StockerYale Announces Fourth Quarter and End-of-Year Financial Results for Fiscal 2001

Company Reports Infrastructure Build-Out Complete

February 27, 2002

Salem, NH -- StockerYale, Inc., (NASDAQ: STKR), a leading independent provider of phase masks, specialty optical fiber, advanced optical technologies and specialized illumination products today reported financial results for the fourth quarter and fiscal year ended December 31, 2001.

In fiscal 2001, the company made significant progress towards its objective of being a leading independent developer and manufacturer of optical sub-components while growing its leadership position in its specialized illumination business.

Despite the tough economic conditions that persisted throughout much of 2001 in both the telecom and electronics assembly markets, the company clearly demonstrated its resolve by accomplishing many of its strategic initiatives.

With a cumulative R&D and manufacturing investment of $23 million in equipment and buildings, the company has begun to reap the rewards of its efforts.

In June 2001 the company was awarded its first R&D contract to develop a custom specialty optical fiber from one of the top-three optical system developers, which was completed last month.
In October 2001 the company demonstrated the first high-performance tunable optical filter (TOF) at the European Conference on Optical Communication (ECOC).
In December the company commenced shipping samples of several specialty optical fibers, including, what is believed to be the industry's most advanced cladding mode suppression (CMS) fiber used in the manufacture of fiber Bragg gratings (FBGs).
CE-compliant illumination products began shipping - opening up new opportunities in European markets.
In January 2002 the company introduced diffraction gratings, which are primarily designed for use in optical spectrum analyzers and multiplexers. Samples are currently shipping.
In February 2002, the company announced the availability of polymer clad fused silica (quartz) fiber used in applications where optimal UV output is critical - one of the target markets being the medical industry.
During 2001, the company developed, and a new customer is currently field-testing a cutting-edge laser used to screen biological agents, including anthrax.
Most recently, the company began shipping samples of polarization maintaining (PM) fiber, which is used primarily in gyroscope, sensor, and telecommunication applications. The company plans to formally announce this new specialty optical fiber before the Optical Fiber Communication Conference and Exhibition (OFC) in March of 2002.

"Last year we built and opened new state-of-the-art R&D and manufacturing facilities, significantly increased our intellectual capital in the optical fiber and components field, filed patent applications, and launched new products that have attracted attention throughout the markets we serve. These important steps have been taken towards a clear, well-defined goal: to position the company as a leader in the design and manufacture of high performance, value-added products for the fiber optic markets. With our infrastructure now fully in place, the company can turn its full attention towards the execution of its business plan," said Mark W. Blodgett, StockerYale's chairman and chief executive officer.

Blodgett continued; "Although it is difficult to predict when or how strong the telecom and electronic assembly markets will rebound, we have begun to see some signs of recovery on both business fronts. I believe that great companies are built in time of maximum challenge and I am confident that we will continue to make significant progress towards our goal of becoming an industry leader in specialty optical fibers and advanced optical sub-components, and will continue our leadership position in specialized illumination products and technologies," Blodgett added.

Outlook

Frank O'Brien, StockerYale's executive vice president and chief financial officer stated; "As StockerYale moves into fiscal 2002, be assured that we have completed our transition from a diversified machine tool, printer and recorder, and basic illumination company to a technology enterprise, focused on photonic applications in the inspection, machine vision, medical, military, and telecommunications markets."

O'Brien continued; "We have absorbed the financial adjustments necessary to affect this strategic change and, most importantly, developed the financial reporting, controls and management structure to effectively monitor both our tactical and strategic goals while maintaining a healthy balance sheet. Finally, we expect that the intensive ramp up in research and development programs initiated in the fourth quarter of 2001, will reap significant revenue benefits beginning in the second quarter of 2002."

Annual Comparisons

Reasonable comparisons between fiscal years 2001 and 2000 are difficult and not linear as StockerYale began to execute its strategic plan in late 2000. The consolidated financial statements included in this press release reflect the associated operating expenses and capital expenditures related to implementing this plan.

REVENUES

Net sales from continuing operations declined $2.8 million or 15% from $18.4 million in 2000 to $15.6 million in fiscal 2001. This revenue decrease was primarily due to a $2.8 million decrease in the company's illumination business as a result of a worldwide slowdown in the semiconductor, disk drive inspection, and electronic assembly markets, negatively affecting the company's overall sales performance for the year. In addition, the company's now discontinued printer and recorder product line incurred a $.6 million revenue decline.

The optical components business revenues on the other hand, rose 21% to $3.6 million over fiscal year 2000 despite the difficult telecom environment, as the company began to implement its fiber optic product strategy.

GROSS PROFITS

Gross profits declined 10% to 27.5% in fiscal 2001 compared to fiscal 2000 due to unabsorbed overhead costs related to the revenue decline in the illumination business as well as increased depreciation and incremental management costs related to the accelerated implementation of specialty optical fiber and optical components manufacturing capacity.

OPERATING EXPENSES

Operating expenses increased from $7.1 million in 2000 to $17.8 million in fiscal 2001 primarily due to salaries and benefits associated with a 50% increase in headcount to support the R&D and manufacturing efforts in the specialty optical fiber and optical components business.

Research and development expenses increased $4.1 million as salaries and benefits rose from $.7 million to $3.8 million, representing an average increase of 55 scientists over the course of the year. Higher depreciation and prototype costs accounted for the majority of the remaining R&D expense increase.

Selling, general and administrative expenses rose $6.5 million with employee costs, marketing expenses and occupancy costs representing approximately $4.0 million. Incremental infrastructure costs related to insurance, professional fees and information technology also contributed to the remaining $2.5 million increase.

Quarterly Comparisons

REVENUES

Net sales from continuing operations was $3.4 million for its fourth quarter ended December 31, 2001. These results represent a decline of $1.0 million or 22% as compared to this same period a year ago when the company reported net sales of $4.4 million. This decrease in net sales was primarily due to a continued slowdown in the electronic assembly industry that negatively affected demand for the company's specialized illumination products.

GROSS PROFITS

Gross profits realized a negative performance in the fourth quarter 2001 as a result of unabsorbed illumination manufacturing costs, higher fixed costs related to fiber and optical components, and an inventory write-off in our discontinued printer and recorder product line.

OPERATING EXPENSES

Operating expenses for the fourth quarter 2001 totaled $5.6 million which represents an increase of $3.1 million compared to this same period last year. This increase in operating expenses was primarily due to continued investments in research and development totaling $2.0 million in the fourth quarter. Higher staffing levels and increased expenditures for prototype materials and supplies were the principal factors influencing research and development operating costs, while increased salaries, benefits and infrastructure costs were the principal factors influencing the $1.1 million increase in selling, general and administrative expenses.

Looking Forward

StockerYale has completed a detailed analysis of its business and, excluding one-time costs, we expect a 10% quarterly decrease in operating expenses through the first half of fiscal 2002 compared to the fourth quarter of fiscal 2001.

Conference Call Information

The company will host a live conference call on Wednesday, February 27 at 11:00 a.m. EST.

Callers from North America can access this teleconference by dialing 800-633-8486. Callers from areas outside of North America can participate by dialing +44 (0) 8700 559 365. The teleconference will also be simultaneously webcast and can be accessed through the company's website at; http://www.stockeryale.com/investor/earnings.htm.

The webcast will be archived for 30 days following the call and can be accessed by visiting the above mentioned web address.

About StockerYale

StockerYale, Inc., headquartered in Salem, NH, is an independent designer and manufacturer of phase masks, specialty optical fiber, and advanced optical sub-components primarily used in the building of optical networks as well as structured light lasers, specialized fiber optic, fluorescent, and LED illumination products for use in the machine vision, industrial inspection, medical and military markets.

StockerYale serves a widely varied, international customer base from its corporate offices in Salem, New Hampshire and reinvests a significant percentage of its revenues in R&D to meet the future requirements of its customers. StockerYale has offices and subsidiaries in Salem, Canada, Europe, and the Pacific Rim.

For more information about StockerYale and their innovative products, contact StockerYale, Inc., 32 Hampshire Rd., Salem, NH, 03079. Call 800-843-8011; Fax 603-893-5604; or E-mail .

Notice to Investors:

This press release contains forward-looking statements that do not give full weight to all the potential risks, but relate to StockerYale's plans, objectives, and expectations, which are dependent upon a number of factors outside of StockerYale's control including, but not limited to: uncertainty that StockerYale's new optical communications sub-components and specialized illumination products anticipated to be released later in 2002 will gain market acceptance; the risk that delays and unanticipated expenses in developing new products could delay the commercial release of those products an affect revenue estimates; the risk that one of our competitors could develop and bring to market a technology that is superior to those products that we are currently developing; and StockerYale's ability to capitalize on its significant research and development efforts by bringing to market successful products in the optical communications sub-components and specialized illumination markets. Thus, actual results may differ materially. StockerYale undertakes no duty to update any of these forward-looking statements.

Contact for Press and Analysts:

Fred Pilon, Dir. Investor Relations
StockerYale, Inc.
603-893-8778

This press release 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 relating to, among other things, the Company's future operating results and sales trends. Reliance should not be placed on forward looking statements because they involve known and unknown risks, uncertainties and other factors which are in some cases, beyond the control of Stocker & Yale, which may cause the actual results, performance or achievements of the Company to differ materially from anticipated future results, performance or achievements expressed or implied by such forward looking statements.

Consolidated Statements of Operations In thousands (except per share data)

	Three Months Ended December 31,		Twelve Months Ended December 31,
	2001	2000	2001	2000

Net Sales	$3,398	$4,377	$15,581	$18,366

Cost of Sales	3,580	3,025	11,303	11,460

Gross Profit	(182)	1,352	4,278	6,906


Research & Development Expenses	2,480	494	5,465	1,333

Selling, General & Administrative Expenses	3,172	2,064	12,291	5,767

Amortization of Goodwill and Intangible Assets	168	171	678	604

Charge for Acquired In-Process R&D	-	-	-	402


Operating Income/(Loss)	(6,002)	(1,377)	(14,156)	(1,200)


Interest & Other Income/(Expense)	(6)	127	441	394

Interest Expense	244	104	757	475


Pretax Income/(Loss)	(6,252)	(1,354)	(14,472)	(1,281)


Tax Provision	(704)	63	(801)	252


Net Income/(Loss) from Continued Operations	$(5,548)	(1,417)	$(13,671)	$(1,533)


Net Income/(Loss) from Discontinued Operations	-	$(1,498)	$(191)	$(1,862)


Net Loss	$(5,548)	$(2,915)	$(13,862)	$(3,395)


Earnings/(Loss) Per Share from Continued Operations	$(0.49)	(0.15)	$(1.28)	$(0.18)

Loss per Share from Discontinuing Operations	-	$(0.16)	$(0.02)	$(0.21)


Loss per Share	$(0.49)	$(0.31)	$(1.30)	$(0.39)


Weighted Average Shares Outstanding	11,391,825	9,335,656	10,683,313	8,710,549

Consolidated Condensed Balance Sheets In thousands

	December 31, 2001	December 31, 2000

Total Cash	$ 3,576 ⁽¹⁾	$ 12,987
Accounts Receivable, Net	$ 2,475	$ 2,946
Inventory	$ 5,224	$ 5,196
Total Current Assets	$ 11,969	$ 21,716
Property, Plant & Equipment, Net	$ 25,813	$ 8,338
Total Assets	$ 43,360	$ 36,981

Current Liabilities	$ 9,281	$ 4,415
Total Liabilities	$ 13,335	$ 9,082
Stockholders Equity	$ 30,025	$ 27,899

(1) Does not include an $8 million private equity placement closed in January 2002.