
and the value of the research and development projects will not be realized. 

Further information about the acquisition of Lasiris may be found in the 
Company's Form 8-K, which was filed with the Securities and Exchange 
Commission (the "SEC") on May 27, 1998, and amended on Form 8-K/A, filed 
with the SEC on July 27, 1998.

Note 3.  Proforma Financial Information

The following proforma financial information assumes that the acquisition 
of Lasiris took place at the beginning of each respective period, including 
the related expense adjustments.

<TABLE>
<S>                      <C>            <C>	
Nine month periods ended September 30,	
                              1998		          1997
Net Revenues              $ 10,628,707   $ 11,183,754   
Net Income                 (10,270,309)      (682,115) 
Earnings per Share             $ (3.22)       $ (0.23)  
Average shares 
outstanding        	         3,194,225      3,012,041
</TABLE>

Note 4.  Write Down of Goodwill

In accordance with the provisions of Statement of Financial Standards 
(SFAS) No. 121 - "Accounting for the Impairment of Long-Lived Assets and 
for Long-Lived Assets to be Disposed Of",  the Company periodically assesses 
the realizability of its long-lived assets.  In addition to this periodic 
review, the Company is obliged to initiate such an assessment in the event 
of a change in the Company's assets or in the valuation of its assets.  
Based on its most recent assessment, the Company has recorded a non-recurring, 
non-cash charge of $7.4 million during the three months ended June 30, 1998, 
to write down the carrying value of its goodwill to its estimated fair value.  

<PAGE>

On July 14, 1998, the Company announced that it had signed a non-binding 
letter of intent to sell its Stilson Division ("Stilson").  As of June 30, 
1998 the carrying value of the Stilson's net assets was $2.0 million plus a 
portion of the goodwill recorded in 1989 when the Company, including Stilson,
was acquired.  The proposed sale of Stilson required the Company to assess 
the realizability of goodwill.  There was no allocation of goodwill to the 
individual divisions of the Company at the time of the acquisition in 1989.  
Accordingly, management of the Company has evaluated the cash flow generated 
by Stilson for the five years preceding and the five years following the 
acquisition relative to the cash flow of the entire Company.  Management has 
also reviewed their expectations, at the time of the 1989 acquisition, of 
the future cash flow of Stilson.  Based on this assessment, management 
allocated approximately 60% of the goodwill resulting from the 1989 
acquisition to Stilson, $4.9 million net of amortization at June 30, 1998.  
Therefore the net assets of Stilson at June 30, 1998 inclusive of goodwill 
were approximately $6.9 million.  The purchase price for the net assets of 
Stilson set forth in the letter of intent was $3.0 million.  Accordingly, 
at June 30, 1998 the Company wrote down the carrying value of the net assets 
of Stilson to $3.0 million and recorded a charge of $3.9 million which was 
included in the goodwill impairment in the three-month period ended June 30, 
1998.  On November 9, 1998, the Company announced that the agreement, dated 
July 14, 1998, for the proposed sale of the assets of its Stilson Division 
to De-Sta-Co Industries had been terminated. 

After allocating the portion of the goodwill associated with Stilson, the 
Company assessed the realizability of the remaining goodwill from the 1989 
acquisition, $3.5 million, net of amortization as of June 30, 1998. Based 
upon the changes in the Company since 1989 and the recent history of losses, 
the Company has concluded that the realizability of the remaining goodwill 
is uncertain and that the carrying value should be written down to zero.  
As a result of this assessment the Company recorded a charge of $3.5 million 
which was included in the goodwill impairment in the three months ended 
June 30, 1998 to write down the remaining goodwill from the 1989 acquisition 
not allocated to Stilson.



               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.  The factors that could cause actual results to differ materially 
from anticipated results include, without limitation, the Company's ability 
to (i) compete with entities that have greater financial, technical and 
marketing resources than the Company, (ii) develop and market new products 
in its various business lines, (iii) compete for and obtain certain U.S. 
Government contracts, (iv) address risks associated with the year 2000 
problem or (v) obtain financing on favorable terms.  In addition, general 
economic conditions in the United States, Southeast Asia, and elsewhere may 
affect the Company's results.  

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.

Three-month periods ended September 30, 1998 and 1997

Consolidated net revenues increased 32% from $2,689,583 in the third quarter 
of 1997 to $3,563,158 in the third quarter of 1998.  Despite significantly 
reduced sales to Southeast Asia, Lighting Products revenues increased 117% 
from $1,041,169 to $2,257,888 due to the addition of $1,413,966 in laser 
lighting revenues contributed by Lasiris and $66,354 in microscope lighting 
revenues contributed by the Company's Singapore subsidiary.  Government and 
civilian sales of Military Products decreased $201,901 from $316,474 to 
$114,573 reflecting the absence in 1998 of a large contract with a direct 
mail marketing firm which favorably impacted 1997, the diminished peacetime 
demand for military supplies, and the closing in December, 1997 of the 
Company's Hong Kong subsidiary which sold Military Products to the civilian 
market.   Sales of Machine Tool Accessories decreased from $948,223 in the 
third quarter of 1997, to $749,891 in the third quarter of 1998, due to a 
slowdown in orders from distributors. Sales of Printer and Recorder Products 
increased from $383,717 in the third quarter of 1997, to $440,806 in the 
third quarter of 1998.  Of the total net revenues reported for the three 
month period ended September 30, 1998, Salem Division contributed 37%,  
Stilson contributed 21%, Lasiris contributed 40%, and Radiant Asiatec Pte., 
Ltd. contributed 2%.

<PAGE>

Gross profit increased $515,555 from $806,902 in the third quarter of 1997 to 
$1,322,457 in the third quarter of 1998, as the Company experienced the 
positive effects of the acquisition of Lasiris, through increased revenues 
and higher gross profit margins.  Selling expenses decreased $41,744, 
reflecting reduced commission expense on lower sales at the Stilson Division 
and reduced costs of sales personnel in the Salem division.   Research and 
Development Expenses increased by $34,282 in 1998, which includes $83,042 
in research and development expenses from Lasiris.  General and 
Administrative costs increased $214,371 from $635,895 in the third quarter 
of 1997 to $850,266 in the third quarter of 1998.  Of this increase, 
$338,692 is attributable to expenses reported by the Company's new Singapore 
subsidiary and Lasiris and associated corporate expenses, with the balance 
due largely to increased personnel costs, legal expenses and bank charges.  
Interest expense increased by $69,087 in the third quarter of 1998 as 
compared to the third quarter of 1997, primarily as a result of the 
Company's increased indebtedness.

Nine-month periods ending September 30, 1998 and 1997

Consolidated net revenues increased 10% from $8,227,525 in the third quarter 
of 1997 to $9,058,439 in the third quarter of 1998.  Despite significantly 
reduced sales to Southeast Asia, Lighting Products revenues increased 65% 
from $3,007,329 to $4,974,879 due to the addition of $2,093,461 in laser 
lighting revenues contributed by Lasiris and $189,568 in microscope lighting 
revenues contributed by the Company's Singapore subsidiary.  Government and 
civilian sales of Military Products decreased $827,784 from $1,149,038 to 
$321,254 reflecting the absence in 1998 of a large contract with a direct 
mail marketing firm which favorably impacted 1997, the diminished peacetime 
demand for military supplies, and the closing in December, 1997 of the 
Company's Hong Kong subsidiary which sold Military Products to the civilian 
market.   Sales of Machine Tool Accessories decreased from $2,944,940 
in the third quarter of 1997, to $2,572,198 in the third quarter of 1998, 
due to a slowdown in orders from distributors. Sales of Printer and Recorder 
Products increased from $1,126,308 in the third quarter of 1997, to 
$1,190,110 in the third quarter of 1998.  Of the total net revenues reported 
for the three month period ended September 30, 1998, Salem Division 
contributed 47%, Stilson contributed 28%, Lasiris contributed 23%, and 
Radiant Asiatec Pte., Ltd. contributed 2%.

Gross profit increased $178,810 from $3,087,961 in the first nine months of 
1997 to $3,266,771 in the first nine months of 1998, as the Company 
experienced the positive effects of the acquisition of Lasiris, through 
increased revenues and higher gross profit margins.  Selling expenses 
decreased $115,575, reflecting reduced commission expense on lower sales at 
the Stilson division and reduced costs of sales personnel in the Salem 
division.   Research and Development Expenses increased by $89,457 in 1998, 
which includes of $120,468  of expenses from Lasiris.  General and 
Administrative costs increased $874,095 from $1,488,138 in the first nine 
months of 1997 to $2,362,233 in the first nine months of 1998.  Of this 
increase, $703,812 is attributable to expenses reported by the Company's 
new Singapore subsidiary and Lasiris and associated corporate expenses, 
with the balance due largely to increased personnel costs, legal expenses 
and bank charges.  Interest expense increased $155,589 in 1998 as a result 
of the Company's increased indebtedness.

In accordance with the provisions of Statement of Financial Standards (SFAS) 
No. 121 - "Accounting for the Impairment of Long-Lived Assets and for 
Long-Lived Assets to be Disposed Of",  the Company periodically assesses 
the realizability of its long-lived assets.  In addition to this periodic 
review, the Company is obliged to initiate such an assessment in the event 
of a change in the Company's assets or in the valuation of its assets. 

On July 14, 1998, the Company announced that it had signed a non-binding 
letter of intent to sell Stilson.   As of June 30, 1998 the carrying value 
of the Stilson's net assets was $2.0 million plus a portion of the goodwill 
recorded in 1989 when the Company, including Stilson, was acquired.  This 
proposed sale of Stilson required the Company to assess the realizability of 
goodwill.  There was no allocation of goodwill to the individual divisions 
of the Company at the time of the acquisition in 1989.  Accordingly, 
management of the Company has evaluated the cash flow generated by Stilson 
for the five years preceding and the five years following the acquisition 
relative to the cash flow of the entire Company.  Management also reviewed 
their expectations, at the time of the 1989 acquisition, of the future 
cash flow of Stilson.  Based on this assessment, management has allocated 
approximately 60% of the goodwill resulting from the 1989 acquisition to 
Stilson, $4.9 million net of amortization at June 30, 1998.  Therefore the 
net assets of Stilson at June 30, 1998 inclusive of goodwill was 
approximately $6.9 million.  The purchase price for the net assets of 
Stilson set forth in the letter of intent was $3.0 million.  Accordingly, 
at June 30, 1998 the Company wrote down the carrying value of the net assets 
of Stilson to $3.0 million and recorded a charge of $3.9 million which is 
included in the goodwill impairment in the three-month period ended June 30, 
1998. On November 9, 1998, the Company announced that the agreement, dated 
July 14, 1998, for the proposed sale of the assets of its Stilson Division 
to De-Sta-Co Industries had been terminated. 

<PAGE>

After allocating the portion of the goodwill associated with Stilson, the 
Company assessed the realizability of the remaining goodwill from the 1989 
acquisition, $3.5 million, net of amortization as of June 30, 1998. Based 
upon the changes in the Company since 1989 and the recent history of losses, 
the Company concluded that the realizability of the remaining goodwill is 
uncertain and that the carrying value should be written down to zero.  As 
a result of this assessment the Company recorded a charge of $3.5 million 
which was included in the goodwill impairment in the three months ended 
June 30, 1998 to write down the remaining goodwill from the 1989 acquisition 
not allocated to Stilson.



Liquidity and Capital Resources

The Company finances its operations primarily through third party credit 
facilities and cash from operations.  Net cash used in operations was 
$194,890 for the nine months ended September 30, 1998 and $ 1,976,712 for 
the nine months ended September 30, 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 Revolving Line of Credit Loan (the "Revolving 
Loan") and a Long Term Loan (the "Term Loan") both due March 31, 1998.  As of 
April 1, 1998, the Company and the Bank entered into an agreement to extend 
the maturity dates of its Revolving Loan and Term, Loan to January 2, 1999.  
The Revolving Loan and the Term Loan bear interest at the Bank's base rate 
plus 2% from July 1, 1998 through the maturity date.  The Company is 
obligated to pay monthly extension fees of $10,000 payable on the last day 
of each of October, November and December.  At September 30, 1998 there was 
a total of $2,959,031 borrowed under the Credit Agreement and availability 
to borrow of $149,090 under the Revolving Loan. The Company is exploring 
financing alternatives and intends to refinance before maturity.

Under the terms of the Credit Agreement, as amended, the Company is required 
to comply with a quarterly minimum net income covenant.  As of June 30, 1998,
the Company was not in compliance with this covenant, and on July 21, 1998, 
the Bank granted a waiver of the net income covenant for the quarter ended 
June 30, 1998.  As of September 30, 1998 the Company was not in compliance 
with this covenant, and on November 5, 1998 the Bank granted a waiver of 
the net income covenant for the quarter ended September 30, 1998. 

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.  

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.  The Company 
financed a portion of the cash consideration paid for Lasiris through a 
private placement of 350,000 shares of the Company's common stock at a price 
of $3.50 per share, which generated net proceeds to the Company of 
$1,124,716, after offering expenses of $100,284.

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 matures on 
May 13, 1999.  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 September 30, 1998 is $746,796.  The Company intends to 
refinance this indebtedness prior to its maturity but can give no assurance 
as to whether such indebtedness will be refinanced or as to the terms of such 
refinancing.  

<PAGE>

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 payable on demand.  As of September 30, 1998, 
borrowings on the TD Line of Credit were $515,000CDN ($345,050US). 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 
$20,833CDN (approximately $14,500US) plus interest.  As of September 30, 
1998, the outstanding balance on the TD Four-Year Term Loan was $916,667CDN 
($641,667 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 $2,900US) plus interest.  As of 
September 30, 1998, the outstanding balance on the TD Two-Year Term Loan 
was $66,667CDN ($46,667 US).
 
On May 7, 1998, Beverly Hospital Corporation prepaid its $1,000,000 Note 
Receivable due to the Company, less a $50,000 discount for early payment.  
The proceeds were used to finance a portion of the Lasiris acquisition.  

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 September 30, 1998, the Company had borrowed $331,656 against such line
of credit.

Accounts payable increased $1,116,285 from December 31, 1997 to September 
30, 1998.  Of this increase  $698,902 resulted from the Lasiris acquisition 
and the balance is attributable to increased payment cycles.  Company 
expenditures for capital equipment were $435,650 in the first nine months of 
1998 as compared to $791,196 in the same period of 1997.  The majority of 
the 1997 expenditures related to the Company's new fiber optic product line. 
The majority of the 1998 expenditures related to the purchase of new CNC 
machinery at  Stilson.

On July 14, 1998, the Company announced that it had signed a non-binding 
letter of intent to sell Stilson to De-Sta-Co Industries.  On November 
9, 1998, the Company announced that the agreement, dated July 14, 1998, for 
the proposed sale of the assets of its Stilson Division to De-Sta-Co 
Industries had been terminated.  As a result, the Company will have 
increased general and administrative expenses incurred in the negotiation 
and due diligence process and increased accounts payable attributable to  
payment cycles which the Company lengthened in anticipation of the sale. 

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's 
existing Credit Agreement with the Bank will expire on January 1, 1999 by 
its terms.  While the Company is currently exploring establishing a 
replacement credit facility with various commercial lenders, the Company can 
give no assurance as to whether such a replacement credit facility will be 
established or as to the terms of such credit facility.  Assuming the 
continued availability of the Company's Credit Agreement with the Bank or a 
replacement 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 the next twelve 
months.  If the Company is unable to refinance or extend its Credit Agreement
with the Bank prior to maturity, then it will be unable to repay such 
indebtedness when due and the Bank may declare a default.  Were a default to 
be declared, the Company would not be able to continue to operate absent 
alternative financing sources.  The Company has been advised by its 
independent public accountants that, if this contingency has not been 
resolved prior to the completion of their audit of the Company's financial 
statements for the year ending December 31, 1998, their auditors' report on 
those financial statements will be modified for that contingency.

Foreign Currency Fluctuations

Historically, foreign currency fluctuations have had only a minor impact on 
the Company's results of operations.  In 1997 and 1996, such foreign currency
fluctuations were favorable and totaled $30,709 in 1997 and $13,103 in 1996.
The Company's direct exposure to foreign currency exchange fluctuations is 
limited to contracts denominated in Swiss Franc.  The Company has Swiss 
Franc contracts to purchase watches at an agreed fixed cost and corresponding
contracts with the General Services Administration to sell those watches at 
a fixed price.  For 1997, the Company recorded favorable Swiss Franc currency
exchange rate fluctuations of $13,303.  At December 31, 1997, the Company 
had a total foreign currency liability of $273,148 Swiss Francs.  

With the exception of these Swiss Franc contracts, the financial operations 
of the Salem and Stilson Divisions are conducted in U.S. dollars.  All sales 
originated by United States operations, including those sales to foreign 
customers, are denominated in U.S. dollars.  Similarly, the financial 
operations of each of the Company's subsidiaries are conducted in the local 
currency (i.e., sales by Stocker & Yale Hong Kong, Ltd, were denominated in 
Hong Kong dollars, and sales by Radiant Asiatec Pte Ltd. are denominated in 
Singapore dollars.) 

<PAGE>

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 are under the 
Company's operation and over which the Company exercises some control, and 
External Matters, which are outside the Company's control and influence. The 
Company has elected first to address Internal Matters, in the belief that 
most other companies and institutions are similarly working to resolve their 
own mission-critical issues and that as a result an early assessment of 
External Matters would be premature.  

Internal Matters
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.

c)  Marketing Sales Management (MSM) Software supported by IMA
	
The Year 2000 compliant version of MSM became available in November, 1998.  
The Company plans to install this Year 2000 Compliant Version 6.5A prior to 
March, 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 different 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 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.  

Subsequent phases will include obtaining written certification of Year 2000 
testing by providers followed by 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.  

<PAGE>

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, our engineers have compiled a Product 
Compliance Listing (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 listed on the Company 
Web Site at www.stkr.com.  The listing 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 will soon be provided along with the List 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 Stocker & Yale 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.  Stocker & Yale 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 Stocker & Yale software other 
than those Company products listed on the List.  The Company has 
manufactured, distributed and sold products which are not listed on the 
List, and such products have not been tested by the Company 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.  The information contained on the 
List is based on data available to Stocker & Yale at the time of its 
preparation.  

From time to time, the information in the List  may be changed by Stocker & 
Yale without notice to the customer.  Therefore, please contact the Company 
for further updates and confirm Year 2000 readiness of the products in your 
own environment.  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,  it has been 
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. 

<PAGE>
	
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
Stocker & Yale Telephone System			Manual Clock Date Set Required

The Company estimates that it has completed approximately 60% of its year 
2000 Plan regarding Internal Matters.  The Internal Matter review process 
is planned for completion by the end of the first quarter 1999.


External Matters

The Company is about to commence review of External Matters which are outside
the Company's control and influence.  This process will be 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 27% 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

10.1 (p)	              Waiver of Certain Provisions of the Credit Agreement 
                       dated November 5, 1998. *

27.1                   Financial Data Schedule

(b) 	The Company's Form 8-K (as amended by 8-K/A) relating to the acquisition 
of Lasiris, Inc. was filed with the Securities and Exchange Commission on May
27, 1998.

* Filed Herewith

  
<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.


November 16, 1998	            /s/ Mark W. Blodgett
                   Mark W. Blodgett, Chairman and Chief Executive Officer

November 16, 1998            /s/ Susan A.H. Sundell
                   Susan A.H. Sundell, Senior Vice President-Finance and 
                                    Treasurer


<PAGE>




10.1(p)

Fleet Bank

Andrew J. Maidman 
Vice President
Managed Assets Division

Fleet Corporate Administration

Mail Stop:  CT MO IT21A
777 Main Street
Hartford, CT 06115
Tel: (860) 986-4572
Fax: (860) 986-2435

November 5, 1998

Stocker & Yale, Inc. (the "Company")
32 Hampshire Road
Salem, NH 03079
Attn:  Mark W. Blodgett

RE:  Credit Arrangement with Fleet Bank

Dear Mr. Blodgett:

Reference is hereby made to that certain Credit Agreement, dated as of 
March 6, 1995 (the "Credit Agreement") by the Company in favor of Fleet 
National Bank, as successor to Shawmut Bank, N.A. (collectively, the "Bank"), 
as amended by that certain Modification and Extension Agreement, dated as of 
April 1, 1998 (the "Modification Agreement"), between the Company and the 
Bank. 

1.  The Company has requested that the Bank agree to waive compliance with 
Sections 10(A) and 10(B) of the Modification Agreement for the quarter 
ending September 30, 1998.  Subject to terms of this letter and the Company's
acknowledgment below indicating the Company's agreement with such terms, and
the satisfaction of the following conditions, the Bank agrees to waive 
compliance with Section 10(A) and 10(B) of the Modification Agreement but 
only for the quarter ending September 30, 1998, and only to the extent the 
Company's aggregate pre-tax losses for such quarter do not exceed $600,000:

A)  payment of $25,000 to the Bank upon execution and delivery of this letter 
agreement as a waiver fee which shall be in addition to all amounts due, 
owing and payable pursuant to the Credit Agreement and shall not be applied 
to any amounts currently outstanding.

B)  reimbursement to the Bank for the Bank's legal expenses in connection 
with the preparation of this letter agreement and other documents 
contemplated herein. 

By execution of this letter agreement the Company and the undersigned 
Guarantor hereby acknowledge and confirm that they do not have any offsets, 
defenses or claims against the Bank, its parents, subsidiaries, affiliates, 
or any officers, agents, directors or employees whether asserted or 
unasserted.  To the extent that they may have such offsets, defenses, or 
claims, the Company, the Undersigned Guarantor and their respective 
successors, assigns, predecessors, employees, agents, heirs, executors, as 
applicable release and forever discharge Bank, its parents, subsidiaries, 
affiliates, and officers, directors, employees, agents, attorneys, successors
and assigns, both present and former (collectively the "Bank Affiliates") 
of and from any and all manner of action and actions, cause and causes of 
action, suits, debts, controversies, damages, judgments, executions, claims 
and demands whatsoever, asserted or unasserted, in law or in equity which 
against Bank and/or Bank Affiliates they ever had, now have or which any of
Company's or such Guarantor's successors, assigns, parents, subsidiaries, 
affiliates, predecessors, employees, agents, heirs, executors, as applicable 
both present and former ever had or now have, upon or by reason of any 
manner, cause, causes or thing whatsoever, including, without limitation, 
any presently existing claim or defense whether or not presently suspected, 
contemplated or anticipated. 

By execution of this letter agreement and except as otherwise modified or 
agreed herein, the Company and the undersigned Guarantor (i) hereby affirm 
and ratify all of these terms, covenants, provisions, conditions, agreements,
warranties and representations contained in the Credit Agreement and 
Modification Agreement and all loan documents executed in connection 
therewith; (ii) hereby agree to make all payments due and payable and to 
perform all of their respective obligations pursuant to the Credit Agreement 
and Modification Agreement and the related loan documents and this letter 
agreement; (iii)  hereby agree to indemnify and hold the Bank harmless from 
any costs, expenses, claims, losses as a result of the agreements contained 
herein; (iv) hereby agree that in addition to the events of default specified
in the Credit Agreement and Modification Agreement, the Company's failure to
comply with its obligations respecting this letter agreement shall constitute 
an event of default under the Credit Agreement and Modification Agreement; 
(v) hereby agree that the Credit Agreement and Modification Agreement and 
this letter agreement are fully enforceable against them and, except as 
modified hereby, the Credit Agreement and Modification Agreement and all 
loan documents delivered in connection with either the Credit Agreement or 
Modification Agreement remain in full force and effect.  (vi) hereby confirm 
that all collateral granted to or assigned to the Bank with respect to the 
loans covered by the Credit Agreement and Modification Agreement continues 
to secure the payment, performance and observance of all liabilities, 
obligations and covenants on the Company's part and/or the Guarantor's part 
to be performed or observed pursuant to the Credit Agreement and Modification
Agreement and this letter agreement;  (vii) hereby represent and warrant that
no event has occurred which is, or with the passage of time or with the 
giving of notice or both would be an event of default under the Credit 
Agreement and Modification Agreement except as expressly contemplated as the
subject of a consent and waiver, and as affected by, this letter agreement; 
and (viii) hereby agree that the Bank has no obligation to extend further 
credit to the Company under the Credit Agreement and Modification Agreement 
of this letter agreement. 

Please contact the undersigned for final payoff information for the term 
loan as well as wiring instructions.  In addition please provide the 
undersigned with a detailed schedule of firms assets of the Stilson division
which are being sold, so that we can prepare necessary releases and 
discharges. 

If the foregoing is acceptable to you, please acknowledge your acceptance by
signing the space provided below.  

Very Truly Yours,

Fleet National Bank

/s/ Andrew J. Maidman
Andrew J. Maidman, Vice President


Agreed and Accepted:

Stocker & Yale, Inc.

/s/ Mark W. Blodgett
Mark W. Blodgett, Chairman and Chief Executive Officer

Acknowledgment by Guarantor

/s/ Mark W. Blodgett
Mark W. Blodgett, individually