Inrad Optics, Inc. (Form: 10-Q, Received: 05/14/2020 14:32:56)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number 0-11668

INRAD OPTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

New Jersey		22-2003247
State or Other Jurisdiction of Incorporation or Organization		I.R.S. Employer Identification No.

181 Legrand Avenue, Northvale, NJ		07647
Address of Principal Executive Offices		Zip Code

(201) 767-1910

Registrant’s Telephone Number, Including Area Code

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Securities registered pursuant to Section 12(b) of the Act: None.

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
None		None		None

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer x	Smaller reporting company x
	Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

The number of shares of the registrant’s common stock outstanding, $0.01 par value, as of May 14, 2020, was 13,730,577.

INRAD OPTICS, INC AND SUBSIDIARIES

INDEX

Part I.	CONDENSED FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements:

	Condensed consolidated balance sheets as of March 31, 2020 (unaudited) and December 31, 2019	1

	Condensed consolidated statements of operations for the three months ended March 31, 2020 and 2019 (unaudited)	2

	Condensed consolidated statements of shareholders equity for the three months ended March 31, 2020 and 2019 (unaudited)	3

	Condensed consolidated statements of cash flows for the three months ended March 31, 2020 and 2019 (unaudited)	4

	Notes to condensed consolidated financial statements (unaudited)	5

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	15

Item 4.	Controls and Procedures	15

Part II.	OTHER INFORMATION	16

Item 1.	Legal Proceedings	16

Item 1A.	Risk Factors	16

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16

Item 3.	Defaults upon Senior Securities	16

Item 4.	Mine Safety Disclosures	16

Item 5.	Other Information	16

Item 6.	Exhibits	17

Signatures		18

INRAD OPTICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2020			2019
		(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	835,047		$	950,705
Accounts receivable, net		1,026,242			1,233,081
Inventories, net		3,037,880			2,834,107
Other current assets		111,058			141,339
Total current assets		5,010,227			5,159,232

Plant and equipment:
Plant and equipment, at cost		15,056,788			14,990,773
Less: Accumulated depreciation and amortization		(14,378,960	)		(14,309,992	)
Total plant and equipment		677,828			680,781
Precious metals		561,910			561,910
Lease right-of-use, net		621,879			688,746
Other assets		48,420			44,577
Total Assets	$	6,920,265		$	7,135,246

Liabilities and Shareholders' Equity
Current liabilities:
Current portion of other long term notes	$	16,204		$	16,044
Accounts payable and accrued liabilities		1,069,216			978,184
Contract liabilities		829,558			768,243
Current portion of lease obligation		277,353			273,369
Total current liabilities		2,192,331			2,035,840

Related party convertible notes payable		2,500,000			2,500,000

Other long term notes, net of current portion		162,647			166,763
Lease obligation, net of current portion		344,527			415,377
Total liabilities		5,199,506			5,117,980

Shareholders' equity:
Common stock: $.01 par value; 60,000,000 authorized shares; 13,735,177 shares issued at March 31, 2020 and December 31, 2019		137,353			137,353
Capital in excess of par value		19,309,235			19,281,255
Accumulated deficit		(17,710,879	)		(17,386,392	)
		1,735,709			2,032,216
Less - Common stock in treasury, at cost (4,600 shares)		(14,950	)		(14,950	)
Total shareholders' equity		1,720,759			2,017,266
Total Liabilities and shareholders' equity	$	6,920,265		$	7,135,246

See Notes to Condensed Consolidated Financial Statements (Unaudited)

INRAD OPTICS, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended March 31,
	2020			2019
Total revenue	$	2,050,496		$	2,601,060

Cost and expenses:
Cost of goods sold		1,635,041			1,956,280
Selling, general and administrative expenses		701,679			642,254
		2,336,720			2,598,534

Income (loss) from operations		(286,224	)		2,526
Other expense:
Interest expense-net		(38,263	)		(38,661	)
Loss on exchange of precious metals		-			-
		(38,263	)		(38,661	)

Income (loss) before income taxes		(324,487	)		(36,135	)

Income tax (provision) benefit		-			-

Net income (loss)	$	(324,487	)	$	(36,135	)

Net (loss) income per common share - basic	$	(0.02	)	$	(0.00	)

Net (loss) income per common share - diluted	$	(0.02	)	$	(0.00	)

Weighted average shares outstanding - basic		13,730,577			13,632,388

Weighted average shares outstanding - diluted		13,730,577			13,632,388

See Notes to Condensed Consolidated Financial Statements (Unaudited)

INRAD OPTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

					Capital in								Total
	Common Stock				excess of		Accumulated			Treasury			Shareholders'
	Shares		Amount		par value		Deficit			Stock			Equity
Balance, January 1, 2019		13,636,988	$	136,371	$	19,055,615	$	(16,610,294	)	$	(14,950	)	$	2,566,742
401K contribution		-		-		-		-			-			-
Stock-based compensation expense		-		-		29,375		-			-			29,375
Net income (loss) March 31, 2019		-		-		-		(36,135	)		-			(36,135	)
Balance, March 31, 2019		13,636,988	$	136,371	$	19,084,990	$	(16,646,429	)	$	(14,950	)	$	2,559,982

					Capital in								Total
	Common Stock				excess of		Accumulated			Treasury			Shareholders'
	Shares		Amount		par value		Deficit			Stock			Equity
Balance, January 1, 2020		13,735,177	$	137,353	$	19,281,255	$	(17,386,392	)	$	(14,950	)	$	2,017,266
401K contribution		-		-		-		-			-			-
Stock-based compensation expense		-		-		27,980		-			-			27,980
Net income (loss) March 31, 2020		-		-		-		(324,487	)		-			(324,487	)
Balance, March 31, 2020		13,735,177	$	137,353	$	19,309,235	$	(17,710,879	)	$	(14,950	)	$	1,720,759

See Notes to Condensed Consolidated Financial Statements (Unaudited)

INRAD OPTICS, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended
	March 31,
	2020			2019
Cash flows from operating activities:
Net income (loss)	$	(324,487	)	$	(36,135	)

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities
Depreciation and amortization		85,227			66,360
401K common stock contribution - non cash item		-			-
Stock based compensation		27,980			29,375
Changes in operating assets and liabilities:
Accounts receivable		206,839			(24,327	)
Inventories, net		(203,773	)		82,347
Other assets		26,437			(20,768	)
Accounts payable and accrued liabilities		91,035			74,358
Contract liabilities		61,315			(169,635	)
Total adjustments and changes		295,059			37,710
Net cash (used in) provided by operating activities		(29,428	)		1,575

Cash flows from investing activities:
Capital expenditures		(82,273	)		(97,112	)
Net cash (used in) investing activities		(82,273	)		(97,112	)

Cash flows from financing activities:
Principal payments on notes payable-other		(3,955	)		(3,233	)
Net cash (used in) financing activities		(3,955	)		(3,233	)

Net (decrease) in cash and cash equivalents		(115,658	)		(98,770	)

Cash and cash equivalents at beginning of period		950,705			1,185,553

Cash and cash equivalents at end of period	$	835,047		$	1,086,783

Supplemental disclosure of cash flow information:
Interest paid	$	1,811		$	40,033
Income taxes paid	$	-		$	-

See Notes to Condensed Consolidated Financial Statements (Unaudited)

INRAD OPTICS, INC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Inrad Optics, Inc. and its subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated.

The condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments of a normal recurring nature considered necessary for a fair presentation have been included. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. For further information, refer to the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

In preparing these unaudited condensed consolidated financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the unaudited condensed consolidated financial statements were issued.

Management Estimates

These unaudited condensed consolidated financial statements and related disclosures have been prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses reported in those financial statements. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods.

Accounts Receivable

Accounts receivable are carried at net realizable value, net of write-offs and allowances. The Company establishes an allowance for doubtful accounts based on estimates as to the collectability of accounts receivable. Management specifically analyzes past-due accounts receivable balances and, additionally, considers bad debt history, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. Uncollectible accounts receivable are written-off when it is determined that the balance will not be collected. Reserves for uncollectible accounts receivable are recorded as part of selling, general and administrative expenses in the Consolidated Statements of Operations, and were $45,000 at March 31, 2020, and $15,000 at December 31, 2019.

Inventories

Inventories are stated at the lower of cost (first-in-first-out basis) and net realizable value. The Company records a reserve for slow moving inventory as a charge against earnings for all products identified as surplus, slow-moving or discontinued. Excess work-in-process costs are charged against earnings whenever estimated costs-of-completion exceed unbilled revenues.

Inventories are comprised of the following and are shown net of inventory reserves of $2,459,000 and $2,489,000 at March 31, 2020 and December 31, 2019, respectively:

	March 31,		December 31,
	2020		2019
	(Unaudited)
	(in thousands)
Raw materials	$	1,336	$	1,248
Work in process, including manufactured parts and components		1,148		1,090
Finished goods		554		496
	$	3,038	$	2,834

Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statements carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the year in which the differences are expected to reverse.

In evaluating the Company’s ability to recover deferred tax assets in future periods, management considers the available positive and negative factors, including the Company’s recent operating results, the existence of cumulative losses and near term forecasts of future taxable income consistent with the plans and estimates that management uses to manage the underlying business. A significant piece of objective negative evidence evaluated was the cumulative loss incurred by the Company over the three year period ended December 31, 2019. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future growth.

On the basis of this evaluation as of March 31, 2020, the Company’s management concluded that it is more likely than not that the Company will not be able to realize any portion of the benefit on the net deferred tax asset balance of $3,405,000 and therefore the Company continues to maintain a valuation allowance for the full amount of the net deferred tax asset balance. When sufficient positive evidence exists, the Company’s income tax expense will be charged with the increase or decrease in its valuation allowance. An increase or reversal of the Company’s valuation allowance could have a significant negative or positive impact on the Company’s future earnings.

For the three months ended March 31, 2020 and 2019, the Company did not record a current provision for either state tax or federal tax due to the losses incurred for both income tax and financial reporting purposes.

Net Income (Loss) per Common Share

Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares and common stock equivalents outstanding, calculated on the treasury stock method for options, stock grants and warrants using the average market prices during the period, including potential common shares issuable upon conversion of outstanding convertible notes, except if the effect on the per share amounts is anti-dilutive.

For the three months ended March 31, 2020 and 2019, all common stock equivalents were excluded from the computation of diluted net loss per share because their effect is anti-dilutive. This included 2,500,000 common shares and 1,875,000 common shares from warrants issuable upon conversion of outstanding related party convertible notes. In addition, 1,160,567 and 1,228,267 common stock options in each respective period, were excluded from the computation of basic and diluted net income per common share because their effect is anti-dilutive.

A reconciliation of the shares used in the calculation of basic and diluted earnings (loss) per common share is as follows:

	Three Months Ended								Three Months Ended
	March 31, 2020								March 31, 2019
	Income(Loss)			Shares		Per Share			Income(Loss)			Shares		Per Share
	(Numerator)			(Denominator)		Amount			(Numerator)			(Denominator)		Amount
Basic Income (Loss) Per Share:
Net Income (Loss)	$	(324,487	)		13,730,577	$	(0.02	)	$	(36,135	)		13,632,388	$	(0.00	)
Effect of dilutive securities:		-			-		-			-			-		-
Convertible Notes		-			-		-			-			-		-
Accrued Interest on Convertible Notes		-			-		-			-			-		-
Warrants		-			-		-			-			-		-
Stock Options		-			-		-			-			-		-
Diluted Income (Loss) Per Share:	$	(324,487	)		13,730,577	$	(0.02	)	$	(36,135	)		13,632,388	$	(0.00	)

Stock-Based Compensation

Stock-based compensation expense is estimated at the grant date based on the fair value of the award. The Company estimates the fair value of stock options granted using the Black-Scholes option pricing model. The fair value of restricted stock units granted is based on the closing market price of the Company’s common stock on the date of the grant. The fair value of these awards, adjusted for estimated forfeitures, is amortized over the requisite service period of the award, which is generally the vesting period.

Recent Accounting Standards

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments" (“ASU 2016-13”) which amended guidance on the accounting for credit losses on financial instruments within its scope. The guidance introduces an expected loss model for estimating credit losses, replacing the incurred loss model. The new guidance also changes the impairment model for available-for-sale debt securities, requiring the use of an allowance to record estimated credit losses (and subsequent recoveries). The new guidance is effective for interim and annual periods beginning in 2023, with earlier application permitted in 2019. The Company is currently evaluating the impact of adoption on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases” (ASC 842), and subsequently issued updates as part of ASU 2018-11, “Leases, Targeted Improvements.” The new guidance requires organizations that lease assets with lease terms of more than 12 months to recognize assets and liabilities for the rights and obligations created by those leases on their balance sheets. The Company adopted ASC 842, effective January 1, 2019. The Company entered into an amendment and extension of its building lease on July 8, 2019, retroactive to June 1, 2019, and accordingly recorded an initial right-of-use asset of $0.8 million. See Note 11a. Lease Commitments. The adoption of ASU 842 and ASU 2018-11 did not have a material impact on the Company’s statements of operations or cash flows.

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation: Improvements to Nonemployee Shared-Based Payment Accounting. The ASU update expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The Company adopted ASU 2018-07 effective January 1, 2019. The adoption did not have a material impact on its financial statements and related disclosures.

NOTE 2 – REVENUE

The Company’s revenues are comprised of product sales as well as products and services provided under long-term government contracts with its customers. All revenue is recognized when the Company satisfies its performance obligation(s) under the contract (either implicit or explicit) by transferring the promised product or service to its customer either when (or as) its customer obtains control of the product or service. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation. The majority of the Company’s contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using the Company’s best estimate of a standalone selling price for each distinct product or service in the contract, which is generally based on an observable price.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or providing services. As such, revenue is recorded net of returns, allowances, customer discounts, and incentives. Sales, value add, and other taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenues) basis. Shipping and handling costs are included in cost of goods sold.

The Company’s performance obligations under long-term government contracts are generally satisfied over time. Revenue from products or services transferred to customers under these performance obligations accounted for approximately 0% and 3.6% of revenue for the three months ended March 31, 2020 and 2019, respectively. This revenue is generally recognized using an input measure based upon the proportion of actual costs incurred to estimated total project costs, which is a method used to best depict the Company’s performance to date under the terms of the contract.

Accounting for these long-term government contracts involves the use of various techniques to estimate total revenue and costs. The Company estimates profit on these long-term government contracts as the difference between total estimated revenue and expected costs to complete a contract and recognizes that profit over the life of the contract. Contract estimates are based on various assumptions to project the outcome of future events that may span several years. These assumptions include, among other things, labor productivity, costs and availability of materials, and timing of funding by the U.S. government. The nature of these long-term agreements may give rise to several types of variable consideration, such as claims, awards and incentive fees. Historically, these amounts of variable consideration are not considered significant. Additionally, contract estimates may include additional revenue for submitted contract modifications if there exists an enforceable right to the modification, the amount can be reasonably estimated and its realization is probable. These estimates are based on historical collection experience, anticipated performance, and the Company’s best judgement at the time. These amounts are generally included in the contract’s transaction price and are allocated over the remaining performance obligations. Changes in judgments on these above estimates could impact the timing and amount of revenue recognized with a resulting impact on the timing and amount of associated income. Under these long-term government contracts, the Company may receive payments from customers based upon contractual billing schedules; accounts receivable are recorded when the right to consideration becomes unconditional. In the event a contract loss becomes known, the entire amount of the estimated loss is recognized in the Consolidated Statements of Operations.

The majority of the Company’s revenue is from products and services transferred to customers at a point in time and was approximately 100% and 96.4% of revenue for the three months ended March 31, 2020 and 2019, respectively. The Company recognizes revenue at the point in time in which the customer obtains control of the product or service, which is generally when product title passes to the customer upon shipment. In limited cases, title does not transfer and revenue is not recognized until the customer has received the products at its physical location.

The following table summarizes the Company’s sales by market area:

	Three Months Ended
	March 31,
	2020		2019
Aerospace & Defense	$	790,965	$	1,040,557
Process Control & Metrology		848,375		1,120,987
Laser Systems		303,990		284,990
Scientific / R&D		107,166		154,526
Total	$	2,050,496	$	2,601,060

Net sales by timing of transfers of goods and services is as follows:

	Three Months Ended
	March 31,
	2020		2019
Transfer at point in time	$	2,050,496	$	2,507,507
Transfer over time		-		93,553
Total net sales	$	2,050,496	$	2,601,060

The timing of revenue recognition, billings and cash collections results in billed receivables, costs in excess of billings (contract assets), and billings in excess of costs (contract liabilities, previously deferred revenue) on the Consolidated Balance Sheet. Contract liabilities also include customer advances or prepayments. Costs in excess of billings and billings in excess of costs associated with long-term government contracts were not significant at March 31, 2020 or 2019. At March 31, 2020 and 2019, the remaining revenue to be recognized from the long-term government contracts was $0 and $94,000, respectively.

On March 31, 2020, the Company had approximately $6.3 million of performance obligations, which is also referred to as backlog. Approximately 3.0% of the March 31, 2020 backlog is related to projects that will extend beyond March 31, 2021.

NOTE 3- EQUITY COMPENSATION PROGRAM AND STOCK BASED COMPENSATION

Stock Option Expense

The Company's results of operations for the three months ended March 31, 2020 and 2019, include stock-based compensation expense for stock option grants totaling $27,980 and $29,375, respectively. The following table shows the amounts for stock-based compensation included in cost of sales and selling, general and administrative expense for the three months ended March 31, 2020 and 2019:

	Three Months Ended
	March 31,
	2020		2019
Cost of sales	$	7,201	$	8,372
Selling, general and administrative		20,779		21,003
Total stock-based compensation expense	$	27,980	$	29,375

As of March 31, 2020 and 2019, there were $181,000 and $282,000 of unrecognized compensation cost, net of estimated forfeitures, related to non-vested stock options, which are expected to be recognized over a weighted average period of approximately 1.12 years and 1.96 years, respectively.

There were 22,500 stock options granted during the three months ended March 31, 2020, and 185,000 stock options granted during the three months ended March 31, 2019. The following range of weighted-average assumptions were used to determine the fair value of stock option grants during the three months ended March 31, 2020 and 2019:

	Three Months Ended
	March 31,
	2020			2019
Expected Dividend yield		-	%		-	%
Expected Volatility		122	%		139	%
Risk-free interest rate		1.96	%		2.43	%
Expected term		10 years			10 years

Stock Option Activity

The following table represents stock options granted, exercised and forfeited during the three months ended March 31, 2020:

				Weighted		Weighted
				Average		Average
				Exercise		Remaining		Aggregate
	Number of			Price per		Contractual		Intrinsic
Stock Options	Options			Option		Term (years)		Value
Outstanding January 1, 2020		1,147,267		$	0.63		6.29	$	718,840
Granted		22,500			1.48
Exercised		-			-
Expired/Forfeited		(9,200	)		0.98
Outstanding March 31, 2020		1,160,567		$	0.65		6.47	$	1,222,620

Exercisable at March 31, 2020		812,852		$	0.56		4.84	$	734,355

The following table represents non-vested stock options granted, vested and forfeited for the three months ended March 31, 2020:

	Weighted-average
	Grant-date Fair Value
	Options			($)
Non-Vested - January 1, 2020		371,669			0.80
Granted		22,500			1.41
Vested		(46,454	)		0.77
Forfeited		-			-
Non-Vested - March 31, 2020		347,715			0.67

NOTE 4 - STOCKHOLDERS’ EQUITY

The Company approved a matching contribution to participants in the Inrad Optics 401k Plan (the “Plan”) for the year ended December 31, 2019, in February 2020. 89,751 common shares of Inrad Optics, Inc. are to be contributed to the Plan in May, 2020.

NOTE 5 – RELATED PARTY TRANSACTIONS

On April 12, 2018, the maturity dates of a $1,500,000 Subordinated Convertible Promissory Note to Clarex Limited (“Clarex”) and a $1,000,000 Subordinated Convertible Promissory Note to an affiliate of Clarex were each extended to April 1, 2021 from April 1, 2018. The notes bear interest at an annual rate of 6%. Interest accrues yearly and is payable on maturity. Unpaid interest, along with principal, may be converted into securities of the Company as follows: the notes are convertible in the aggregate into 1,500,000 units and 1,000,000 units, respectively, with each unit consisting of one share of common stock and one warrant. Each warrant allows the holder to acquire 0.75 shares of common stock at a price of $1.35 per share. As part of the agreement, the expiration dates of the warrants were extended from April 1, 2022 to April 1, 2024. As of March 31, 2020, the Company had accrued interest in the amount of $150,000 associated with these notes.

NOTE 6 – OTHER LONG TERM NOTES

Other Long Term Notes consist of the following:

	March 31,			December 31,
	2020			2019
	(Unaudited)
	(in thousands)
U.S. Small Business Administration term note payable in
equal monthly installments of $1,922 and bearing an
interest rate of 4.0% and expiring in July 2029.	$	179		$	183
Less current portion		(16	)		(16	)
Long-term debt, excluding current portion	$	163		$	167

On May 6, 2020, the Company received loans totaling $973,000 as part of the 2020 Coronavirus Aid, Relief and Economic Stability Act. Please refer to Note 9, “Subsequent Events” of these condensed consolidated financial statements for additional details.

NOTE 7 – LEASE AMENDMENT

The Company entered into an amendment and extension of its building lease on July 8, 2019, retroactive to June 1, 2019. Under the guidance of ASU 2016-02, Leases (Topic 842), the Company determines if such an arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease at inception of the arrangement. The Company determined that this lease is an operating lease and presented as a right-of-use lease asset, short term lease liability and long term lease liability on the consolidated balance sheet. These assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term using the Company’s incremental borrowing rate.

Lease expense is recognized on a straight-line basis over the lease term and is included in cost of sales and general and administrative expenses on the consolidated statement of operations.

An initial right-of-use asset of $0.8 million was recognized as a non-cash asset addition with the signing of the July 8, 2019, office lease. Cash paid for amounts included in the present value of operating lease liability was $0.1 million during the three months ended March 31, 2020, and is included in operating cash flows.

Operating lease costs were $0.1 million during the three months ended March 31, 2020 and 2019, respectively.

NOTE 8 – IMPACT OF COVID-19

On March 11, 2020, the World Health Organization declared the global novel coronavirus disease (“COVID-19”) a pandemic. The Company’s operations are considered essential business under the Executive Orders of New Jersey’s Governor and the Company’s operations have been identified as critical infrastructure, as defined by the U.S. Department of Homeland Security. Companies aligned with the essential critical infrastructure workforce definition have a special responsibility to maintain normal work schedules. We are conducting our business to ensure the safety of our employees and associates actively and earnestly, following all best practice CDC guidelines for prevention in the workplace. We have applied social distancing in our operations and implemented a connected, remote workforce where practicable. We cannot predict what actions these mandates may have on our customers and suppliers, operating results, or financial condition. However we will continue to actively monitor the situation and may be required to take further actions that alter our business operations or that we determine are in the best interests of our employees, customers, and partners. The Company has taken additional steps to protect our employees in the event of infection in our offices and production facility and continues to enhance its business continuity plans.

NOTE 9 – SUBSEQUENT EVENT

On May 6, 2020, Inrad Optics, Inc. (the “Borrower” or the “Company”) received loan (the “PPP Loan”) proceeds of approximately $973,000, under the Paycheck Protection Program (“PPP”). The PPP was established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) which was enacted March 27, 2020. The PPP Loan, which is in the form of a Note dated May 4, 2020, issued by the Borrower, matures on May 4, 2022, and bears interest at a rate of 1.0% per annum, payable monthly commencing on December 4, 2020.

The CARES Act and the PPP provide a mechanism for forgiveness of up to the full amount borrowed. The amount of loan proceeds eligible for forgiveness is based on a formula that takes into account a number of factors, including the amount of loan proceeds used by the Company during the eight-week period after the loan origination for certain eligible purposes including payroll costs, interest on certain mortgage obligations, rent payments on certain leases, and certain qualified utility payments, provided that at least 75% of the loan amount is used for eligible payroll costs; the employer maintaining or rehiring employees and maintaining salaries at certain levels; and other factors. Subject to the other requirements and limitations on loan forgiveness, only loan proceeds spent on payroll and other eligible costs during the covered eight-week period will qualify for forgiveness. The Company intends to use the entire loan amount for qualifying expenses. Any forgiveness of the PPP Loan will be subject to approval by the SBA, and no assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part.

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Caution Regarding Forward Looking Statements

This Quarterly Report contains forward-looking statements as that term is defined in the federal securities laws. The Company wishes to insure that any forward-looking statements are accompanied by meaningful cautionary statements in order to comply with the terms of the safe harbor provided by the Private Securities Litigation Reform Act of 1995. The events described in the forward-looking statements contained in this Quarterly Report may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of the Company’s plans or strategies, projected or anticipated benefits of acquisitions made by the Company, projections involving anticipated revenues, earnings, or other aspects of the Company’s operating results. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions are intended to identify forward-looking statements. The Company cautions you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks, and other influences, many of which are beyond the Company’s control, that may influence the accuracy of the statements and the projections upon which the statements are based. Factors which may affect the Company’s results include, but are not limited to, the risks and uncertainties discussed in Items 1A, 7 and 7A of the Company’s most recent Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on April 14, 2020. Any one or more of these uncertainties, risks, and other influences could materially affect the Company’s results of operations and whether forward-looking statements made by the Company ultimately prove to be accurate. Readers are further cautioned that the Company’s financial results can vary from quarter to quarter, and the financial results for any period may not necessarily be indicative of future results. The foregoing is not intended to be an exhaustive list of all factors that could cause actual results to differ materially from those expressed in forward-looking statements made by the Company. The Company’s actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward looking statements, whether from new information, future events, or otherwise.

Critical Accounting Policies and Estimates

Our significant accounting policies are described in Note 1 of the accompanying condensed consolidated financial statements and further discussed in our annual financial statements included in our annual report on Form 10-K for the year ended December 31, 2019. In preparing our unaudited condensed consolidated financial statements, we made estimates and judgments that affect the results of our operations and the value of assets and liabilities we report. Our inventories are stated at the lower of cost (first-in-first-out basis) and net realizable value. The Company records a reserve for slow moving inventory as a charge against earnings for all products identified as surplus, slow-moving or discontinued. Excess work-in-process costs are charged against earnings whenever estimated costs-of-completion exceed unbilled revenues. The Company’s estimates also include the amount and timing of future taxable income in determining the valuation allowance for deferred income tax assets. Our actual results may differ from these estimates under different assumptions or conditions.

For additional information regarding our critical accounting policies and estimates, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report filed with the Securities and Exchange Commission on Form 10-K for the year ended December 31, 2019.

Impact of COVID-19

On March 11, 2020, the World Health Organization declared the global novel coronavirus disease (“COVID-19”) a pandemic. The Company’s operations are considered essential business under the Executive Orders of New Jersey’s Governor and the Company’s operations have been identified as critical infrastructure, as defined by the U.S. Department of Homeland Security. Companies aligned with the essential critical infrastructure workforce definition have a special responsibility to maintain normal work schedules. We are conducting our business to ensure the safety of our employees and associates actively and earnestly, following all best practice CDC guidelines for prevention in the workplace. We have applied social distancing in our operations and implemented a connected, remote workforce where practicable. We cannot predict what actions these mandates may have on our customers and suppliers, however we will continue to actively monitor the situation and may be required to take further actions that alter our business operations or that we determine are in the best interests of our employees, customers, and partners. The Company has taken additional steps to protect our employees in the event of infection in our offices and production facility and continues to enhance its business continuity plans.

Results of Operations

Inrad Optics, Inc.’s business falls into two main categories: Optical Components and Laser Devices/Instrumentation.

The Optical Components category is focused on custom optics manufacturing. The Company specializes in high-end precision components. It develops, manufactures and delivers precision custom optics and thin film optical coating services through its Custom and Metal Optics operations. Glass, metal, and crystal substrates are processed using complex processes and techniques to manufacture components, deposit optical thin films, and assemble sub-components used in advanced photonic systems. The majority of custom optical components and optical coating services supplied are used in inspection, process control systems, defense and aerospace electro-optical systems, laser system applications, industrial scanners, and medical system applications.

The Laser Devices/Instrumentation category includes the growth and fabrication of crystalline materials with electro-optic (EO) and non-linear optical properties for use in both standard and custom products. This category also includes the manufactured crystal based devices and associated instrumentation. The majority of crystals, crystal components and laser devices manufactured are used in laser systems, defense EO systems, medical lasers and R&D applications by engineers within corporations, universities and national laboratories.

The Company operates a manufacturing facility in Northvale, New Jersey and has its corporate offices in the same location.

Revenue

Sales for the three months ended March 31, 2020, were $2.0 million, a decrease of 21.2%, or $0.6 million, compared to $2.6 million for the three months ended March 31, 2019.

Sales to the defense/aerospace market decreased by $0.2 million or 24% to $0.8 million in the three months ended March 31, 2020, compared to $1.0 million for the three months ended March 31, 2019. The decrease in sales in the defense/aerospace market is attributable to production delays in completing two large contracts.

Process control and metrology (“PC&M”) sales were $0.8 million for the three months ended March 31, 2020, a decrease of $0.3 million, or 24.3%, from $1.1 million for the three months ended March 31, 2019. The continued reduction in demand for certain products in our PC&M market and the delayed delivery schedules from certain customers, particularly in the semi-conductor industry, negatively impacted the sales for the three months ended March 31, 2020, compared to March 31, 2019.

For the three months ended March 31, 2020 and 2019, sales to customers in the laser systems market were $0.3 million. Sales were flat year over year, as increased sales to customers were offset by reduced deliveries of electro-optical crystals to a certain customer.

Sales to customers in the Scientific/R&D market were $0.1 million for the three months ended March 31, 2020, compared to $0.2 million for three months ended March 31, 2019. The decrease in sales in the Scientific/R&D market is attributable to the completion of a federal government R&D contract in the latter part of 2019.

For the three months ended March 31, 2020, only one customer represented 10% or more of revenues. For the three months ended March 31, 2019, there were two customers that represented 10.0% or more of total sales.

The Company’s top five customers represented 49.7% of sales in the three month period ended March 31, 2020, compared to 46.1% in the same period in 2019.

Orders booked during the first three months of 2020, totaled $3.1 million, compared to $1.9 million for the same period last year. Order backlog at March 31, 2020 and 2019, was $6.3 million and $5.7 million, respectively.

Cost of Goods Sold

For the three months ended March 31, 2020 and 2019, cost of goods sold was $1.6 million, and $2.0 million, or 79.7% and 75.2% of total revenues, respectively. The impact of increased labor and service costs, as well as manufacturing overhead, resulted in an increase in costs of goods sold as a percentage of sales.

Gross profit for the three months ended March 31, 2020, was $0.4 million or 20.3% of sales, compared to $0.6 million or 24.8% of sales in the same quarter last year.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A” expenses) in the three months ended March 31, 2020, amounted to $0.7 million, or 34.7%, of sales, compared to $0.6 million, or 24.7%, for the same period a year ago. The increase in SG&A expenses reflects costs related to the Company’s continued investment in sales, an increase in legal and accounting fees, and charges related to uncollectible accounts, offset by a decrease in outside services for temporary employees and a reduction in other general and administrative expenses.

Income (Loss) from Operations

The Company incurred a net loss from operations of $0.3 million for the three months ended March 31, 2020, compared with an operating income of $0.0 million in the three months ended March 31, 2019. The decrease in income primarily reflects the impact of the Company’s lower sales in the three months ended March 31, 2020, compared to the same period last year, coupled with related cost of goods sold and SG&A costs.

Other Income and Expense

There was no significant change in net interest expense for the three months ended March 31, 2020, compared to the same period in 2019, as there was no significant change in the Company’s borrowing level.

Income Taxes

For the three months ended March 31, 2020, and 2019, the Company did not record a current provision for either state tax or federal alternative minimum tax due to the losses incurred for both income tax and financial reporting purposes.

Net Income (Loss)

The Company had a net loss of $0.3 million for the three months ended March 31, 2020, compared to a net loss of $0.0 million for the three months ended March 31, 2019. The higher net loss primarily reflects the decrease in sales for the three months ended March 31, 2020, compared to the 2019 period, combined with related cost of goods sold and increased SG&A expenses.

Liquidity and Capital Resources

The Company’s primary source of liquidity is cash and cash equivalents and on-going collection of accounts receivable. The Company’s major use of cash in recent years has been for financing operations, for payment of accrued and current interest on convertible debt, for servicing of long term debt, and for capital expenditures.

As of March 31, 2020 and December 31, 2019, the Company had cash and cash equivalents of $0.8 million and $1.0 million, respectively.

The Company occupies approximately 42,000 square feet of space located at 181 Legrand Avenue, Northvale, New Jersey pursuant to a net lease which was amended on July 8, 2019, retroactive to June 1, 2019, for an additional three year term. Under the terms of the lease, the Company is obligated for all real estate taxes, maintenance and operating costs of the facility.

The following table summarizes net cash (used in) operating, investing and financing activities for the three months ended March 31, 2020 and 2019:

	Three Months Ended
	March 31,
	2020			2019
	(in thousands)
Net cash (used in) provided by operating activities	$	(29	)	$	2
Net cash (used in) investing activities		(82	)		(97	)
Net (used in) financing activities		(4	)		(4	)
Net (decrease) in cash and cash equivalents	$	(116	)	$	(99	)

Net cash used in operating activities was $29,000 for the three months ended March 31, 2020, compared to net cash provided by operations of $2,000 in the same period last year. The net cash used in operating activities in the three months ended March 31, 2020, resulted primarily from operating losses as well as reductions in accounts receivable and increases in accounts payable and contract liabilities.

Net cash used in investing activities was $82,000 during the three months ended March 31, 2020, compared to $97,000 in the same period last year reflecting capital expenditures in both periods.

Overall, cash and cash equivalents decreased by $116,000 for the three months ended March 31, 2020 and decreased $99,000 in the period ending March 31, 2019.

On May 6, 2020, the Company received loan proceeds of approximately $973,000, under the Paycheck Protection Program (“PPP”). The PPP was established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) which was enacted March 27, 2020. The PPP Loan, which is in the form of a Note dated May 4, 2020, issued by the Borrower, matures on May 4, 2022, and bears interest at a rate of 1.0% per annum, payable monthly commencing on December 4, 2020. Subject to the other requirements and limitations on loan forgiveness, only loan proceeds spent on payroll and other eligible costs during the covered eight-week period will qualify for forgiveness. The Company intends to use the entire loan amount for qualifying expenses. Any forgiveness of the PPP Loan will be subject to approval by the SBA, and no assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part.

Management believes, based on the Company’s operations and its existing working capital resources together with existing cash flows, that the Company has sufficient cash flows to fund operations through at least May 14, 2021.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is a smaller reporting company and not required to provide the information required under this item.

ITEM 4.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of March 31, 2020 (the “Evaluation Date”), have concluded that as of the Evaluation Date, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports we file or submit under the Exchange Act (1) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and (2) is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

None.

ITEM 1A.

RISK FACTORS

Not applicable

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.

DEFAULTS UNDER SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable

ITEM 5.

OTHER INFORMATION

None

ITEM 6.

EXHIBITS

10.5

Note dated May 4, 2020, between Inrad Optics, Inc. and Valley National Bank.*

31.1

Certificate of the Registrant’s Chief Executive Officer, Amy Eskilson, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2

Certificate of the Registrant’s Chief Financial Officer, Theresa A. Balog, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1

Certificate of the Registrant’s Chief Executive Officer, Amy Eskilson, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.2

Certificate of the Registrant’s Chief Financial Officer, Theresa A. Balog, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

101.INS

XBRL Instance Document*

101.SCH

XBRL Taxonomy Extension Schema*

101.CAL

XBRL Taxonomy Extension Calculation Linkbase*

101.DEF

XBRL Taxonomy Extension Definition Linkbase*

101.LAB

XBRL Taxonomy Extension Label Linkbase*

101.PRE

XBRL Taxonomy Extension Presentation Linkbase*

Filed herewith

Furnished herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Inrad Optics, Inc.

	By:	/s/ Amy Eskilson
		Amy Eskilson
		President and Chief Executive Officer

	By:	/s/ Theresa A. Balog
		Theresa A. Balog
		Chief Financial Officer,
		Secretary and Treasurer
Date: May 14, 2020

Exhibit 10.5

DocuSign Envelope ID: 67F03340-F2D0-449C-9884-6053779AB4C1 _5_/4_/2_0_2_0 Thank you for choosing Valley for your Paycheck Protection Program (PPP) Loan. Enclosed you will find the closing documentation. Please execute all loan documentation where you are required to sign in the loan documentation and return the executed documents. You may execute the documents electronically in accordance with the instructions contained in the documentation. It is important to remember that the PPP loan proceeds are intended for: - - - - - - Payroll costs Payments on Mortgage Interest Rent Utilities Interest on Other Debt Obligations To refinance eligible EIDL loans The PPP allows for your loan to be forgiven under certain conditions. The conditions and requirements for granting forgiveness as well as the instructions and timing for applying for forgiveness can be found on the Small Business Association (SBA) website . It is your responsibility to satisfy all requirements, including providing the documentation that substantiates the PPP funds were spent in the approved manner for forgiveness. You will need to provide such support with a certification at time of application for forgiveness. The amount of loan forgiveness shall be calculated (and may be reduced) in accordance with the requirements of the PPP, including the provisions of Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (P.L. 116-136). 1

DocuSign Envelope ID: 67F03340-F2D0-449C-9884-6053779AB4C1 SMALL BUSINESS ADMINISTRATION'S (“SBA”) PAYCHECK PROTECTION PROGRAM(“PPP”) TERM NOTE (“NOTE”) 5/4/2020 $_9_7_3,_1_6_6._0_0 _ _ Wayne, New Jersey For value received,theundersigned In_ra_d_O_p_tic_s_, I_n_c._ , a (the C_-_C_or_p_ _ , with an address of _18_1_L_e_gr_a_nd_A_v_e_. N_o_rt_h_va_le_N_J_7_6_47 _ _, "Borrower"), promises to pay to the order of Valley National Bank, a national banking association with an address of 1455 Valley Road, Wayne, New Jersey 07470 (together with its successors and assigns, the "Bank"), pursuant to the terms and conditions promulgated by the SBA, and /or The U.S. Department of Treasury concerning the PPP as authorized by Title 1 of theCoronavirusAid,ReliefandEconomicSecurityAct(“CaresAct”),theprincipalamountof ($_9_7_3,_16_6_.0_0 ) on or before _M_ay_4 , 2022 , which is two (2) years after execution of this Note (the "Maturity Date"). This Note shall be repaid in the manner hereinafter set forth, together with interest from the date this Note is executed, until such time that the Note is paid in full together will all outstanding interest and other costs. The aggregate principal balance outstanding shall bear interest thereon at a per annum rate equal to One Percent (1.00%). Payments under this Note shall be deferred for six (6) months, from the date of its execution (“Deferment Period”). Interest shall continue to accumulate during the Deferment Period. Borrower commencing as of _D_ec_e_m_b_er_4 , 2020, shall pay the Bank consecutive equal monthly payments of $_5_4_,6_3_2._59 , the Bank shall not require a balloon payment on the Maturity Date, except for the last installment, which may include any outstanding principal, costs and fees due to the Bank, if any, as of the Maturity Date. Monthly payments may be adjusted, if part of the loan is forgiven, in accordance with the terms and conditions of this Note or regulations concerning the PPP and the Cares Act. Principal and interest shall be payable at the Bank's main office or at such other place as the Bank may designate in writing in immediately available funds in lawful money of the United States of America without set-off, deduction or counterclaim. Interest shall be calculated on the basis of actual number of days elapsed and a 360-day year. This Note shall continue in full force and effect until all obligations and liabilities evidenced by this Note are paid in full and the Bank is no longer obligated to extend financial accommodations to the Borrower respecting this Note. Any payments received by the Bank on each installment payment shall be applied first to pay interest accrued to the day the Bank receives the payment, and then to bring principal current. The Bank will then apply any remaining balance to reduce principal. Bank and SBA shall have no recourse against any individual shareholder, member or partner of Borrower for non-payment of the loan, except to the extent that such shareholder, member or partner uses the loan proceeds for an unauthorized purpose. The Borrower hereby authorizes the Bank to charge any deposit account which the Borrower may maintain with the Bank for any payment required hereunder without prior notice to the Borrower. If pursuant to the terms of this Note, the Borrower is at any time obligated to pay interest on the principal balance at a rate in excess of the maximum interest rate permitted by applicable law for the loan evidenced by this Note, the applicable interest rate shall be immediately reduced to such maximum rate and all previous payments in excess of the maximum rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder. Notwithstanding any provision in this Note to the contrary: Borrower may prepay this Note at any time without penalty. Borrower may prepay 20 percent or less of the unpaid principal balance at any time without notice. If Borrower prepays more than 20 percent and the Loan has been sold on the secondary market, Borrower must: (i) Give Bank written notice; (ii) Pay all accrued interest; and (iii) If the prepayment is received less than 21 days from the date Bank received the notice, pay an amount equal to 21 days interest from the date Bank received the notice, less any interest accrued during the 21 days and paid under (ii) of this paragraph. If Borrower does not prepay within 30 days from the date Bank received the notice, Borrower must give Bank a new notice. Borrower may apply to Lender for forgiveness of the amount due on this loan in an amount equal to the sum of the following costs incurred by Borrower during the 8-week period beginning on the date of first disbursement of this loan: a. b. Payroll costs Any payment of interest on a covered mortgage obligation (which shall not include any prepayment

DocuSign Envelope ID: 67F03340-F2D0-449C-9884-6053779AB4C1 of or payment of principal on a covered mortgage obligation) c. d. Any payment on a covered rent obligation Any covered utility payment The amount of loan forgiveness shall be calculated (and may be reduced) in accordance with the requirements of the Paycheck Protection Program, including the provisions of Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (P.L. 116-136). Not more than 25% of the amount forgiven can be attributable to non-payroll costs. Borrower understands that if, Borrower received an Economic Injury Disaster Loan (“EIDL”) advance, that amount shall be subtracted from the loan forgiveness amount. The Borrower hereby affirms, certifies and represents to the Bank that the proceeds of this Note will not be used in any manner whatsoever that would violate the use of funds as set forth in the rules and regulations promulgated for the PPP pursuant to the Cares Act, inclusive of, but not limited to all requirements set forth in the Paycheck Protection Program Interim Final Rule, as amended from time to time and the PPP. Borrower will not, without Lender’s consent, change its ownership structure, make any distribution of company assets that would adversely affect its financial condition, or transfer (including pledging) or dispose of any assets, except in the ordinary course of business. Borrower will keep books and records in a manner satisfactory to Lender, furnish financial statements as requested by Lender, and allow Lender and SBA to inspect and audit books, records and papers relating to Borrower’s financial or business condition. Program Interim Final Rule, as amended from time to time. No delay or omission on the part of the Bank in exercising any right hereunder shall operate as a waiver of such right or of any other right of the Bank, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. The Borrower of this Note, waives presentment, demand, protest, notice of intent to accelerate, notice of acceleration and all other notices of every kind in connection with the delivery, acceptance, performance or enforcement of this Note and assent to any extension or postponement of the time of payment or any other indulgence. This Note shall be binding upon the Borrower and upon its respective heirs, successors, assigns and legal representatives, and shall inure to the benefit of the Bank and its successors, endorsees and assigns. The Borrower will from time to time execute and deliver to the Bank such documents, and take or cause to be taken, all such other further action, as the Bank requests in order to effect and confirm or vest more securely in the Bank all rights contemplated by this Note or any other loan documents related thereto (including, without limitation, to correct clerical errors) or to vest more fully in or assure to the Bank the security interest in any collateral securing this Note or to comply with applicable statute, law or regulation of the SBA or United States Treasury, applicable to the PPP. In addition, Borrower shall execute and produce any documentation necessary or as required by the SBA or United States Treasury for the Bank to calculate, confirm and authenticate the loan forgiveness authorized to pursuant to PPP, inclusive of, but not limited to requirements set forth in Section 1106 of the Cares Act. Any notices under or pursuant to this Note shall be deemed duly received and effective if delivered in hand to any officer or agent of the Borrower or Bank, or if mailed by registered or certified mail, return receipt requested, addressed to the Borrower or Bank at the address set forth in this Note, or delivered by electronic means, with receipt acknowledged by recipient, or as any party may from time to time designate by written notice to the other party. The parties agree that this Note may be completed, signed and delivered by electronic means (including, without limitation, through the DocuSign, Inc. electronic signing system) in one or more counterparts and all of the counterparts taken together shall constitute the same agreement. This Note shall be interpreted as a valid and binding agreement and fully admissible in any court of law or otherwise and under any and all state and federal rules of evidence. The Borrower agrees this Note is a transferrable record under any applicable Uniform Electronic Transactions Act and under the federal Electronic Signatures in Global and National Commerce Act, as may be amended from time to time. THE BORROWER, AND THE BANK EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, AND AFTER AN OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL, (A) WAIVES ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING IN CONNECTION WITH THIS NOTE, ANY OF THE OBLIGATIONS OF THE BORROWER TO THE BANK, AND ALL MATTERS CONTEMPLATED HEREBY AND DOCUMENTS EXECUTED IN CONNECTION HEREWITH AND (B) AGREES NOT TO SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE, OR HAS NOT BEEN, WAIVED OR ANY OTHER ACTION OF ANY BORROWER GRANTED A LOAN BY THE BANK UNDER THE PPP. THE BORROWER AND THE BANK EACH CERTIFIES THAT NEITHER THE BANK NOR ANY OF ITS REPRESENTATIVES, AGENTS OR COUNSEL HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD NOT IN THE EVENT OF ANY SUCH PROCEEDING SEEK TO ENFORCE THIS WAIVER. THIS NOTE WILL BE INTERPRETED AND ENFORCED UNDER FEDERAL LAW, INCLUDING SBA REGULATIONS. AS TO THIS NOTE, BORROWER MAY NOT CLAIM OR ASSERT AGAINST SBA ANY LOCAL OR 2

DocuSign Envelope ID: 67F03340-F2D0-449C-9884-6053779AB4C1 STATE LAW TO DENY ANY OBLIGATION, DEFEAT ANY CLAIM OF SBA, OR PREEMPT FEDERAL LAW. 5/4/2020 Executed as an instrument under seal as of Borrower: _In_ra_d_O pt_ic_s_, I_n_c._ _ By: Name: Title: _ T_h_e_re_s_a_A_._B_a_lo_g_ _ C_F_O _ 3

DocuSign Envelope ID: 67F03340-F2D0-449C-9884-6053779AB4C1 Settlement Sheet EXPIRATION DATE: 04/30/2022 Remaining: Print Name: Title: SBA Form 1050 (04-19) Previous Editions Obsolete NOTE: According to the Paperwork Reduction Act, you are not required to respond to this collection of information unless it displays a currently valid OMB Control Number. The estimated burden for completing this form, including time for reviewing instructions, and gathering data needed, is 30 minutes. Comments or questions on the burden estimates or other aspects of this information collection should be sent to U.S. Small Business Administration, Director, RMD, 409 3rd St., SW, Washington DC 20416 and/or SBA Desk Officer, Office of Management and Budget, New Executive Office Building, Rm. 10202, Washington DC 20503. PLEASE DO NOT SEND THE COMPLETED FORMS TO THESE ADDRESSES. At the time of completion of this form, the Lender and the Borrower certify that: 1. The loan proceeds were disbursed and received and will be used in accordance with the Use of Proceeds section of the Authorization, including any and all SBA/Lender approved modifications, and that all required equity or Borrower injections have been made in accordance with the Authorization and any approved modifications; and 2. There has been no unremedied adverse change in the Borrower’s or Operating Company’s financial condition, organization, management, operations or assets since the date of application that would warrant withholding or not making this disbursement or any further disbursement. At the time of each subsequent disbursement on this loan, the Lender, by disbursing the loan proceeds, and the Borrower by receiving them, are deemed to certify that the above certifications are true with respect to each and every disbursement made. WARNING: By signing below you are certifying that the above statements are accurate to the best of your knowledge. Submitting false information to the Government may result in criminal prosecution and fines up to $250,000 and/or imprisonment for up to 5 years under 18 USC § 1001. Submitting false statements to a Federally insured institution may result in fines up to $1,000,000 and/or imprisonment for up to 30 years under 18 USC § 1014, penalties under 15 USC § 645, and/or civil fraud liability. Authorized Lender Official Borrower Signature: Signature: Thomas Iadanza Print Name: Theresa A. Balog Chief Banking Officer Title: CFO 5/4/2020 Date: 5/4/2020 Date: Authorized Use of Proceeds: Name of Payee: Amount Disbursed: Authorized Amount SBA PPP Inrad Optics, Inc. $ 973,166.00 - $ - U.S. Small BusinessOMB APPROVAL NO.: 3245-0200 SBA Loan Number 6778817206 Lender Name 9DOOH\ 1DWLRQDO %DQN Lender FIRS Number 9396 SBA Loan Name Inrad Optics, Inc. Note Amount 973,166.00 Loan Type: X Term LoanLine of CreditDisbursement Type:First DisbursementSubsequent Disbursement X Full Disbursement

DocuSign Envelope ID: 67F03340-F2D0-449C-9884-6053779AB4C1 ATTESTATION OF BORROWER Theresa A. Balog , beingof ,being full the age, with an address at 14258 Gregg Neck Road, Galena, MD 21635 (Select one of the following) Eligible Individual Corporate Officer Manager Sole Member or Member(s) of Inrad Optics, Inc. , (the “Company”) a (Select one of the following) Sole Proprietorship/independent Contractor Limited Liability Company Corporation Non-Profit at 181 Legrand Ave. Northvale NJ 7647 with an address herebyaffirms attests and certifies under penalty of perjury, as follows: I have submitted the application pursuant the SBA/Paycheck Protection Program ( "PPP") promulgated in accordance with the Sections 1102-1106 of the Coronavirus Aid, Relief and Economic Security Act (“Cares Act”). The information set forth in the application is true and correct. I certify that the Company has been open and in operation to during the operative eligibility period set forth in the Cares Acts; the application and any exhibits and/or supplemental material provided, inclusive of, but not limited to, payroll, verified payments, or any other eligible costs or expenses are true and correct. Any funds provided to the Company pursuant to the Cares Act shall be used solely for retention of workers, payroll, mortgage interest payments, lease payments and utility payments. I will not use the funds provided pursuant to the Cares Act for any purpose whatsoever, not permitted pursuant to the Cares Act. I have been advised that Valley National Bank will not share fees with agents as envisioned under the SBA interim final regulation. I certify that no accountant, lawyer, broker or other agent is entitled to a fee for submitting or preparing my application that will be payable by Valley National Bank out the administrative fee Valley is entitled to from the SBA or otherwise. I acknowledge and accept Valley National Bank’s interpretation of the definitions and obligations set forth in the Cares Act, including, but not limited to its interpretation of the meaning of eligible payroll expenses and other eligible expenses. Valley National Bank’s interpretation shall be final as it relates to this application and the Company by executing this Attestation agrees not to bring any claim related to such interpretation. I affirm and understand that if the Company does not have a deposit account in its own name at Valley National Bank, but a party related to the Company, who is able to act as a fiscal agent for the Company maintains a deposit account with Valley National Bank, the Company hereby permits the proceeds of the PPP loan be deposited in such account. The name of the related party along with the account number with the deposit account at Valley National Bank acting as a fiscal agent for the Company is set forth in the application or said information is otherwise attached to the application package as a schedule or exhibit or is otherwise attached to the loan application package or loan documentation provided by me to Valley National Bank. I will supply information as requested by the Lender and/or the Small Business Administration (“SBA”) underwriting and/or servicing the loan in a timely manner. Further I shall update and correct any statements or information and shall ensure said information remains accurate throughout the term of the loan. I certify , affirm and attest that the foregoing statements made by me are true. I am aware that if any of the foregoing statements made by me are willfully false, I am subject to punishment, inclusive of but not limited to denial of the application, immediate default of the loan and other penalties. ENTITY NAME: By: Name: Theresa A. Balog CFO Title: © 2020 Valley National Bank. Member FDIC. Equal Opportunity Lender. All Rights Reserved. X X

Exhibit 31.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Amy Eskilson certify that:

I have reviewed the quarterly report on Form 10-Q of Inrad Optics, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15d -15(f)) for the registrants and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function(s):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:

May 14, 2020

/s/Amy Eskilson

President and Chief Executive Officer

A signed original of this written statement required by Section 302 has been provided to Inrad Optics, Inc. and will be retained by Inrad Optics, Inc. and furnished to the Securities Exchange Commission or its staff upon request.

Exhibit 31.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Theresa A. Balog certify that:

I have reviewed the quarterly report on Form 10-Q of Inrad Optics, Inc.;

10.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:

May 14, 2020

/s/ Theresa A. Balog

Chief Financial Officer,

Secretary and Treasurer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Inrad Optics, Inc. on Form 10-Q for the period ended March 31, 2020, filed with the Securities and Exchange Commission (the “Report”), I, Amy Eskilson, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and the consolidated result of operations of the Company for the periods presented.

Dated:

May 14, 2020

/s/Amy Eskilson

President and Chief Executive Officer

This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and has not been filed as part of the Report or as a separate disclosure document.

A signed original of this written statement required by Section 906 has been provided to Inrad Optics, Inc. and will be retained by Inrad Optics, Inc. and furnished to the Securities Exchange Commission or its staff upon request.

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Inrad Optics, Inc. on Form 10-Q for the period ended March 31, 2020, filed with the Securities and Exchange Commission (the “Report”), I, Theresa A. Balog of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2)

Dated:

May 14, 2020

/s/ Theresa A. Balog

Chief Financial Officer,

Secretary and Treasurer

This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and has not been filed as part of the Report or as a separate disclosure document.