UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~FORM 10-Q~~

(Mark One)

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

For the quarterly period ended June 30, 2021

or

~~For the quarterly period ended~~ ~~June 30, 2020~~

or

¨

☐

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

~~For the transition period from ___________ to ___________~~

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)~~ (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 August 13, ~~2020,~~2021, was ~~13,820,328~~.13,967,257.

Table of Contents

INRAD OPTICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

June 30, December 31,
2020 2019
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 2,021,383 $ 950,705
Accounts receivable, net 1,054,699 1,233,081
Inventories, net 3,217,696 2,834,107
Other current assets 90,207 141,339
Total current assets 6,383,985 5,159,232

Plant and equipment:
Plant and equipment, at cost 15,088,567 14,990,773
Less: Accumulated depreciation and amortization (14,448,279 ) (14,309,992 )
Total plant and equipment 640,288 680,781
Precious metals 561,910 561,910
Lease right-of-use, net 554,038 688,746
Other assets 48,420 44,577
Total Assets $ 8,188,641 $ 7,135,246

Liabilities and Shareholders' Equity
Current liabilities:
Current portion of other long term notes $ 16,311 $ 16,044
Accounts payable and accrued liabilities 1,018,208 978,184
Contract liabilities 1,026,856 768,243
Current portion of lease obligation 296,285 273,369
Total current liabilities 2,357,660 2,035,840

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

Other long term notes, net of current portion 1,133,095 166,763
Lease obligation, net of current portion 298,820 415,377
Total liabilities 6,289,575 5,117,980

Shareholders' equity:
Common stock: $.01 par value; 60,000,000 authorized shares; 13,824,928 shares
issued at June 30, 2020, and 13,735,177 shares issued at December 31, 2019 138,251 137,353
Capital in excess of par value 19,460,849 19,281,255
Accumulated deficit (17,685,084 ) (17,386,392 )
1,914,016 2,032,216
Less - Common stock in treasury, at cost (4,600 shares) (14,950 ) (14,950 )
Total shareholders' equity 1,899,066 2,017,266
Total Liabilities and shareholders' equity $ 8,188,641 $ 7,135,246


	June 30,		December 31,
	2021		2020
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	1,494,346	$	1,129,703
Accounts receivable, net		1,024,229		824,452
Inventories, net		3,078,824		3,206,057
Other current assets		102,340		214,748
Total current assets		5,699,739		5,374,960

Plant and equipment:
Plant and equipment, at cost		15,205,646		15,191,610
Less: Accumulated depreciation and amortization		(14,629,031)		(14,564,186)
Total plant and equipment		576,615		627,424
Precious metals		561,909		561,909
Lease right-of-use, net		272,645		415,377
Other assets		48,421		48,421
Total Assets	$	7,159,329	$	7,028,091

Liabilities and Shareholders' Equity
Current liabilities:
Current portion of other long term notes	$	16,288	$	16,288
Accounts payable and accrued liabilities		589,067		717,536
Contract liabilities		547,056		856,802
Current portion of lease obligation		298,821		304,844
Total current liabilities		1,451,232		1,895,470

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

Other long term notes, net of current portion		166,053		1,133,682
Lease obligation, net of current portion		0		144,228
Total liabilities		4,117,285		5,673,380

Shareholders' equity:
Common stock: $.01 par value; 60,000,000 authorized shares; 13,967,257 shares issued at June 30, 2021, and 13,824,928 shares issued at December 31, 2020		139,674		138,251
Capital in excess of par value		19,687,223		19,516,363
Accumulated deficit		(16,769,903)		(18,284,953)
		3,056,994		1,369,661
Less - Common stock in treasury, at cost (4,600 shares)		(14,950)		(14,950)
Total shareholders' equity		3,042,044		1,354,711
Total Liabilities and shareholders' equity	$	7,159,329	$	7,028,091

See Notes to Condensed Consolidated Financial Statements (Unaudited)

3

Table of Contents

INRAD OPTICS, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019

Total revenue $ 2,523,990 $ 2,619,623 $ 4,574,485 $ 5,220,683

Cost and expenses:
Cost of goods sold 1,784,192 2,172,649 3,419,232 4,128,930
Selling, general and administrative expenses 676,046 749,064 1,377,725 1,391,318
2,460,238 2,921,713 4,796,957 5,520,248

Income (loss) from operations 63,752 (302,090 ) (222,472 ) (299,565 )
Other expense:
Interest expense-net (37,957 ) (38,682 ) (76,220 ) (77,343 )
Loss on exchange of precious metals - (438 ) - (438 )
(37,957 ) (39,120 ) (76,220 ) (77,781 )

Income (loss) before income taxes 25,795 (341,210 ) (298,692 ) (377,346 )

Income tax (provision) benefit - - - -

Net income (loss) $ 25,795 $ (341,210 ) $ (298,692 ) $ (377,346 )

Net income (loss) per common share - basic $ 0.00 $ (0.02 ) $ (0.02 ) $ (0.03 )

Net income (loss) per common share - diluted $ 0.00 $ (0.02 ) $ (0.02 ) $ (0.03 )

Weighted average shares outstanding - basic 13,745,536 13,653,353 13,734,851 13,641,664

Weighted average shares outstanding - diluted 14,145,909 13,653,353 13,734,851 13,641,664


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020

Total sales revenue	$	2,881,751	$	2,523,990	$	5,661,299	$	4,574,485

Cost and expenses:
Cost of goods sold		1,824,001		1,784,192		3,790,808		3,419,232
Selling, general and administrative expenses		638,691		676,046		1,247,449		1,377,725
		2,462,692		2,460,238		5,038,257		4,796,957

Income (loss) from operations		419,059		63,752		623,042		(222,472)
Other expense:
Gain on forgiveness of PPP loan		0		0		973,166		0
Interest expense-net		(44,343)		(37,957)		(81,158)		(76,220)
		(44,343)		(37,957)		892,008		(76,220)

Income (loss) before income taxes		374,716		25,795		1,515,050		(298,692)

Income tax (provision) benefit		0		0		0		0

Net income (loss)	$	374,716	$	25,795	$	1,515,050	$	(298,692)

Net income (loss) per common share - basic	$	0.03	$	0.00	$	0.11	$	(0.02)

Net income (loss) per common share - diluted	$	0.03	$	0.00	$	0.11	$	(0.02)

Weighted average shares outstanding - basic		13,844,050		13,745,536		13,827,106		13,734,851

Weighted average shares outstanding - diluted		14,128,491		14,145,909		14,103,797		13,734,851

See Notes to Condensed Consolidated Financial Statements (Unaudited)

4

Table of Contents

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

401K contribution 98,189 982 92,605 - - 93,587
Stock-based compensation expense - - 33,343 - - 33,343
Net income (loss) June 30, 2019 - - - (341,210 ) - (341,210 )
Balance, June 30, 2019 13,735,177 $ 137,353 $ 19,210,938 $ (16,987,639 ) $ (14,950 ) $ 2,345,702


				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	0		0		0		0		0		0
Stock-based compensation expense	—		0		27,980		0		0		27,980
Net income (loss) March 31, 2020	—		0		0		(324,487)		0		(324,487)
Balance, March 31, 2020	13,735,177	$	137,353	$	19,309,235	$	(17,710,879)	$	(14,950)	$	1,720,759

401K contribution	89,751		898		123,457		0		0		124,355
Stock-based compensation expense	—		0		28,157		0		0		28,157
Net income (loss) June 30, 2020	—		0		0		25,795		0		25,795
Balance, June 30, 2020	13,824,928	$	138,251	$	19,460,849	$	(17,685,084)	$	(14,950)	$	1,899,066

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

401K contribution 89,751 898 123,457 - - 124,355
Stock-based compensation expense - - 28,157 - - 28,157
Net income (loss) June 30, 2020 - - - 25,795 - 25,795
Balance, June 30, 2020 13,824,928 $ 138,251 $ 19,460,849 $ (17,685,084 ) $ (14,950 ) $ 1,899,066


				Capital in						Total
	Common Stock			excess of		Accumulated		Treasury		Shareholders'
	Shares	Amount		par value		Deficit		Stock		Equity
Balance, January 1, 2021	13,824,928	$	138,251	$	19,516,363	$	(18,284,953)	$	(14,950)	$	1,354,711
401K contribution	0		0		0		0		0		0
Stock-based compensation expense	—		0		29,303		0		0		29,303
Net income (loss) March 31, 2021	—		0		0		1,140,334		0		1,140,334
Balance, March 31, 2021	13,824,928	$	138,251	$	19,545,666	$	(17,144,619)	$	(14,950)	$	2,524,348

401K contribution	142,329		1,423		101,926		0		0		103,349
Stock-based compensation expense	—		0		39,631		0		0		39,631
Net income (loss) June 30, 2021	—		0		0		374,716		0		374,716
Balance, June 30, 2021	13,967,257	$	139,674	$	19,687,223	$	(16,769,903)	$	(14,950)	$	3,042,044

See Notes to Condensed Consolidated Financial Statements (Unaudited)

5

Table of Contents

INRAD OPTICS, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Six Months Ended June 30,
2020 2019

Cash flows from operating activities:
Net income (loss) $ (298,692 ) $ (377,346 )

Adjustments to reconcile net (loss) to net cash
(used in) provided by operating activities
Depreciation and amortization 138,287 131,237
(Gain) loss on exchange of precious metals - 438
401K common stock contribution - non cash item 124,355 93,587
Stock based compensation 56,137 62,719
Changes in operating assets and liabilities:
Accounts receivable 178,382 (184,685 )
Inventories, net (383,589 ) 170,887
Other current assets 51,132 21,804
Other assets (3,844 ) -
Accounts payable and accrued liabilities 83,379 105,153
Contract liabilities 258,613 (181,748 )
Total adjustments and changes 502,852 219,392
Net cash provided by (used in) operating activities 204,160 (157,954 )

Cash flows from investing activities:
Capital expenditures (100,081 ) (190,692 )
Net cash (used in) investing activities (100,081 ) (190,692 )

Cash flows from financing activities:
Proceeds from PPP loan 973,166 -
Principal payments on notes payable-other (6,567 ) (6,444 )
Net cash provided by (used in) financing activities 966,599 (6,444 )

Net increase (decrease) in cash and cash equivalents 1,070,678 (355,090 )

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

Cash and cash equivalents at end of period $ 2,021,383 $ 830,463

Supplemental disclosure of cash flow information:
Interest paid $ 3,043 $ 80,088
Lease right-of-use asset $ - $ 819,612


	Six Months Ended
	June 30,
	2021		2020
Cash flows from operating activities:
Net income (loss)	$	1,515,050	$	(298,692)

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities
Depreciation and amortization		64,845		138,287
401K common stock contribution - non cash item		103,349		124,355
Stock based compensation		68,934		56,137
Gain on forgiveness of PPP loan		(973,166)		0
Capitalized interest on promissory note		5,538		0
Changes in operating assets and liabilities:
Accounts receivable		(120,917)		178,382
Inventories, net		127,232		(383,589)
Other assets		112,408		47,288
Accounts payable and accrued liabilities		(135,989)		83,379
Contract liabilities		(388,605)		258,613
Total adjustments and changes		(1,136,371)		502,852
Net cash provided by operating activities		378,679		204,160

Cash flows from investing activities:
Capital expenditures		(14,036)		(100,081)
Net cash (used in) investing activities		(14,036)		(100,081)

Cash flows from financing activities:
Proceeds from PPP Loan		0		973,166
Principal payments on notes payable-other		0		(6,567)
Net cash provided by financing activities		0		966,599

Net increase in cash and cash equivalents		364,643		1,070,678

Cash and cash equivalents at beginning of period		1,129,703		950,705

Cash and cash equivalents at end of period	$	1,494,346	$	2,021,383

Supplemental disclosure of cash flow information:
Interest paid	$	83,070	$	3,043
Income taxes paid	$	0	$	0

See Notes to Condensed Consolidated Financial Statements (Unaudited)

6

Table of Contents

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.~~

2020.

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~~$91,000 at June 30, ~~2020,~~2021 and ~~$15,000 at~~ December 31, ~~2019.~~

2020.

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.

7

Table of Contents

Inventories are comprised of the following and are shown net of inventory reserves of ~~$2,485,000~~$2,829,000 and $2,489,000 at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively:

	2020		2019
	(Unaudited)

					June 30,		December 31,
					2021		2020
					(Unaudited)
						(in thousands)
Raw materials	$	1,251	$	1,248	$	973	$	1,130
Work in process, including manufactured parts and components		1,416		1,090		1,488		1,718
Finished goods		551		496		618		358
	$	3,218	$	2,834
					$	3,079	$	3,206

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~~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~~three-year period ended December 31, ~~2019.~~2020. 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 June 30, ~~2020,~~2021, 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 ~~$3,416,000~~$3,480,000 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 and six months ended June 30, 2021, the Company did 0t record a current provision for income taxes due to the availability of net operating loss carryforwards to offset taxable income for both federal and state tax purposes.

For the three months ended June 30, 2020, the Company did ~~not~~0t record a current provision for income taxes due to the availability of net operating loss carryforwards to offset taxable income for both federal and state tax purposes. For the six months ended June 30, 2020, the Company did ~~not~~0t 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.

For the three months and six months ended June 30, 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) 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 and six months ended June 30, 2021, a total of 2,500,000 common shares and 1,875,000 common shares from warrants issuable upon conversion of outstanding related party convertible notes in addition to 190,000 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.

For the three ~~months~~ and six months ended June 30, 2020, a total of 2,500,000 common shares and 1,875,000 common shares from warrants issuable upon conversion of outstanding related party convertible notes in addition to 368,400 and 1,160,567 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.

8

~~For the three months and six months ended June 30, 2019, all common stock equivalents were excluded from the computation~~Table 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, 1,218,367 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.Contents

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

	Three Months Ended						Three Months Ended
	June 30, 2020						June 30, 2019
	Income(Loss)		Shares		Per Share		Income(Loss)			Shares		Per Share
	(Numerator)		(Denominator)		Amount		(Numerator)			(Denominator)		Amount

															Three Months Ended					Three Months Ended
															June 30, 2021					June 30, 2020
															Income(Loss)		Shares	Per Share		Income(Loss)		Shares	Per Share
															(Numerator)		(Denominator)	Amount		(Numerator)		(Denominator)	Amount
Basic Income (Loss) Per Share:
Net Income (Loss)	$	25,795		13,745,536	$	0.00	$	(341,210	)		13,653,353	$	(0.02	)	$	374,716	13,844,050	$	0.03	$	25,795	13,745,536	$	0.00
Effect of dilutive securities:		-		-		-		-			-		-			—	—		—		—	—		—
Convertible Notes		-		-		-		-			-		-			0	0		0		0	0		0
Accrued Interest on Convertible Notes		-		-		-		-			-		-			0	0		0		0	0		0
Warrants		-		-		-		-			-		-			0	0		0		0	0		0
Stock Options		-		400,373		-		-			-		-			0	284,441		0		0	400,373		0
Diluted Income (Loss) Per Share:	$	25,795		14,145,909	$	0.00	$	(341,210	)		13,653,353	$	(0.02	)	$	374,716	14,128,491	$	0.03	$	25,795	14,145,909	$	0.00

	Six Months Ended								Six Months Ended
	June 30, 2020								June 30, 2019
	Income(Loss)			Shares		Per Share			Income(Loss)			Shares		Per Share
	(Numerator)			(Denominator)		Amount			(Numerator)			(Denominator)		Amount

																	Six Months Ended					Six Months Ended
																	June 30, 2021					June 30, 2020
																	Income(Loss)		Shares	Per Share		Income(Loss)		Shares	Per Share
																	(Numerator)		(Denominator)	Amount		(Numerator)		(Denominator)	Amount
Basic Income (Loss) Per Share:
Net Income (Loss)	$	(298,692	)		13,734,851	$	(0.02	)	$	(377,346	)		13,641,664	$	(0.03	)	$	1,515,050	13,827,106	$	0.11	$	(298,692)	13,734,851	$	(0.02)
Effect of dilutive securities:		-			-		-			-			-		-			—	—		—		—	—		—
Convertible Notes		-			-		-			-			-		-			0	0		0		0	0		0
Accrued Interest on Convertible Notes		-			-		-			-			-		-			0	0		0		0	0		0
Warrants		-			-		-			-			-		-			0	0		0		0	0		0
Stock Options		-			-		-			-			-		-			0	276,691		0		0	0		0
Diluted Income (Loss) Per Share:	$	(298,692	)		13,734,851	$	(0.02	)	$	(377,346	)		13,641,664	$	(0.03	)	$	1,515,050	14,103,797	$	0.11	$	(298,692)	13,734,851	$	(0.02)

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. The Company is currently evaluating the impact of adoption on its consolidated financial statements and does not expect the adoption of ASU 2016-13 to have a material impact on the Company’s statements of operations or cash flows.

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 8. 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.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This guidance ~~will be~~was effective for entities ~~for the fiscal years, and interim periods within those~~with fiscal years beginning after December 15, ~~2020 on a prospective basis, with early adoption permitted.~~2020. The ~~Company is currently evaluating the impact of~~ adoption of this guidance ~~and does~~did not ~~expect the adoption of this guidance to~~ have a material impact on the Company’s consolidated financial statements.

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NOTE 2 – SALES REVENUE

The Company’s revenues are comprised of the ~~sales~~sale of products and services including, 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 0.7% of revenue for the three and six months ended June ~~20, 2020,~~30, 2021, and ~~4.0%,~~ 0%of revenue for the three ~~months~~ and six months ended June 30, ~~2019.~~2020. 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%~~99.3% and ~~96.0%~~100% of revenue for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, 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.

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

	Three Months Ended					Six Months Ended
	June 30,				��	June 30,
	2020		2019			2020		2019

										Three Months Ended				Six Months Ended
										June 30,				June 30,
										2021		2020		2021		2020
Aerospace & Defense	$	940,727	$	979,004		$	1,820,639	$	2,019,561	$	1,055,936	$	940,727	$	2,232,266	$	1,820,639
Process Control & Metrology		1,093,022		993,355			1,945,397		2,114,342		1,171,856		1,093,022		2,249,232		1,945,397
Laser Systems		150,451		324,282			361,493		609,272		276,483		150,451		391,229		361,493
Scientific / R&D		339,790		322,982			446,956		477,508		377,476		339,790		788,572		446,956
Total	$	2,523,990	$	2,619,623		$	4,574,485	$	5,220,683	$	2,881,751	$	2,523,990	$	5,661,299	$	4,574,485

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019

									Three Months Ended				Six Months Ended
									June 30,				June 30,
									2021		2020		2021		2020
Transfer at point in time	$	2,523,990	$	2,506,028	$	4,574,485	$	5,013,534	$	2,881,751	$	2,523,990	$	5,621,080	$	4,574,485
Transfer over time		-		113,595		-		207,149		0		0		40,219		0
Total net sales	$	2,523,990	$	2,619,623	$	4,574,485	$	5,220,683	$	2,881,751	$	2,523,990	$	5,661,299	$	4,574,485

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 June 30, ~~2020~~2021 or ~~2019. At June 30, 2020 and 2019, the~~2020. The Company had 0 remaining revenue to be recognized from ~~the~~ long-term government contracts ~~was $0 and $105,000, respectively.~~

at June 30, 2021 or 2020.

On June 30, ~~2020,~~2021, the Company had approximately ~~$6.4~~$9.4 million of performance obligations, which is also referred to as backlog. Approximately ~~4.0%~~12.9% of the June 30, ~~2020~~2021 backlog, is related to projects that will extend beyond June 30, ~~2021.~~2022.

NOTE ~~3 -~~3- EQUITY COMPENSATION PROGRAM AND STOCK BASED COMPENSATION

a)	a) Stock Option Expense

The Company's results of operations for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, include stock-based compensation expense for stock option grants totaling ~~$28,157~~$39,631 and ~~$33,591,~~$28,157, respectively. For the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, stock-based compensation expense for stock option grants totaled ~~$56,137~~$68,934 and ~~$62,719,~~$56,137, 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 and six months ended June 30, ~~2020~~2021 and ~~2019:~~2020:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019

									Three Months Ended				Six Months Ended
									June 30,				June 30,
									2021		2020		2021		2020
Cost of sales	$	7,201	$	9,493	$	14,402	$	17,719	$	8,750	$	7,201	$	15,952	$	14,402
Selling, general and administrative		20,956		24,098		41,735		45,000		30,881		20,956		52,982		41,735
Total stock-based compensation expense	$	28,157	$	33,591	$	56,137	$	62,719	$	39,631	$	28,157	$	68,934	$	56,137

As of June 30, ~~2020~~2021 and ~~2019,~~2020, there were ~~$153,000~~$171,000 and ~~$100,000~~$153,000 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 1.57 years and 1.16 years, ~~and 1.95 years,~~ respectively.

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There were 200,000 stock options granted during the six months ended June 30, 2021, and 22,500 stock options granted during the six months ended June 30, ~~2020, and 200,000 stock options granted during the six months ended June 30, 2019.~~2020. The following range of weighted-average assumptions were used to determine the fair value of stock option grants during the six months ended June 30, ~~2020~~2021 and ~~2019:~~2020:

	Six Months Ended
	June 30,
	2020			2019

							Six Months Ended
							June 30,
							2021		2020
Expected Dividend yield		-	%		-	%	0	%	0	%
Expected Volatility		122	%		125	%	106	%	122	%
Risk-free interest rate		1.96	%		2.83	%	0.86	%	1.96	%
Expected term		10 years			10 years		10	years	10	years

b)	b) Stock Option Activity

The following table represents stock options granted, exercised and forfeited during the six months ended June 30, ~~2020:~~2021:

				Weighted		Weighted
				Average		Average
				Exercise		Remaining		Aggregate
	Number of			Price per		Contractual		Intrinsic

											Weighted		Weighted
											Average		Average
											Exercise		Remaining	Aggregate
										Number of	Price per		Contractual	Intrinsic
Stock Options	Options			Option		Term (years)		Value		Options	Option		Term (years)	Value

Outstanding January 1, 2020		1,147,267		$	0.63		6.29	$	718,840
Outstanding January 1, 2021										1,150,867	$	0.64	6.61	$	107,573
Granted		22,500			1.48					200,000		0.62
Exercised		-			-					0		0
Expired/Forfeited		(9,200	)		0.98					(72,400)		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
Outstanding June 30, 2021										1,278,467	$	0.62	6.81	$	258,107

Exercisable at June 30, 2021										998,465	$	0.59	5.85	$	229,707

The following table represents non-vested stock options granted, vested and forfeited for the three months ended June 30, ~~2020:~~2021:

	Weighted-average
	Grant-date Fair Value
	Options			($)
Non-Vested - January 1, 2020		371,669			0.80

						Weighted-average
						Grant-date Fair Value
						Options	($)
Non-Vested - January 1, 2021						210,840	0.89
Granted		22,500			1.41	200,000	0.57
Vested		(46,454	)		0.77	(130,838)	0.90
Forfeited		-			-	0	0
Non-Vested - June 30, 2020		347,715			0.84
Non-Vested - June 30, 2021						280,002	0.66

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,~~2020, in February ~~2020.~~2021. A total of ~~89,751~~142,329 common shares of Inrad Optics, Inc. and $42,000 were contributed to the Plan in June, ~~2020.~~2021.

NOTE 5 – RELATED PARTY TRANSACTIONS

On July 22, 2020, 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, 2024 from April 1, 2021. 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~~1 share of common stock and ~~one~~1 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~~2024 to April 1, 2027. As of June 30, ~~2020,~~2021, the Company had accrued interest in the amount of ~~$187,500~~$37,500 associated with these notes.

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NOTE 6 – OTHER ~~LONG TERM~~LONG-TERM NOTES

Other ~~Long Term~~Long-Term Notes consist of the following:

	June 30,			December 31,
	2020			2019
	(Unaudited)
	(in thousands)

							June 30,		December 31,
							2021		2020
							(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.	$	175		$	183		$	182	$	177
Less current portion		(16	)		(16	)		(16)		(16)
PPP Loan								0		973
Long-term debt, excluding current portion	$	160		$	167		$	166	$	1,134

NOTE 7 – PAYROLL PROTECTION PROGRAM

On May 6, 2020, the Company received loan proceeds of approximately $973,000 (the “PPP Loan”), 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 iswas in the form of a promissory note, dated May 4, 2020, issued by the Company, ~~matures~~originally matured on May 4, 2022, and ~~bears~~bore an interest at a rate of 1.0% per ~~annum, payable monthly commencing on December 4, 2020.~~

annum.

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 24-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 60% 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 a covered eight-week or ~~twenty-four week~~twenty-four-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~~is subject to approval by the Small Business ~~Association, and no assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part.~~Administration. At ~~June 30,~~December 31, 2020, the PPP Loan is included in other ~~long term~~long-term notes on the accompanying balance sheet.

On January 19, 2021, the Company received notification from the Small Business Administration that the Company’s Forgiveness Application of the PPP Loan and accrued interest, totaling $980,000, was approved in full, and the Company had no further obligations related to the PPP Loan. Accordingly, the Company recorded a gain on the forgiveness of the PPP Loan.

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NOTE 8 – LEASES

Maturities of lease liabilities as of June 30, 2021, were as follows:

~~Under the guidance of ASU 2016-02, Leases (Topic 842), the Company determines if such an arrangement contains a~~


	(in thousands)
2021 (Remaining)	$	161
2022		144
2023 and beyond		3
Total undiscounted lease payments		308

Less: imputed interest		(9)
Present value of lease liabilities	$	299

The Company’s lease ~~and whether that lease meets the classification criteria~~ liabilities consist of a ~~finance or operating~~financing lease ~~at inception of the arrangement.~~

a)	~~Equipment Financing Lease~~

~~The Company entered into an equipment lease on January 17, 2020, commencing in March~~ for certain computer equipment with a bargain purchase option of $1.00 at the end of the lease for a term of 36 months. The lease is classified as a financing lease under the guidance of Topic 842. The present value of the lease payments, discounted at 3.99%, is $45,000, which initial value is recorded in Plant and ~~Equipment on the Company’s Condensed Consolidated Balance Sheet (unaudited).~~

~~The undiscounted cash flow principal payments for the remaining term of the lease will be as follows:~~

Maturity of Lease Liability (in thousands)
2020 (Remaining) $ 8
2021 16
2022 and beyond 18
Total undiscounted operating lease payments 42

Less: imputed interest (1 )
Present value of financing lease liability $ 41

b)	~~Facility Lease Amendment~~

~~The Company entered into an amendment and extension of its building lease on July 8, 2019, retroactive to June 1, 2019. 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 usingfor 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 June 30, 2020, and is included in operating cash flows.

facility. Operating lease costs were $0.1 ~~million~~ and $0.2 million during the three ~~months~~ and six months ended June 30, ~~2020.~~2021, respectively.

NOTE 9 – 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~~may be required by federal, state, or local authorities in the future, nor can we predict what actions any new mandates may have on our customers and ~~suppliers, operating results, or financial condition. However we will~~suppliers. We 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, partners, suppliers and ~~partners.~~shareholders. The ~~Company has taken additional steps to protect our employees in the event~~total impact of ~~infection in our offices and production facility and continues to enhance its business continuity plans.~~

~~The COVID-19 pandemic has caused uncertainty and disruption in~~ the global ~~economy~~emergence of COVID-19 on our business and ~~businesses worldwide. Despite these circumstances, orders booked in the six months ended June 30, 2020, were up 63% over the same period in 2019, reflecting stronger orders in the defense~~financial results are not completely known, and ~~aerospace market. The Company’s other segments have suffered some contraction and certain customers have pushed orders to the latter part of 2020 and early 2021. We~~we cannot predict ~~whether there will be further push outs and/or softening in the non-defense markets we serve and~~ what impact ~~this~~it may have on our ~~results of~~continuing operations ~~financial position,~~ and ~~liquidity.~~

~~The Company has taken steps to preserve cash and has deferred interest payments on its related party notes through June 30, 2020, but has elected to discontinue deferment for~~ the ~~remainder of 2020. However, as the outbreak continues, there is uncertainty around sales, cash collections, and costs related~~effect to our ~~mediation efforts. These uncertainties include the duration and severity~~financial results.

14

Table of ~~the pandemic, and how compliance with containment measures will impact our day-to-day operations as well as that of our key customers, suppliers and other partners.~~Contents

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF ~~OPERATIONS~~OPERTIONS

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~~ensure 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 and 7 of the Company’s most recent Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, as filed with the Securities and Exchange Commission on March 30, ~~2020.~~2021. 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~~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.~~2020. 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.~~2020.

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~~may be required by federal, state, or local authorities in the future, nor can we predict what actions any new mandates may have on our customers and ~~suppliers, operating results,~~suppliers. It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our financial ~~condition. However we~~results. 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, partners, suppliers and ~~partners.~~shareholders. The ~~Company has taken additional steps to protect our employees in the event~~total impact of ~~infection in our offices and production facility and continues to enhance its business continuity plans.~~

~~The COVID-19 pandemic has caused uncertainty and disruption in~~ the global ~~economy~~emergence of COVID-19 on our business and ~~businesses worldwide. Despite these circumstances, orders booked in the six months ended June 30, 2020, were up 63% over the same period in 2019, reflecting stronger orders in the defense~~financial results are not completely known, and ~~aerospace market. The Company’s other segments have suffered some contraction and certain customers have pushed orders to the latter part of 2020 and early 2021. We~~we cannot predict ~~whether there will be further push outs and/or softening in the non-defense markets we serve and~~ what impact ~~this~~it may have on our ~~results~~continuing operations and the effect to our financial results.

Table of ~~operations, financial position,~~Contents

Total sales for the year ended December 31, 2020 were negatively impacted by business factors resulting from COVID-19 and ~~liquidity.~~

~~The~~governmental restrictions, including disruptions to our customers’ and suppliers’ operations. Our sales and marketing efforts were negatively impacted due to travel and other operational restrictions. While the Company has ~~taken steps to preserve cash~~seen improved results, the total impact of the global emergence of COVID-19 on our business and ~~has deferred interest payments~~financial results are not completely known, and we cannot predict what impact it may have on ~~its related party notes through June 30, 2020, but has elected to discontinue deferment for~~our continuing operations and the ~~remainder of 2020. However, as the outbreak continues, there is uncertainty around sales, cash collections, and costs related~~effect to our ~~mediation efforts. These uncertainties include~~financial results in the ~~duration and severity of the pandemic, and how compliance with containment measures will impact our day-to-day operations as well as that of our key customers, suppliers and other partners.~~future.

13

Results of Operations

Inrad Optics, Inc.~~’s business falls into two main categories:~~ is a vertically integrated optical components and subsystems manufacturer focused in three areas: Crystal-based Optical Components and ~~Laser Devices/Instrumentation.~~Assemblies, Custom Optical Components from both glass and metal, and Optical and Opto-mechanical assemblies.

The Crystal-based Optical Components and Devices 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. The majority of crystal components and assemblies manufactured are used in laser systems, defense EO systems, medical lasers and R&D applications by engineers within corporations, universities and national laboratories.

The Optical Components ~~category is~~and Assembly categories are focused on custom optics manufacturing. The Company specializes in high-end precision ~~components.~~components and assemblies. It develops, manufactures and delivers precision custom optics, optical assemblies and ~~thin film optical coating services~~opto-mechanical assemblies through its ~~Custom and Metal Optics~~advanced manufacturing operations. Glass, metal, and ~~crystal~~single-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~~assemblies, along with thin film coatings, are used in inspection applications, 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 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~~Jersey. Its corporate offices are located in the same ~~location.~~facility.

Sales Revenue

Sales for the three months ended June 30, ~~2020,~~2021, were ~~$2.5~~$2.9 million, ~~a decrease~~an increase of ~~3.7%~~14.2%, or ~~$0.1~~$0.4 million, compared to ~~$2.6~~$2.5 million for the three months ended June 30, ~~2019.~~2020. For the six months ended June 30, ~~2020,~~2021, sales were ~~$4.6~~$5.7 million, ~~a decrease~~an increase of ~~12.4%~~23.8%, or ~~$0.6~~$1.1 million, compared to sales of ~~$5.2~~$4.6 million for the six months ended June 30, ~~2019.~~2020.

For the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, sales to the defense/aerospace market were $1.1 million and $0.9 million, ~~in each period.~~respectively. For the six months ending June 30, 2021 and 2020, sales to the defense/aerospace market ~~decreased~~were $2.2 million and $1.8 million, respectively. The increase in sales in the three months and six months ended June 30, 2021, of $0.2 million, or ~~9.8%~~22.2% and $0.4 million, or 22.6%, ~~to $1.8 million compared to sales of $2.0 million~~respectively, reflect a continued increase in ~~the six month period ending June 30, 2019. The decrease is due to timing of product shipments.~~

demand in this market.

Process control and metrology (“PC&M”) sales were $1.2 million for the three months ended June 30, 2021, an increase of $0.1 million, or 0.7%, from $1.1 million for the three months ended June 30, 2020, ~~an increase of $0.1 million, or 10.0%, from $1.0 million for the three months ended June 30, 2019, due to~~reflecting stronger sales in the semi-conductor industry. For the six months ended June 30, ~~2020,~~2021, sales ~~decreased 8.0%~~increased 15.6% or ~~$0.2~~$0.3 million to ~~$1.9~~$2.3 million from ~~$2.1~~$2.0 million for the six months ended June 30, ~~2019. Timing of sales~~2020. Sales in the ~~first quarter of 2020 from~~PC&M market continue to increase due to demand in the semi-conductor ~~industry negatively impacted year to date sales from process control and metrology.~~

industry.

For the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, sales to customers in the laser systems market were $0.3 million and $0.2 million, respectively. The increase of $0.1 million, ~~and $0.3 million, respectively. This decrease of $0.2 million~~ or ~~53.6%~~83.8%, reflects ~~reduced~~an increase in demand for laser-based ~~products during the quarter.~~products. Sales for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, were $0.4 million ~~and $0.6 million, respectively, a decrease of $0.2 million, or 40.7%. This decrease is reflective of the reduced demand~~ in ~~the laser products market.~~

each period.

Sales to customers in the Scientific/R&D market were $0.4 million and $0.3 million for the three months ended June 30, 2021 and 2020, ~~and 2019.~~respectively, an increase of $0.1 million, or 11.1%. The increase reflects stronger demand from national laboratories. For the ~~six month~~six-month period ending June 30, ~~2020,~~2021, sales ~~decreased $0.1~~increased $0.4 million to ~~$0.4~~$0.8 million, compared to ~~$0.5~~$0.4 million for six months ended June 30, ~~2019.~~2020. The ~~decrease~~increase in sales infor the ~~Scientific/R&D market is attributable to~~six-month period ending June 30, 2021, largely reflects the ~~completion of~~revenues from a federal government R&D contract completed in the ~~latter part~~first quarter of ~~2019.~~2021.

16

Table of Contents

For each of the three months ended June 30, 2021 and 2020, three customers represented 10% or more of ~~revenues. For the three months ended June 30, 2019, two customers represented 10.0% or more of total~~ sales. For the six months ended June 30, ~~2020, only one customer~~2021, two customers represented 10.0% or more of ~~total~~ sales, compared to ~~two customers~~one customer representing 10.0% of sales for the six months ended June 30, ~~2019.~~

2020.

The Company’s top five customers represented ~~50.9%~~57.4% of sales in the ~~three month~~three-month period ended June 30, ~~2020,~~2021, compared to ~~45.1%~~50.9% in the same period in ~~2019.~~2020. For the ~~six month~~six-month period ended June 30, ~~2020~~2021 and ~~2019,~~2020, the Company’s top five customers represented 50.0% and 44.4% ~~and 48.3%,~~of sales, respectively.

Orders booked during the first six months of ~~2020,~~2021, totaled ~~$5.9~~$9.1 million, compared to ~~$3.6~~$5.9 million for the same period last year. Order backlog at June 30, 2021 and 2020, was $9.4 million and ~~2019, was~~ $6.4 million, ~~and $5.7 million,~~ respectively. ~~The increase in orders booked reflects orders in the defense/aerospace and process control and metrology markets.~~

14

Cost of Goods Sold

For the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, cost of goods sold was $1.8 million and ~~$2.2~~$1.8 million, or ~~70.7%~~63.3% and ~~82.9%~~70.7% of total revenues, respectively. ~~The $0.3 million decrease, or 18%, is~~Cost of goods sold in the three-month period ending June 30, 2021, was lower as a percentage of sales due to ~~the impact of~~ lower material and ~~outside~~ services costs, ~~manufacturing~~indirect labor costs, and ~~lower direct~~employee related costs. Direct labor, ~~and related employee costs.~~manufacturing expenses were higher in the three-month period ending June 30, 2021. Cost of goods sold for the six months ended June 30, 2021 and 2020, ~~and 2019,~~ were ~~$3.4~~$3.8 million and ~~$4.1~~$3.4 million, respectively. Cost of goods sold ~~decreased 17.2%~~increased 10.9% or ~~$0.7~~$0.4 million reflecting ~~lower~~higher material ~~direct labor,~~and outside services costs, direct labor, and manufacturing ~~expenses.~~

expenses, offset by a decrease in employee related costs and indirect labor.

Gross profit for the three months ended June 30, ~~2020,~~2021, was $1.1 million or 36.7% of sales, compared to $0.7 million or 29.3% ~~of sales, compared to $0.4 million or 17.1%~~ of sales in the same quarter last year. Gross profit for the ~~year to date~~year-to-date period ending June 30, ~~2020,~~2021, was $1.9 million or 33.0% of sales, an increase of $0.7 million, compared to $1.2 million or 25.3% of sales, ~~an increase of $0.1 million from $1.1 million or 20.9% of sales~~ for the ~~six month~~six-month period ending June 30, ~~2019.~~2020. The increase in gross profit for the three and six months ended June 30, 2021, compared to the three and six months ended June 30, 2020, is due to higher sales revenues combined with material costs reflective of sales mix and lower employee related costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A” expenses) were ~~$0.7~~$0.6 million in the three months ended June 30, ~~2020~~2021, or 22.2% of sales and ~~2019,~~0.7 million, or 26.8% of sales, ~~and 28.6% of sales, respectively.~~in the three months ended June 30, 2020. The decrease in SG&A expenses in the three months ended June 30, ~~2020, reflect~~2021, reflects a reduction in travel and entertainment costs, ~~and~~ marketing related costs due to restrictions on travel related to ~~COVID-19. Outside services~~COVID-19, and ~~temporary~~ employee ~~costs are also down from the year ago quarter.~~related expenses. SG&A expenses for the ~~six month~~six-month period ending June 30, 2021 and 2020, were $1.2 million, or 22.0% of sales, and ~~2019, were~~ $1.4 million ~~in each period,~~ or 30.1% of sales, ~~and 26.7 percent of sales,~~ respectively. The decrease in SG&A expenses for the ~~year to date~~year-to-date period reflect 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 andreflects a reduction in ~~other general~~travel and ~~administrative~~entertainment costs, marketing related costs due to restrictions on travel related to COVID-19, and employee related expenses.

Income (Loss) from Operations

The Company realized net income from operations of ~~$0.1~~$0.4 million for the three months ended June 30, ~~2020,~~2021, compared with a net ~~operating loss~~income from operations of ~~$0.3~~$0.1 million in the three months ended June 30, ~~2019.~~2020. The increase in income primarily reflects ~~the impact of the Company’s~~an increase in sales coupled with lower ~~costs of goods sold and~~ SG&A ~~expenses in~~expenses. The Company incurred net income from operations of $0.6 million for the ~~three~~six months ended June 30, ~~2020,~~ 2021,compared to ~~the same period last year. The Company incurred~~ a net loss from operations for the six months ended June 30, 2020, ~~and 2019,~~ of $0.2 ~~million and $0.3 million, respectively.~~million. The ~~decrease~~increase in ~~the~~ net ~~loss~~income from operations is primarily due to ~~lower cost of goods sold and~~an increase in revenues coupled with a decrease in SG&A expenses.

Other Income and Expense

There was no significant change in net interest expense for the three months or six months periods ended June 30, ~~2020,~~2021 compared to the same ~~period in 2019. Although~~periods ended June 30, 2020. Other income reflects the ~~Company incurred additional debt~~gain on the forgiveness of the PPP loan of $1.0 million ~~due to the loan (the “PPP Loan”) received under the Paycheck Protection Program (the “PPP”), interest has not accrued on this loan and there was no other significant change~~ in ~~the Company’s borrowings. For~~ the six months ended June 30, ~~2020, other expense was slightly lower than~~2021.

Income Taxes

For the three months and six months ended June 30, ~~2019,~~2021, the Company did not record a current provision for income taxes due to the ~~reduction in interest expense.~~availability of net operating loss carryforwards to offset taxable income for both federal and state tax purposes.

17

~~Income Taxes~~Table of Contents

For the three months ended June 30, 2020, the Company did not record a current provision for income taxes due to the availability of net operating loss carryforwards to offset taxable income for both federal and state tax purposes. For the six months ended June 30, 2020, 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)

~~For~~

The Company had a net income of $0.4 million for the three ~~months and six~~ months ended June 30, ~~2019, the Company did not record a current provision for either state tax or federal alternative minimum tax due~~2021, compared to ~~the losses incurred for both income tax and financial reporting purposes.~~

~~Net Income (Loss)~~

~~The Company had a~~ net income of less than $0.1 million for the three months ended June 30, ~~2020,~~2020. The change primarily reflects an increase in sales coupled with a reduction in SG&A costs. For the six months ended June 30, 2021, the Company recorded net income of $1.5 million compared to a net loss of $0.3 million for the ~~three months ended June 30, 2019. The change primarily reflects the decrease in cost of goods sold for the three months ended June 30, 2020, compared to the 2019 period. For the~~ six months ended June 30, ~~2020~~2020. The increase in net income reflects higher sales, lower SG&A costs, and ~~2019,~~ the ~~Company recorded a net loss~~gain resulting from forgiveness of ~~$0.3 million and $0.4 million, primarily reflecting lower cost of goods sold.~~the PPP loan.

15

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~~long-term debt, and for capital expenditures. ~~The Company received PPP proceeds from the PPP Loan of approximately $1.0 million during the three months ended June 30, 2020.~~

As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had cash and cash equivalents of ~~$2.0~~$1.4 million and ~~$1.0~~$1.1 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~~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.

On July 22, 2020, 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, 2024, from April 1, 2021. 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, 2024 to April 1, 2027. As of June 30, ~~2020,~~2021, the Company had accrued interest in the amount of ~~$187,500~~$37,500 associated with these notes.

The following table summarizes net cash provided by (used in) operating, investing and financing activities for the six months ended June 30, ~~2020~~2021 and ~~2019:~~2020:

Six Months Ended
June 30,
2020 2019
(in thousands)
Net cash provided by (used in) operating activities $ 204 $ (158 )
Net cash (used in) investing activities (100 ) (191 )
Net cash provided by (used in) financing activities 967 (6 )
Net increase (decrease) in cash and cash equivalents $ 1,071 $ (355 )


	Six Months Ended
	June 30,
	2021		2020

	(in thousands)
Net cash provided by operating activities	$	379	$	204
Net cash (used in) investing activities		(14)		(100)
Net cash provided by financing activities		—		967
Net increase in cash and cash equivalents	$	365	$	1,071

Net cash provided by operating activities was ~~$204,000~~$379,000 for the six months ended June 30, ~~2020,~~2021, compared to net cash ~~used in~~provided by operating activities of ~~$158,000~~$204,000 for the same period last year. The net cash provided by operating activities in the six months ended June 30, 2021, resulted primarily from operating income and a reduction in inventories and other assets, offset by the gain on the forgiveness of the PPP loan, an increase in accounts receivable and decreases in accounts payable and contract liabilities. Net cash used in operating activities during the six months ended June 30, 2020, resulted ~~primarily~~ from a reduction in accounts receivable and an increase in accounts payable and contract liabilities, offset by an increase in inventory. Net cash used in operating activities during the six months ended June 30, 2019, resulted from an increase in accounts receivable and a decrease in contract liabilities, offset by a decrease in inventories and an increase in accounts payable.

Net cash used in investing activities was ~~$100,000~~$14,000 during the six months ended June 30, ~~2020,~~2021, compared to ~~$191,000~~$100,000 in the same period last year reflecting capital expenditures in both periods.

18

Table of Contents

Net cash provided by financing activities reflects the PPP Loan proceeds received during the six months ended June 30, 2020.

Overall, cash and cash equivalents increased by $365,000 and $1,071,000 for the six months ended June 30, 2021 and 2020, ~~and decreased $355,000 in the six month period ending June 30, 2019.~~respectively.

16

On May 6, 2020, the Company received loan proceeds of approximately $973,000 (the “PPP Loan”), under the ~~PPP.~~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 iswas in the form of a promissory note, dated May 4, 2020, issued by the Company, ~~matures~~originally matured on May 4, 2022, and ~~bears~~bore an interest at a rate of 1.0% per ~~annum, payable monthly commencing~~annum.

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 ~~December 4, 2020.~~a formula that takes into account a number of factors, including the amount of loan proceeds used by the Company during the 24-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 60% 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~~a covered ~~24-week~~eight-week or twenty-four-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~~is subject to approval by the Small Business ~~Administration, and no assurance~~Administration. At December 31, 2020, the PPP Loan is ~~provided~~included in other long-term notes on the accompanying balance sheet.

On January 19, 2021, the Company received notification from the Small Business Administration that the ~~Company will obtain forgiveness~~Company’s Forgiveness Application of the PPP Loan and accrued interest, totaling $980,000, was approved in ~~whole or~~full, and the Company had no further obligations related to the PPP Loan. Accordingly, the Company recognized a gain from forgiveness on PPP Loan in ~~part.~~the six months ended June 30, 2021.

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 the third quarter of ~~2021.~~2022.

17

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~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

~~ITEM 4.~~ ~~CONTROLS AND PROCEDURES~~

a.

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 June 30, ~~2020~~2021 (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.

b.

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.

19

Table of Contents

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

18

20

Table of Contents

ITEM 6.

EXHIBITS


	31.1~~ITEM 6.~~	~~EXHIBITS~~

~~4.1~~

Note dated July 22, 2020, held by Clarex, Ltd.*

~~4.2~~

Note dated July 22, 2020 held by Welland, Ltd.*

~~10.5~~

Note dated May 4, 2020, between Inrad Optics, Inc. and Valley National Bank. (Incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 14, 2020)

~~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~~
	101.INS		Inline XBRL Instance Document*

~~101.SCH~~
	101.SCH		Inline XBRL Taxonomy Extension Schema*

~~101.CAL~~
	101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase*

~~101.DEF~~
	101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase*

~~101.LAB~~
	101.LAB		Inline XBRL Taxonomy Extension Label Linkbase*

~~101.PRE~~
	101.PRE	XBRL Taxonomy Extension Presentation Linkbase*

	104	Cover Page Interactive Data File (embedded within the Inline XBRL and Contained in Exhibit 101)

*

*Filed herewith

**

~~Furnished herewith~~

19**Furnished herewith

21

Table of Contents

SIGNATURES

~~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: August ~~14, 2020~~13, 2021

20

22


Part I.		CONDENSED FINANCIAL INFORMATION

Item 1.		Condensed Consolidated Financial Statements:

		Condensed consolidated balance sheets as of June 30, ~~2020~~2021 (unaudited) and December 31, ~~2019~~2020	1	3

		Condensed consolidated statements of operations for the three and six months ended June 30, 2021 and 2020 ~~and 2019~~ (unaudited)	2	4

		Condensed consolidated statements of shareholders equity for the three and six months ended June 30, 2021 and 2020 ~~and 2019~~ (unaudited)	3	5

		Condensed consolidated statements of cash flows for the six months ended June 30, 2021 and 2020 ~~and 2019~~ (unaudited)	4	6

		Notes to condensed consolidated financial statements (unaudited)	5	7

Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations	13	15

Item 3.		Quantitative and Qualitative Disclosures about Market Risk	18	19

Item 4.		Controls and Procedures	18	19

Part II.		OTHER INFORMATION	18	20

Item 1.		Legal Proceedings	18	20

Item 1A.		Risk Factors	18	20

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	18	20

Item 3.		Defaults upon Senior Securities	18	20

Item 4.		Mine Safety Disclosures	18	20

Item 5.		Other Information	18	20

Item 6.	Exhibits	~~Exhibits~~	19	21

Signatures			20	22

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019

Total revenue	$	2,523,990		$	2,619,623		$	4,574,485		$	5,220,683

Cost and expenses:
Cost of goods sold		1,784,192			2,172,649			3,419,232			4,128,930
Selling, general and administrative expenses		676,046			749,064			1,377,725			1,391,318
		2,460,238			2,921,713			4,796,957			5,520,248

Income (loss) from operations		63,752			(302,090	)		(222,472	)		(299,565	)
Other expense:
Interest expense-net		(37,957	)		(38,682	)		(76,220	)		(77,343	)
Loss on exchange of precious metals		-			(438	)		-			(438	)
		(37,957	)		(39,120	)		(76,220	)		(77,781	)

Income (loss) before income taxes		25,795			(341,210	)		(298,692	)		(377,346	)

Income tax (provision) benefit		-			-			-			-

Net income (loss)	$	25,795		$	(341,210	)	$	(298,692	)	$	(377,346	)

Net income (loss) per common share - basic	$	0.00		$	(0.02	)	$	(0.02	)	$	(0.03	)

Net income (loss) per common share - diluted	$	0.00		$	(0.02	)	$	(0.02	)	$	(0.03	)

Weighted average shares outstanding - basic		13,745,536			13,653,353			13,734,851			13,641,664

Weighted average shares outstanding - diluted		14,145,909			13,653,353			13,734,851			13,641,664

					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

401K contribution		98,189		982		92,605		-			-			93,587
Stock-based compensation expense		-		-		33,343		-			-			33,343
Net income (loss) June 30, 2019		-		-		-		(341,210	)		-			(341,210	)
Balance, June 30, 2019		13,735,177	$	137,353	$	19,210,938	$	(16,987,639	)	$	(14,950	)	$	2,345,702

Maturity of Lease Liability	(in thousands)
2020 (Remaining)	$	8
2021		16
2022 and beyond		18
Total undiscounted operating lease payments		42

Less: imputed interest		(1	)
Present value of financing lease liability	$	41