EDGAR 10-K Filing

Company CIK: 719494
Filing Year: 2024
Filename: 719494_10-K_2024_0001410578-24-000337.json

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ITEM 1. BUSINESS
Item 1. Business
Inrad Optics, Inc. (the “Company,” “Inrad,” or “we”), was incorporated in New Jersey in 1973. The Company develops, manufactures, and markets products and services for use in photonics enabled industry sectors.
The Company is a vertically integrated manufacturer specializing in glass, crystal, and metal based optical components, and sub-assemblies. Manufacturing capabilities include super-precision optical surfacing, precision diamond turning, the ability to handle large substrates, proprietary optical contacting processes, thin film coatings, and high resolution in-process metrology.
Inrad Optics’ customers include leading corporations in the semiconductor equipment, process control and metrology, defense, aerospace, and laser systems sectors of the broad set of photonics enabled industries, as well as the U.S. Government, National Laboratories and universities and institutions worldwide.
Administrative, engineering and manufacturing operations are in a 42,000 square foot building located in Northvale, New Jersey.
Products Manufactured by the Company
The Company built its reputation on its ability to grow and fabricate crystalline materials. As original equipment manufacturers (OEM) demand waned for such crystals the Company transitioned to a vertically integrated photonics manufacturer focused in three main categories: Ultraviolet (UV) to Infrared (IR) Optical Components, X-ray Imaging Optics, and Metal Substrate Optics.
The Company offers thin-film coating services, opto-mechanical design for manufacturability, and complex assembly services as part of its deliverables, and supports prototyping through production requirements across all three product areas.
UV-IR Optics and Assemblies
The Company specializes in high-end precision components and sub-assemblies. It develops, manufactures, and delivers precision custom optics and thin film optical coatings. Glass and single crystal substrates are processed to specific customer requirements using complex and often proprietary techniques to manufacture components, deposit optical thin films, and assemble sub-components used in advanced photonic systems. Planar, prismatic, and spherical components are fabricated from glass and synthetic crystals, including fused silica, germanium, quartz, silicon, zinc selenide, zinc sulfide, and other optical glasses.
Components consist of large form factor transmission flats, optical windows for airborne applications, multi-element optical assemblies, lenses, mirrors, polarizing optics, prisms, and wave plates. The Company specializes in super-precision interferometer and transmission flats up to 480mm diameter across a variety of optical materials, as well as multi-element optical assemblies utilizing adhesive free optical contacting and other bonding processes.
Most optical components and sub-assemblies in the UV-IR range require thin film coatings on their surfaces. Depending on the design, optical coatings can refract, reflect, and transmit specific wavelengths. Optical coating specialties include anti-reflective high laser damage resistance, highly reflective, infra-red, polarizing, and coating to complex multi- wavelength requirements on a wide range of substrate materials. Coating deposition process technologies employed include electron beam, ion and plasma assisted deposition, and thermal deposition of multi-layer coating designs.
X-Ray Imaging Optics
Using proprietary optical polishing and proprietary adhesive free bonding techniques, the Company fabricates high-performance bent x-ray monochromators from a large selection of crystal materials and orientations. The Company’s implementation of exacting metrology and specialized processing techniques enable it to develop flat and bent x-ray crystals curved to different shapes with arcsecond precision, verified quality, and high orientation accuracy. This technology is used in OEM and research and development (R&D) high-impact applications, including x-ray photoelectron spectroscopy (XPS) for elemental surface analysis applications in semiconductor wafer inspection, life science and micro-probe chemical analysis. The Company’s bent x-ray crystal assemblies have wide deployment in government R&D facilities for synchrotron beamline focusing and plasma diagnostics in nuclear fusion energy research. Overall, the Company’s products in this area have substantial market impact and the Company has continuously driven innovation to better serve the changing needs of x-ray optics customers.
Metal Substrate Optics and Assemblies
The Company manufactures precision aspheres, large and small metal mirrors, low RMS surface finish polished mirrors, reflective Porro prisms, and thermally stable optical mirrors. Plating specialties include void-free gold and electroless nickel. Metal substrate optics are produced to customer specifications utilizing high precision diamond machining, polishing, and plating of aluminum, AlBeMet™, beryllium, and stainless steel. Leveraging its unique metal substrate expertise, the Company minimizes assembly distortion of the finished optic and ensures quality through in-house testing. The Company’s design optimization results in lower costs and shortened cycle time while improving repeatability for configured components. This product area has served the defense markets for many years and has evolved to include space-based applications in communications and docking systems.
The following table summarizes the Company’s net sales by product categories during the past two years.
Years Ended December 31,
Category (In thousands)
Net Sales
%
Net Sales
%
UV-IR Optics
$
4,960
38.4
$
4,877
45.9
X-ray Optics
6,235
48.3
4,379
41.2
Metal Substrate Optics
1,715
13.3
1,375
12.9
Total
$
12,910
100.0
$
10,631
100.0
Sales by Market
The photonics industry serves a broad, fragmented, and expanding set of markets. As technologies are discovered, developed, and commercialized, the applications for photonic systems and devices, and the components embedded within those devices, expand across traditional market boundaries. While a significant part of the Company’s business remains firmly in the process control and metrology and defense and aerospace markets, other markets served include OEM manufacturers in the medical and industrial laser market, university research institutes and national labs worldwide. Scanning, detection and imaging technologies for homeland security and surface inspection also provide opportunities for the Company and these sectors are expected to continue to account for potential future growth and demand for our products and capabilities.
In 2023 and 2022, the Company’s product sales were made to customers in the following market areas:
Years Ended December 31,
Market (In thousands)
Net Sales
%
Net Sales
%
Aerospace & Defense
$
2,540
19.7
$
3,008
28.3
Process Control & Metrology
9,325
72.1
6,981
65.7
Laser Systems
0.4
1.8
Scientific / R&D
7.7
4.3
Total
$
12,910
100.0
$
10,631
100.0
Aerospace & Defense
This market consists of sales to OEM defense electro-optical systems and subsystems manufacturers, U.S. based prime aerospace and defense contractors, and system integrators where the products have the same end-use.
End-use applications for the Company’s products in the aerospace and defense sector include military laser systems, military electro-optical systems, satellite-based systems, and missile warning sensors and systems that protect aircraft. The dollar volume of shipments of product within this sector depends in large measure on the U.S. Defense Department budget and its priorities, that of foreign governments, the timing of their release of contracts to their prime equipment and systems contractors, and the timing of competitive awards from this customer community to the Company.
Sales in the aerospace and defense market represented approximately 19.7% and 28.3% of sales in 2023 and 2022, respectively. Sales of $2.5 million in 2023 decreased by approximately $0.5 million, or 15.6% from sales of $3.0 million in 2022. The decrease is attributable to the timing of contracts and internal capacity constraints. The Company believes that the aerospace and defense sector continues to represent a significant opportunity for growth given the Company’s capabilities in glass, single crystal and metal precision optics, all widely deployed throughout this sector, despite the decline in revenues from 2022 to 2023.
Process Control and Metrology
This market consists of capital equipment manufacturers whose products are used in the areas of manufacturing process and control, optics-based metrology, quality assurance, and inventory and product control. Examples of applications for such equipment include semiconductor wafer inspection, nanoscale surface defect analysis, and optical sensing systems.
Sales in the Process Control and Metrology (PC&M) market increased by approximately $2.3 million, or 33.6% to $9.3 million in 2023, compared to sales of $7.0 million in 2022. Sales in the PC&M market represented 72.2% and 65.6% of total sales in 2023 and 2022, respectively. Increased sales in 2023 were a result of the continuing demand for our products, especially products installed in semiconductor capital equipment.
The Company believes that the optical and x-ray inspection segment of the semiconductor industry offers continued growth opportunities which match its capabilities in precision optics, crystal products, and monochromators.
Laser Systems
This market consists principally of customers who are OEM manufacturers of industrial, medical, and R&D lasers. The Company also serves a number of smaller customers in other niche markets and international distributors.
Sales in this market were 0.4% of total sales in 2023 compared to 1.8% of total sales in 2022. Sales in the laser systems market decreased $0.1 million, due to last time orders placed in 2022 for legacy products.
Scientific / R&D
These sales consist of product sales directly to researchers at various educational and research institutions domestically and internationally. A portion of the international sales to this market are through distributors. Sales to customers within the Scientific/R&D market consist primarily of x-ray monochromators for use in plasma physics applications for defense and fusion energy research. Sales of $1.0 million in 2023 increased approximately $0.5 million, or 118.5% from sales of $0.5 million in 2022 due to increased research and development activities coupled with timing of orders.
Major Customers
The Company’s sales have historically been concentrated within a small number of customers, although the top customers have varied from year to year.
In 2023, the Company’s sales to its top three customers accounted for 54.4% of sales. These customers included three OEM manufacturers of process control and metrology equipment. These customers represented 27.5%, 14.8%, and 12.1% of total sales during the year.
Sales to the Company’s top five customers represented approximately 69.6% and 68.6% of sales, in 2023 and 2022, respectively. All of these customers are OEM manufacturers either within the process control and metrology or aerospace and defense sectors.
Export Sales
The Company’s export sales are primarily to customers in Canada, the Czeck Republic, Germany, Israel, and Singapore, amounted to approximately 44.4% and 39.0% of product sales in 2023 and 2022, respectively.
Long-Term Contracts
Certain of the Company’s agreements with customers provide for periodic deliveries at fixed prices over a long period of time. In such cases, the Company negotiates to obtain firm price commitments, as well as cash advances from its customers for the purchase of the materials necessary to fulfill the order.
Marketing and Business Development
The Company markets its products domestically, through the coordinated efforts of the sales, marketing, and customer service team.
The Company has moved towards a strategy of utilizing these combined sales and marketing resources for cross selling all products across all business lines. This strategy is well suited to the diverse and fragmented photonics enabled applications.
Non-exclusive independent sales agents are occasionally used in major non-U.S. markets, including the United Kingdom, the European Union, Israel, and Japan.
Sales and marketing efforts are coordinated by the Vice President, Sales and Marketing, to promote our product lines through various means including, participation in trade shows, internet-based marketing, media and non-media advertising and promotions, customer visits, and management of international sales representatives and distributors.
Backlog
The Company’s order backlog as of December 31, 2023, was $15.6 million. The Company’s order backlog at December 31, 2022, was $20.5 million. The decrease in order backlog is due to customers placing contracts with multi-year delivery schedules in 2022, particularly from customers across the process control and metrology sector.
We anticipate shipping a majority of the present backlog during fiscal year 2024. However, our current backlog consists of orders with delivery schedules that extend beyond 12 months into the future.
Competition
Within each product category in which the Company’s business units are active, there are varying degrees of competition.
Our optical components manufacturing capabilities offer unique solutions designed for highly specialized applications. We are an industry leader in supplying bent crystal analyzers used in x-ray photoelectron spectroscopy, synchrotron beamline focusing, and plasma diagnostics in controlled nuclear fusion research facilities. We are a leading supplier of large precision flats produced in volume for semiconductor defect inspection tools and metrology systems. We have a broad range of materials expertise to produce products across the spectrum from the ultraviolet to the far infrared. Specialized custom optical and opto-mechanical components that we produce are used in military imaging platforms and early warning missile sensing systems. By utilizing a team of scientists, engineers, and manufacturing experts, we believe we have a competitive advantage over traditional optical component manufacturers.
Although price is a principal factor in many product categories, competition is also based on product design, performance, customer confidence, quality, delivery, and customer service. Based on its performance to date, the Company believes that it can continue to compete successfully, although no assurances can be given in this regard.
Competitors for our custom optical components used in military and process control applications include several large publicly traded, broad capability, photonics companies. There is also competition from a range of smaller niche businesses catering to a limited set of product offerings. In metal optics, we have similar competition for mirrors used in aerospace telescopes and EO/IR modules from large and well-capitalized public companies as well as several smaller niche companies. There is limited competition in the x-ray optics product segment, where the Company possesses proprietary intellectual property and expertise.
Human Capital
We believe that each employee contributes to the culture of integrity, respect, and commitment to our customers through innovation and teamwork. Our workplace health and safety programs include robust policies, procedures, training programs, and self-audits. Our manufacturing facility is in Northvale, NJ, where we maintain high standards of workplace safety and employee protection. We have also been demonstrating a focus on health and safety in our response to COVID-19. Measures adopted onsite include multiple COVID-19 safety protocols, such as the use of personal protective equipment, enhanced cleaning practices, and regular internal communication regarding impacts of COVID-19 outbreaks.
We offer a variety of benefits such as health insurance, paid and unpaid leave, retirement, and life and disability/accident coverage as applicable.
Inrad Optics recognizes the significance and value of diversity, equity, and inclusion (DE&I). DE&I serves as a fundamental component in promoting innovation, fostering a positive work culture, and driving long-term business success and has enabled us to position ourselves as an employer of choice, attracting talent in our workforce from diverse backgrounds. We recognize the significance and value of the DE&I efforts in our organization.
For our manufacturing activities, the speed at which we can recruit, train, and deploy quality new and replacement personnel is an important part of our ability to increase and strengthen our production capacity. We rely upon both employees and resources from staffing firms to meet our needs for direct labor. We face strong competition from companies in the photonics and optics industry as well as a variety of other technology fields to secure the engineering and fabrication talent that we require.
As of the close of business on March 28, 2024, the Company had 61 full-time employees.
Intellectual Property
The Company relies on its manufacturing and technological expertise, know-how, and trade secrets to maintain its competitive position in the industry. The Company takes precautionary and protective measures to safeguard its technical design and manufacturing processes. The Company executes nondisclosure agreements with its employees and, where appropriate, with its customers, suppliers, and other associates.
Regulation
Foreign sales of certain of the Company’s products to certain countries may require export licenses from the United States Department of Commerce and/or Department of State. Such licenses are obtained when required. All requested export licenses of Inrad Optics products have been granted or deemed not required.
International Traffic in Arms Regulations (“ITAR”) governs much of the Company’s domestic defense sector business, and the Company is capable of handling its customers’ technical information under these regulations. Inrad Optics, Inc. is registered with the United States Department of State Directorate of Defense Trade Controls and utilizes a supplier base of similarly registered companies.
There are no other federal regulations or any unusual state regulations that directly affect the sale of the Company’s products other than those environmental compliance regulations that generally affect companies engaged in manufacturing operations in New Jersey.
Availability of Reports
Our principal executive offices are located at 181 Legrand Avenue, Northvale, N.J. 07647, which also houses our manufacturing operations. Our telephone number is 201-767-1910, and our corporate website address is www.inradoptics.com. We include our website address in this annual report on Form 10-K only as an inactive textual reference and do not intend it to be an active link to our website. The information on our website is not incorporated by reference in this annual report on Form 10-K.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to such reports, as well as other documents we file with the Securities and Exchange Commission, are available free of charge on our web site at www.inradoptics.com as soon as reasonably practicable after such reports are electronically filed with or furnished to the Securities and Exchange Commission (“SEC”) (www.sec.gov). We will also provide electronic or paper copies of such reports free of charge upon request made to our Corporate Secretary.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
The Company cautions investors that its performance (and, therefore, any forward-looking statement) is subject to risks and uncertainties. The risks described below are those we currently consider to be material. However, there may be other risks, which we now consider immaterial, or which are unknown or unpredictable, with respect to our business, the markets in which we operate, our competition, the regulatory environment or otherwise that could have a material adverse effect on our business, financial condition, or results of operations.
a.
The Company has a history of losses
While we were profitable in 2023, 2022, and 2021, we recorded a net loss for each of the years ended December 31, 2020, and 2019. Our previous history of losses has had an adverse effect on our working capital, total assets, and shareholders’ equity. We are unable to predict, with certainty, whether we will continue to be profitable after 2023, and our inability to achieve and sustain profitability may negatively affect our business, financial condition, results of operations, and cash flows.
b.
The Company may need to raise additional capital to repay indebtedness and to fund our operations
We may need to raise additional financing to repay our outstanding indebtedness of approximately $2.8 million and to fund our current level of operations. Additional financing, which is not in place at this time, may be from the sale of equity or convertible or
other debt securities in a public or private offering, or from an additional credit facility. We may be unable to raise sufficient additional capital on favorable terms, if at all, to supply the working capital needs of our existing operations or to expand our business.
c.
The Company has exposure to government markets
Sales to customers in the defense industry represent a significant part of our business. These customers in turn generally contract with government agencies. Most governmental programs are subject to funding approval through congressional appropriations which can be modified or terminated without warning upon the determination of a legislative or administrative body. Appropriations can also be affected by legislation that addresses larger budgetary issues of the U.S. Government which could reduce available funding for most federal agencies, including the Department of Defense. It is difficult to assess how this may impact our defense industry customers and the business we do with them in the future. The loss or failure to obtain certain contracts or a loss of a major government customer could have a material adverse effect on our business, results of operations, or financial condition.
d.
The Company’s revenues are concentrated in its largest customer accounts
For the year ended December 31, 2023, three customers each accounted for more than 10% of revenues representing 54.4% of total revenues. We are a supplier of custom manufactured components of OEM customers and have a number of large customers in both the commercial and defense markets. The relative size and identity of our largest customers may change from year to year, but in the short term, the loss of any of these large customer accounts or a decline in demand in the markets which they represent could have a material adverse effect on our business, results of operations, or financial condition. The Company depends on, but may not succeed in, developing and acquiring new products and processes
To meet the Company’s strategic objectives, the Company needs to continue to develop new processes, improve existing processes, and manufacture and market new products. As a result, the Company may continue to make investments in process development and additions to its product portfolio. There can be no assurance that the Company will be able to develop and introduce new products or enhancements to its existing products and processes in a way that achieves market acceptance or other pertinent targeted results. The Company also cannot be sure that it will have the human or financial resources to pursue or succeed in such activities.
e.
The Company’s stock price may fluctuate widely
The Company’s stock is thinly traded. Many factors, including, but not limited to, future announcements concerning the Company, its competitors or customers, as well as quarterly variations in operating results, announcements of technological innovations, seasonal or other variations in anticipated or actual results of operations, changes in earnings estimates by analysts or reports regarding the Company’s industries in the financial press or investment advisory publications, could cause the market price of the Company’s stock to fluctuate substantially. In addition, the Company’s stock price may fluctuate widely for reasons which may be unrelated to operating results. Also, any information concerning the Company, including projections of future operating results, appearing in investment advisory publications or on-line bulletin boards, or otherwise emanating from a source other than the Company could in the future contribute to volatility in the market price of the Company’s common stock.
f.
The Company’s business success depends on its ability to recruit and retain key personnel
The Company depends on the expertise, experience, and continuing services of certain scientists, engineers, production, and management personnel, and on the Company’s ability to recruit additional personnel. There is competition for the services of these personnel, and there is no assurance that the Company will be able to retain or attract the personnel necessary for its success, despite the Company’s efforts to do so. The loss of services of the Company’s key personnel could have a material adverse effect on its business, results of operations, or financial condition.
g.
Many of the Company’s customers are in cyclical industries
The Company’s business is significantly dependent on the demand its customers experience for their products. Many of their end users are in industries that historically have experienced a cyclical demand for their products. The industries include, but are not limited to, the defense electro-optics industry and the manufacturers of process control capital equipment for the semiconductor tools industry. As a result, demand for the Company’s products is subject to cyclical fluctuations, and this could have a material effect on our business, results of operations, or financial condition.
h.
The Company’s manufacturing processes require products from limited sources of supply
The Company utilizes many relatively uncommon materials and compounds to manufacture its products. Many of the materials have long lead times and the Company’s suppliers could fail to deliver sufficient quantities of these necessary materials on a timely basis, or deliver contaminated or inferior quality materials, or markedly increase their prices. Any such actions could have an adverse effect on the Company’s business, despite the Company’s efforts to secure long term commitments from its suppliers. Adverse results might include reducing the Company’s ability to meet commitments to its customers, compromising the Company’s relationship with its customers, adversely affecting the Company’s ability to meet expanding demand for its products, or causing the Company’s financial results to deteriorate.
i.
The Company faces competition
The Company encounters substantial competition from other companies positioned to serve the same market sectors. Some competitors may have financial, technical, capacity, marketing, or other resources more extensive than ours, or may be able to respond more quickly than the Company to new or emerging technologies and other competitive pressures. Some competitors have manufacturing operations in low-cost labor regions such as the Far East and Eastern Europe and can offer products at lower prices than the Company. The Company may not be successful in winning orders against the Company’s present or future competitors, and competition may have a material adverse effect on our business, results of operations, or financial condition.
j.
The Company may not be able to fully protect its intellectual property
The Company does not in general rely on patents to protect its products or manufacturing processes. The Company generally relies on a combination of trade secrets and employee non-compete and nondisclosure agreements to protect its intellectual property rights. There can be no assurance that the steps the Company takes will be adequate to prevent misappropriation of the Company’s technology. In addition, there can be no assurance that, in the future, third parties will not assert infringement claims against the Company. Asserting the Company’s rights or defending against third-party claims could involve substantial expense, thus materially and adversely affecting the Company’s business, results of operations, or financial condition.
k.
Data breach and breakdown of information and communication technologies
In the course of our business, we collect and store sensitive data, including intellectual property. We could be subject to service outages or breaches of security systems which may result in disruption, unauthorized access, misappropriation, or corruption of this information. We rely on our information technology systems to effectively manage our operational and financial functions. We increasingly rely on information technology systems to process, transmit, and store electronic information. In addition, a significant portion of internal communications, as well as communication with customers and suppliers, depends on information technology. We are exposed to the risk of cyber incidents in the normal course of business. Cyber incidents may be deliberate attacks for the theft of intellectual property, other sensitive information or cash or may be the result of unintentional events. Like most companies, our information technology systems may be vulnerable to interruption due to a variety of events beyond our control, including, but not limited to, physical or electronic break-ins, vendor service outages, terrorist attacks, telecommunications failures, computer viruses, hackers, foreign governments, and other security issues. We have technology security initiatives and data recovery plans in place to mitigate our risk to these vulnerabilities, but these measures may not be adequate, or implemented properly, or executed timely to ensure that our operations are not disrupted. We have insurance coverage for cyber liability, but there can be no assurances that the amount of coverage will be adequate or that insurance proceeds will be available for a particular claim.
Although we have not experienced an incident, potential consequences of a material cyber incident include damage to our reputation, litigation, system disruptions, shutdowns, unauthorized disclosure of confidential information, and increased cyber security protection and remediation costs. Such consequences could materially and adversely affect our results of operations.
l.
The Company may be impacted by global political and economic conditions, including acts of war
Terrorism, armed conflict, and acts of war (or the expectation of such events), both in the US and abroad, could also have a significant impact on Inrad Optics’ business and the worldwide economy. For instance, the Russia-Ukraine conflict has had an adverse impact, among other things, on certain of our suppliers or customers. Ongoing economic sanctions may further disrupt the supply chain and increase costs where there are limited sources of certain raw materials.
m.
A pandemic, epidemic or outbreak of an infectious disease in the United States and globally may adversely affect our business
A pandemic, epidemic or outbreak of an infectious disease occurring in the United States and/or worldwide, may adversely affect production. The spread of an infectious disease, including the COVID-19 virus, which was declared a pandemic by the World Health Organization on March 11, 2020, may also result in the inability of our suppliers to deliver on a timely basis or at all. In addition federal, state, and local governments may curtail and restrict business activities, as well as the ability for our employees to work. Such events may result in a period of business disruption, and in reduced operations, which could materially affect our business, financial condition and results of operations. Any significant infectious disease outbreak, including the COVID-19 pandemic, could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, resulting in an economic downturn that could impact our business, financial condition and results of operations, including our ability to obtain additional funding, if needed.
The spread of COVID-19 has negatively impacted the global economy and has impacted our operations, including the curtailment of certain of our production activities from a human resource perspective and minor disruptions in our supply chain. The extent to which the global coronavirus pandemic continues to impact our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19, and the actions to contain or treat its impact, among others. The Company continues to monitor safety protocols and enhance its business continuity plans for potential exposure in the event of infection in our offices and production facility, or in response to potential mandatory quarantines.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
None

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ITEM 2. PROPERTIES
Item 2. Properties
Administrative, engineering, and manufacturing operations are housed in a 42,000 square foot building located in Northvale, New Jersey. The lease for the Northvale facility was renewed for a term of three years from June 1, 2022 to May 31, 2025, along with an option to renew the lease for three additional one-year terms running through May 31, 2028, at substantially the same terms. We believe that our existing facility is adequate to meet current and future projected production needs.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
We are not party to any legal proceedings as of the date hereof.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not Applicable
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters
a.Market Information
The Company’s Common Stock, with a par value of $0.01 per share, is traded on the OTC Pink Sheets under the symbol “INRD.”
b.Shareholders
As of March 28, 2024, there were approximately 124 shareholders of record of our Common Stock based on the `Shareholders’ Listing provided by the Company’s transfer agent. As of the same date, the Company estimates there are an additional 240 beneficial shareholders.
c.Dividends
The Company has not historically paid cash dividends. Payment of cash dividends is at the discretion of the Company’s Board of Directors (the “Board”) and depends, among other factors, upon the earnings, capital requirements, operations, and financial condition of the Company. The Company does not anticipate paying cash dividends in the foreseeable future.
d.Recent Sales of Unregistered Securities
There have been no sales of unregistered securities during the past year.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Reserved

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation
The following discussion and analysis should be read in conjunction with the Company’s consolidated financial statements and the notes thereto presented elsewhere herein. The discussion of results should not be construed to imply any conclusion that such results will necessarily continue in the future.
Critical Accounting Policies
The Company’s significant accounting policies are described in Note 1 of the Consolidated Financial Statements. The Company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. In preparing the Company’s financial statements, the Company made certain estimates and judgments that affect the results of operations and the value of assets and liabilities the Company reports. We base these significant judgments and estimates on historical experience and other applicable assumptions we believe to be reasonable based upon information presently available. These estimates may change as new events occur, as additional information is obtained, and as our operating environment changes. These changes have historically been minor and have been included in the financial statements as soon as they became known. Actual results could materially differ from our estimates under different assumptions, judgments, or conditions.
Management has discussed the development and selection of these critical accounting policies and estimates with the Audit Committee of the Board of Directors and the Audit Committee has reviewed the related disclosure. The Company believes that the following summarizes critical accounting policies that require significant judgments and estimates in the preparation of the Company’s consolidated financial statements:
Revenue Recognition
Revenue from the Company’s sales continue to generally be recognized either when products are shipped (i.e., point in time) or under certain long-term government contracts, as the Company transfers control of the product or service to its customers (i.e., over time), which approximates the previously used percentage-of-completion method of accounting.
Inventory
Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. Cost of manufactured goods includes material, labor and overhead.
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.
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 estimated 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.
Income Taxes
Deferred income taxes are provided on the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the amounts of assets and liabilities recorded for income tax and financial reporting purposes. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
The Company recognizes the financial statement benefit of an uncertain tax position only after determining that the relevant tax authority would more likely than not sustain the position. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.
The Company classifies interest and penalties related to income taxes as income tax expense in its Consolidated Financial Statements.
Leases
The Company entered into an amendment and extension of its building lease on July 25, 2022, retroactive to June 1, 2022. Under the guidance of ASU 2016-02, Leases (Topic 842), the Company must determine 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.
Results of Operations
The following table sets forth, for the past two years, the percentage relationship of statement of operations categories to total revenues.
Years ended December 31,
%
%
Revenues:
Product sales
100.0
%
100.0
%
Costs and expenses:
Cost of goods sold
61.8
70.8
Gross profit margin
38.2
29.2
Selling, general and administrative expenses
23.2
26.2
Operating income (loss)
15.0
3.0
Net income (loss)
13.9
1.4
Revenues
Sales were $12.9 million in 2023, an increase of 21.4% or $2.3 million, compared to $10.6 million in 2022. The increase in sales from 2022 to 2023 was due to stronger sales in the process control and metrology and scientific/R&D as applications and components for the semiconductor capital equipment market are developed.
Sales to the defense and aerospace market in 2023 decreased 15.6% or $0.5 million to $2.5 million from $3.0 million in 2022. Sales in the defense and aerospace market represented 19.7% and 28.3% of total sales in 2023 and 2022, respectively. The decrease in revenue in this market was due to a decrease in the demand for our products.
Sales in the process control and metrology market increased $2.3 million, or 33.4% to $9.3 million in 2023 from $7.0 million in 2022. Sales in the process control and metrology market represented 72.1% and 65.7% of total sales in 2023 and 2022, respectively. Increased demand for process control and metrology components, including critical components in the semiconductor capital equipment market positively impacted sales in 2023 and 2022.
In 2023 and 2022, the Company served as an OEM supplier of custom optical components within the non-military laser industry. Sales to this and related markets in 2023 were $0.1 million, a decrease of $0.1 million or 71.9% compared to $0.2 million in 2022. Overall, sales of laser devices and related products represented 0.4% and 1.8% of revenues in 2023 and 2022, respectively.
Sales to customers within the Scientific / R&D market were $1.0 million and $0.5 million for the years ended December 31, 2023 and 2022, respectively. As a percentage of total sales, this market represented 7.8% and 4.3% sales in 2023 and 2022, respectively. The increase in sales in this market is due to timing of research and development activities.
Bookings
The Company booked new orders totaling approximately $8.0 million in 2023. The Company’s backlog as of December 31, 2023, was $15.6 million, compared to $20.5 million as of December 31, 2022. The significant decrease in year over year bookings is due to extraordinary demand from customers to secure capacity for optical and x-ray components in the process control and metrology sector in 2022.
Cost of Goods Sold and Gross Profit Margin
Cost of goods sold as a percentage of sales was 61.8% and 70.8% for the years ended December 31, 2023 and 2022, respectively. The cost of goods sold in 2023 was $8.0 million compared to $7.5 million in 2022, an increase of $0.5 million mainly attributable to the increase in sales. Materials, direct labor, and overhead offset by inventory adjustments impacted gross profit margin in 2023.
Selling, General and Administrative Expenses
Selling, general and administrative expenses (“SG&A”) were $3.1 million and $2.8 million for the years ended December 31, 2023 and 2022, respectively. SG&A expenses increased due to an increase in corporate insurance costs, legal and professional fees, and trade show and travel expenses. As a percentage of sales, SG&A was 24.1% of sales in 2023 compared to 26.2% of sales in 2022.
Operating Income
The Company had operating income of $1.7 million in 2023, compared to operating income of $0.2 million in 2022.
Other Income and Expenses
Net interest expense was $0.1 million and $0.2 million in the years ended December 31, 2023 and 2022, respectively.
Income Taxes
For the year ended December 31, 2023, the Company recorded a net valuation allowance release of $1.0 million on the basis of management’s reassessment of the amount of its deferred tax assets that are more likely than not to be realized. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of December 31, 2023, management determined there is sufficient positive evidence that it is more likely than not that the net deferred tax asset (other than foreign net operation losses) is realizable.
The Company did not record a current provision for income taxes in 2022, due to the availability of net operating loss carryforwards to offset taxable income for both federal and state tax purposes.
Net Income (Loss)
As a result of the foregoing, the Company recorded net income of $2.7 million in 2023 compared to $0.2 million in 2022.
Liquidity and Capital Resources
The Company’s primary source of liquidity is cash and cash equivalents and on-going collection of our accounts receivable. The Company’s major uses of cash in the past three years have been for operating expenses, capital expenditures, and for repayment and servicing of outstanding debt and accrued interest.
As of December 31, 2023, and December 31, 2022, cash and cash equivalents were $3.0 million and $2.0 million, respectively.
On October 12, 2023, 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 January 15, 2025, from August 15, 2024. The notes bear interest at 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 for $1.35 per share. The warrants expire on August 15, 2027.
The Company paid $0.2 million for interest on the subordinated convertible promissory notes in each of the years ended December 31, 2023, and 2022. Accrued interest of $37,500 is included in accounts payable and accrued liabilities as of December 31, 2023, and 2022.
In total, the Company paid $0.2 million of interest in each of the years ended December 31, 2023 and 2022, on its outstanding debt, including interest paid on the subordinated convertible promissory notes.
Capital expenditures were $0.4 million in 2023 and $0.8 million in 2022. The Company continues to invest in new manufacturing equipment and upgrades to existing equipment.
The Company had a net increase in cash of $1.0 million for the year ended December 31, 2023, compared to a net increase in cash of $0.2 million for the year ended December 31, 2022.
Cash flows pertaining to our source and use of cash are presented below (in thousands):
Years Ended
December 31,
(in thousands)
Net cash provided by operating activities
$
1,361
$
Capital expenditures
(363)
(539)
Net cash used in financing activities
(28)
(35)
Overview of Financial Condition
The Company recorded net income of $2.7 million and $0.2 million for the twelve months ended December 31, 2023 and 2022, respectively. The Company’s cash and cash equivalents increased to $3.0 million at December 31, 2023, from $2.0 million at December 31, 2022.
The Company’s order backlog extends beyond 2024. The Company’s management expects that future cash flows from operations and its existing cash reserves will provide adequate liquidity for the Company’s operations and working capital requirements through at least March 31, 2025.
Contractual Obligations
Subordinated Convertible Promissory Notes
As of December 31, 2023 and 2022, the outstanding principal on the Subordinated Convertible Promissory Notes was $2.5 million. Interest accrues at 6% annually. For the years ended December 31, 2023 and 2022, the Company recorded interest expense on these notes of $0.2 million in each year.
Notes Payable Other
At December 31, 2023 and 2022, the Company had $0.3 million and $0.4 million outstanding in Notes Payable Other in each year, respectively. Interest accrues annually at a weighted average interest rate of 4.9%. For the years ended December 31, 2023 and 2022, the Company recorded interest expense on Notes Payable Other of $18,000 and $20,000 respectively.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Not Applicable

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary financial information required to be filed under this Item are presented commencing on page 21 of the Annual Report on Form 10-K and are incorporated herein by reference.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

---

ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
a. Evaluation of Disclosure Controls and Procedures
The Company’s management, including the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Annual Report on Form 10-K. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures as of December 31, 2023, are effective to ensure that information required to be disclosed in the reports the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding disclosure.
b. Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining an adequate system of internal control over financial reporting. Our internal control over financial reporting includes those policies and procedures that:
● pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
● provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting principles in the United States, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
Management assessed the effectiveness of the Company’s system of internal control over financial reporting as of December 31, 2023. In making this assessment, management used the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our assessment and the criteria set forth
by COSO, management has concluded that the Company maintained effective internal control over financial reporting as of December 31, 2023.
c. Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation that occurred during the Company’s last fiscal quarter that have materially affected, or that are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

---

ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
None

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers, and Corporate Governance
Executive Officers and Directors
The following table sets forth the name and age of each executive officer and director of the Company, the period during which each such person has served as an executive officer or director and the current position with the Company held by each such person:
Name
Age
Since
Position with the Company
Amy Eskilson
President, Chief Executive Officer and Director
Theresa A. Balog
Chief Financial Officer, Corporate Secretary and Treasurer
George Murray
Vice President of Sales and Marketing
Jan M. Winston
Chairman of the Board
William J. Foote
Director of the Company
Luke P. LaValle, Jr.,
Director of the Company
Dennis G. Romano
Director of the Company
N.E. Rick Strandlund
Director of the Company
Amy Eskilson has served as President and Chief Executive Officer of Inrad Optics since October 2012 and served as Inrad Optics’ Vice President of Sales and Marketing from February 2011 through October 2012. Prior to joining the Inrad Optics team, Ms. Eskilson spent 18 years with Thorlabs, Inc., a photonic tools catalogue company, where she served as Director of Business Development from 2001 to 2011. In this role, Ms. Eskilson coordinated a team responsible for a total of eight acquisitions and fostered the development of multiple partner companies, technology transfers and IP license agreements. Ms. Eskilson was also involved in photonic start-ups Nova Phase, Inc., Menlo Systems, Inc. and Idesta Quantum Electronics. Honored in 2021 as an Optica Fellow for her contributions to the photonics industry, as well as a long history of advocacy for the optics & photonics community, Ms. Eskilson continues to be an active Optica volunteer. She is a member of the Steering Committee of the National Photonics Initiative and serves as a Trustee of the New Jersey Manufacturing Extension Partnership. She received her BA in Communications from Montclair State University.
Theresa Balog has served as the Chief Financial Officer, Secretary, and Treasurer since joining Inrad Optics in May 2019. As CFO, Ms. Balog oversees the accounting, business support, financial planning and analysis, treasury, and human resources functions at Inrad Optics. Ms. Balog has previously served as chief financial officer for Clear Align, LLC and MakerBot Industries, Vice President and Global Controller and Chief Accounting Officer for VWR International, Executive Director for MSCI, Inc., and Vice President and Controller for KeySpan Energy. Ms. Balog holds a BBA in Accounting from St. Mary’s College, a Master’s Degree in Accounting from the University of Delaware, a Master’s Degree in Human Resource Management from Wilmington University, and DBA in Industrial and Organizational Psychology from Northcentral University. Ms. Balog serves on the Advisory Board of the Accounting and MIS
Department at the University of Delaware and mentors undergraduate business students in the University’s Lerner Executive Mentoring Program. She is a licensed CPA in the state of Delaware.
George Murray has served as Vice President, Sales & Marketing at Inrad Optics since 2013. Mr. Murray joined the Company as Sales Manager, West Region in 2010. Previously, Mr. Murray managed the sales and marketing activities at Axsys Technologies Imaging Systems (now part of General Dynamics), a premier supplier of optical components. He also held increasingly responsible roles in applications engineering, product marketing, and sales management which included international sales territories at Photon Dynamics, now a division of KLA Corporation, and Gerber Scientific. Mr. Murray holds a Bachelor of Science degree in Mechanical Engineering from the University of Connecticut and an MBA from Rensselaer Polytechnic Institute in Hartford, CT.
Jan M. Winston has served as Chairman of the Board since 2009 and has been a member of Board since 2000. Mr. Winston has also served as a Management Consultant of Winston Consulting since 1997. From 1981 through 1997, Mr. Winston served as a Division Director/General Manager at IBM Corporation. Mr. Winston has an AB degree from Princeton University and attended the Columbia Graduate School of Business Administration.
William J. Foote has been a director since 2017. Mr. Foote served as the Company’s VP and Chief Accounting Officer from 2018-2019 and as its Chief Financial Officer from 2006-2018. Mr. Foote also gained extensive experience in finance and accounting through a number of senior financial roles with small and mid-cap private and public manufacturing companies, Mr. Foote is a CPA and a certified professional accountant in Canada and is a member of the Illinois Society of CPAs and the AICPA. Mr. Foote holds a BA from Carleton University in Ottawa and a Master’s Degree in Accounting from the University of British Columbia.
Luke P. LaValle, Jr. has been a director since 2005. Currently, Mr. LaValle serves as the Chairman, Chief Executive Officer and co-Chief Investment Officer of American Capital Management Inc., a boutique investment management firm, since 1980. He has a BS from Boston College and an MBA from the University of Massachusetts. Mr. LaValle is a retired Lieutenant Colonel, Military Intelligence, U.S. Army Reserve and served with the 101st Airborne Division and on the Army Staff, The Pentagon.
Dennis G. Romano has been a director since 2009. From 2002-2007, Mr. Romano served as the Senior Vice President of Business Development, Defense Business Unit, Washington Group International, a provider of engineering construction and technical services. Mr. Romano holds a Bachelor of Science degree and Master of Science degree in Physics from Adelphi University.
N.E. Rick Strandlund has been a director since 2009. From 2005-2008, he served as the Chairman, President and CEO of Nanoproducts Corporation, a producer and developer of nanoproduct materials and technologies. Mr. Strandlund has served on the Board of Directors for Research Electro-Optics (a private company) and served as the Chairman of the Board for NanoProducts Corporation (a private company). Mr. Strandlund holds an MBA in management from Golden Gate University and a Bachelor of Science degree in Aerospace Engineering from San Diego State University.
Family Relationships
There are no family relationships among any of our directors or executive officers.
Code of Ethics
The Company has adopted a Code of Ethics that applies to the Company’s principal executive officer, principal financial officer, principal accounting officer or controller (or persons performing similar functions). A copy of such Code of Ethics is available on the Company website at www.inradoptics.com and will be made available without charge and upon written request addressed to the attention of the Secretary of the Company and mailed to the Company’s principal executive offices, 181 Legrand Avenue, Northvale, NJ 07647. If the Company makes any substantive amendments to the Code of Ethics or grants any waiver, including any implicit waiver from a provision of the Code of Ethics to its directors or executive officers, the Company will disclose the nature of such amendments or waiver in its website or in a current report on Form 8-K.
Composition of the Board
The Board currently consists of six members. The Company’s directors hold office until their successors have been elected and qualified or until the earlier of their resignation or removal.
The Board is divided into three classes (Class I, Class II and Class III) with directors of the Board (collectively, “Directors”) in each class serving staggered three-year terms. At each annual meeting of shareholders, the terms of Directors in one of these three classes expire. At that annual meeting of shareholders, Directors are elected to a Class to succeed the Directors whose terms are then expiring, with the terms of that Class of Directors so elected to expire at the third annual meeting of shareholders, thereafter. Our directors are divided among the three classes as follows:
● The Class I directors are Dennis G. Romano and N.E. Rick Strandlund; their terms will expire at the annual meeting of stockholders to be held in 2026.
● The Class II directors are William J. Foote and Luke P. LaValle, Jr.; their terms will expire at the annual meeting of stockholders to be held in 2024.
● The Class III directors are Amy Eskilson and Jan M. Winston; their terms will expire at the annual meeting of stockholders to be held in 2025.
The by-laws of the Company provide for a range of no less than four and no more than six directors.
Audit Committee
The Company has a separately designated standing Audit Committee. Luke P. LaValle, Jr. has served as the Audit Committee Chairman since assuming the role in December 2006. The three other members of the Audit Committee are Messrs. Romano, Strandlund, and Winston. The Board has determined that the members of the Audit Committee each satisfy the requirements for independence under applicable SEC rules, as well as the independence standards of the NASDAQ Stock Market.
The Board of Directors has determined that Mr. LaValle is an “audit committee financial expert” as such term is defined under applicable SEC rules.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
The following tables and accompanying disclosure set forth information about the compensation earned by our named executive officers during 2023. Our named executive officers include our principal executive officer and the two most highly compensated executive officers (other than our principal executive officer) serving as executive officers as of December 31, 2023, as set forth below:
● Amy Eskilson, President and CEO;
● Theresa Balog, CFO; and
● George Murray Vice President, Sales & Marketing.
Summary Compensation Table
The following Summary Compensation Table sets forth, for the years ended December 31, 2023 and 2022, the compensation paid by the Company and its Subsidiaries, with respect to the Company’s named executive officers.
Option
All Other
Salary
Bonus
Awards
Compensation
Total
Name & Principal Position
Year
$
$
$ (1)(2)
$ (3)
$
Amy Eskilson
212,000
-
-
9,540
221,540
President & CEO
212,000
25,000
28,250
10,665
275,915
Theresa Balog
182,000
10,000
-
8,342
200,342
Chief Financial Officer
182,000
20,000
16,950
8,490
227,440
George Murray
158,000
-
-
7,110
165,110
Vice President, Sales & Marketing
158,000
22,500
11,300
8,123
199,923
(1)The aggregate grant date fair value of option awards and stock awards are computed in accordance with FASB ASC Topic 718, in accordance with SEC rules. The valuation is based on the assumptions set forth in Note 10 to our Consolidated Financial Statements in this annual report.
(2)On February 24, 2022, 50,000, 30,000, and 30,000 stock options were awarded to Ms. Eskilson, Ms. Balog, and Mr. Murray respectively. The options have an exercise price of $1.20 and a fair value of $1.03 per share. There were no stock options granted in 2023. All stock options granted in 2022 have a ten-year term and vest over three years, one-third each year upon the anniversary of the grant. The amounts reflect the aggregate grant date fair value of each award.
(3)All Other Compensation includes the fair value of Company stock and cash contributed in 2023 and 2022, as a match to the Company’s Section 401(k) Plan for individual executive contributions to the Plan in the 2023 and 2022 Plan years, respectively.
Employment Agreements
The Company has not entered into any employment agreement with any of Ms. Eskilson, Ms. Balog, or Mr. Murray.
Outstanding Equity-Based Awards at Fiscal Year-End
The following table provides information pertaining to vested and non-vested stock options held by each of the executive officers named in the Summary Compensation Table as of December 31, 2023.
Option Awards (1)
Number of
Number of
Securities
Securities
Underlying
Underlying
Option
Unexercised
Unexercised
Exercise
Option
Options (#)
Options (#)
Price
Expiration
Name & Principal Position
Exercisable
Unexercisable
$
Date
Amy Eskilson
16,667
33,333
1.20
02/24/32
President & CEO
33,333
16,667
0.62
02/24/31
40,000
-
0.71
02/27/29
40,000
-
1.00
07/03/28
40,000
-
0.57
01/18/27
40,000
-
0.35
02/22/26
25,000
-
0.19
01/13/25
Total
235,000
50,000
Theresa Balog
10,000
20,000
1.20
02/24/32
Chief Financial Officer
20,000
10,000
0.62
02/24/31
15,000
-
1.48
02/12/30
15,000
-
1.80
05/16/29
Total
60,000
30,000
George Murray
10,000
20,000
1.20
02/24/32
Vice President, Sales & Marketing
13,333
6,667
0.62
02/24/31
20,000
-
0.71
02/27/29
20,000
-
1.00
07/03/28
15,000
-
0.57
01/18/27
15,000
-
0.35
02/22/26
20,000
-
0.19
01/13/25
Total
113,333
26,667
(1)Options have a 10-year term and vest over three years, one third each year upon each anniversary of the grant.
Director Compensation
Fees earned or
Option
paid in cash
Awards (1)(2)
Total
Name
$
$
$
William Foote
20,500
-
20,500
Luke P. LaValle, Jr.
20,500
-
20,500
N.E. Rick Strandlund
20,500
-
20,500
Dennis Romano
20,500
-
20,500
Jan M. Winston
25,500
-
25,500
(1)
The value of stock option awards is computed in accordance with FASB ASC Topic 718. The Option Awards reflect the aggregate grand date fair value of the awards. The Company granted 10,000 stock options with an exercise price of $1.20 to each of the directors on March 24, 2022. No stock options were granted to the any of the directors in 2023.
(2)
The number of stock options which vested in 2023 to each non-employee director was as follows: William J. Foote, 6,666; Luke P. LaValle, Jr., 6,666; Dennis G. Romano, 6,666; N.E. Rick Strandlund, 6,666; and Jan M. Winston, 6,666. As of December 31, 2023, the aggregate number of option awards outstanding for each non-employee director then serving as a director was as follows: William J. Foote, 115,000; Luke P. LaValle, Jr., 70,000; Dennis G. Romano, 75,000; N.E. Rick Strandlund, 75,000; and Jan M. Winston, 70,000.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table gives the information about the Company’s Common Stock that may be issued upon the exercise of options, warrants, and rights under the Company’s 2010 Equity Compensation Program and the 2020 Equity Compensation Plan, as of December 31, 2023. These Plans were the Company’s only equity compensation Plans in existence as of December 31, 2023.
(a)
(b)
(c)
Number of Securities
Remaining Available for
Future Issance Under
Number of Securities to
Weighted-Average
Equity Compensation
be Issued Upon Exercise
Exercise Price of
Plans (Excluding
of Outstanding Options,
Outstanding Options,
Securities Reflected in
Plan Category
Warrants, and Rights
Warrants, and Rights
Column (a)
Equity Compensation Plans Approved by Shareholders (1)
1,112,667
$
0.85
3,580,000
Equity Compensation Plans Not Approved by Shareholders
-
$
-
-
Total
1,112,667
$
0.85
3,580,000
(1)
The 2020 Equity Compensation Program was adopted by the Company’s shareholders at the Annual Meeting held on June 23, 2020. Under this Program, an aggregate of up to 4,000,000 shares of common stock may be granted. The 2010 Equity Compensation Program expired on June 2, 2020, and each outstanding option, warrant and right granted under the Program expired on the date determined under the terms of the original award, which in no event, exceeded 10 years. As of December 31, 2023, there was a total of 778,667 options outstanding under the 2010 Plan. In 2023, 109,333 stock options expired and 64,667 stock options were forfeited under the 2010 Plan. Under the 2020 Equity Compensation Plan, a total of 20,000 stock options were awarded to employees during 2023 and 20,000 shares were forfeited under the 2020 Equity Compensation Plan. No stock options were exercised under the 2020 Equity Compensation Plan in 2023 or 2022.
The following table presents certain information available to the Company at the date hereof with respect to the security ownership of the Company’s Common Stock by (i) each of the Company’s directors and nominees, (ii) each named executive officer of the Company, (iii) all executive officers and directors as group, and (iv) each person known by the Company to beneficially own more than five percent (5%) of the Company’s common stock outstanding as of December 31, 2023. Percentages that include ownership of options or convertible securities are calculated assuming exercise or conversion by each individual or entity of the options (including “out-of-the-money options”), or convertible securities owned by each individual or entity separately without considering the dilutive effect of option exercises and security conversions by any other individual or entity. Accordingly, the percentages may add to more than
100%. The address of each principal shareholder, unless otherwise indicated, is c/o Inrad Optics, Inc., 181 Legrand Avenue, Northvale, NJ 07647.
Beneficial Ownership of Common Stock
Amount and
Nature of
Percent of
Beneficial
Common
Name and Address of Beneficial Owner
Ownership
Stock
William J. Foote
159,327
(1)
0.8
%
Luke P. LaValle, Jr.
80,000
(2)
0.4
%
Dennis G. Romano
80,000
(3)
0.4
%
N.E. Rick Strandlund
80,000
(4)
0.4
%
Jan M. Winston
80,000
(5)
0.4
%
Amy Eskilson
467,025
(6)(12)
2.4
%
George Murray
265,305
(7)
1.3
%
Theresa Balog
104,888
(8)(12)
0.5
%
All Directors and Executive Officers as a group (8 persons)
1,316,545
(9)
6.7
%
Clarex Ltd. & Welland Ltd.
7,782,839
(10)
39.3
%
Bay Street and Rawson Square
P.O. Box N 3016
Nassau, Bahamas
Emancipation Management LLC
3,558,702
(11)
18.0
%
825 Third Avenue
New York, NY 10022
Minerva Advisors LLC
999,435
(12)
5.1
%
50 Monument Road, Suite 201
Bala Cynwyd, PA 19004
Inrad Optics, Inc. Employees 401(k) Plan
988,742
(13)
5.0
%
Amy Eskilson, as Trustee
181 Legrand Avenue
Northvale, NJ 07647
(1) Including 101,166 shares issuable upon exercise of options exercisable within 60 days of March 29, 2024, 22,162 shares owned, and 32,165 shares allocated to Mr. Foote in the Inrad Optics, Inc. 401(k) Plan over which he has voting and dispositive power.
(2) Including 66,666 shares issuable upon exercise of options exercisable within 60 days of March 29, 2024, and 10,000 shares owned.
(3) Including 66,666 shares issuable upon exercise of options exercisable within 60 days of March 29, 2024, and 10,000 shares owned.
(4) Including 66,666 shares issuable upon exercise of options exercisable within 60 days of March 29, 2024, and 10,000 shares owned.
(5) Including 66,666 shares issuable upon exercise of options exercisable within 60 days of March 29, 2024, and 10,000 shares owned.
(6) Including 268,333 shares issuable upon exercise of options exercisable within 60 days of March 29, 2024, 65,000 shares owned, and 114,391 shares allocated to Ms. Eskison in the Inrad Optics, Inc. 401(k) Plan over which she has voting and dispositive power.
(7) Including 130,000 shares issuable upon exercise of options exercisable within 60 days of March 29, 2024, 21,000 shares owned, and 102,292 shares allocated to Mr. Murray in the Inrad Optics, Inc. 401(k) Plan over which he has voting and dispositive power.
(8) Including 80,000 shares issuable upon exercise of options exercisable within 60 days of March 29, 2024, and 12,817 shares allocated to Ms. Balog in the Inrad Optics, Inc. 401K Plan over which she has voting and dispositive power.
(9) Including 846,163 shares issuable upon exercise of options exercisable within 60 days of March 29, 2024.
(10) Including 2,500,000 shares and warrants to purchase an additional 1,875,000 shares at $1.35 per share which are issuable upon conversion of convertible promissory notes and 50,000 shares issuable upon conversion of accrued interest as of March 29, 2023, on convertible promissory notes.
(11) These figures are based upon information set forth in Schedule 13G filed January 31, 2024, on behalf of the following reporting persons:
Emancipation Management LLC (a)
Circle N Advisors, LLC (a)
Charles Frumberg (a)
(a) Each of these reporting persons is deemed a beneficial owner of 3,558,702 shares of Inrad Optics, Inc. held by Emancipation with shared investment power but no voting power with respect to these 3,558,702 shares.
(12) These figures are based upon information set forth in Schedule 13G filed February 14, 2023, on behalf of the following reporting persons:
Minerva Advisors LLC (a)
Minerva Group, LP (a)
Minerva GP, LP
Minerva GP, Inc. (a)
David P. Cohen (a)
(a) Each of these reporting persons is deemed a beneficial owner of 998,742 shares of Inrad Optics, Inc. held by Minvera Group, L.P. with both investment power and voting power with respect to these 998,742 shares.
(13) These figures are based upon information provided by Amy Eskilson and Theresa Balog, Trustees of the 401(k) Plan. Ms. Eskilson and Ms. Balog, as trustees of the 401(k) Plan, share voting power with respect to the shares held by the 401(k) Plan, but do not have dispositive power over such shares. Ms. Eskilson and Ms. Balog disclaim beneficial ownership of the shares held by the 401(k) Plan, except to the extent of the shares allocated to them in the 401(k) Plan in their individual capacities, and such shares are not refelcted in the amounts of shares listed as being beneficially held in them in individual capacities in this table.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
The documented ethics policies of the Company restrict certain types of related party transactions between the Company and its directors, officers, and employees of the Company. Specifically, compensation for services provided by directors, officers, and employees to the Company may not be through any source but the Company. The Company’s policies do permit related parties to participate in financial transactions, limited to financing via debt or equity. In such instances, the Company has an informal policy of requiring that the terms of such financing, including but not limited to interest rates and fees, are at least equal to or better than the terms obtainable via financing from other sources. The Audit Committee is responsible for the review and approval of all related party transactions.
On October 12, 2023, 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 January 15, 2025, from August 15, 2024. The notes bear interest at 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. The warrants expire on August 15, 2027.
No payments against the total principal of $2,500,000 have been made. In 2023, the Company paid a total of $150,000 in interest on the outstanding Subordinated Convertible Notes described above. Accrued interest on the notes amounted to $37,500 as of December 31, 2023.
Director Independence
The Board has determined that each of Mr. William J. Foote, Mr. Luke P. LaValle, Jr., Mr. Dennis G. Romano, Mr. N.E. Rick Strandlund, and Mr. Jan M. Winston has no material relationship with the Company (other than as director) and is therefore “independent” within the meaning of the current listing standards of the Nasdaq Stock Market and applicable SEC rules. Ms. Eskilson is not an independent director due to her position as President and CEO of the Company. The Company has established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee, each of which are comprised of independent directors.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services
In accordance with the requirements of the Sarbanes-Oxley Act of 2002 and the Audit Committee’s charter, all audit and audit-related work and all non-audit work performed by the Company’s independent accountants is approved in advance by the Audit Committee, including the proposed fees for such work. The Audit Committee is informed of each service actually rendered.
Audit Fees.
Audit fees billed or expected to be billed by the Company’s principal accountant, PKF O’Connor Davies, LLP (PKF) for the audit of the financial statements included in the Company’s Annual Reports on Form 10-K for the year ended December 31, 2023, were $134,000. Audit fees billed or expected to be billed by PKF for the audit of the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, were $126,000.
Audit-Related Fees
The Company was billed $7,000 and $0 by the Company’s principal accountants for each of the fiscal years ended December 31, 2023 and 2022, for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under the caption “Audit Fees” above.
Tax Fees
The Company was billed or is expected to be billed an aggregate of $17,000 by the Company’s principal accountants for the fiscal year ended December 31, 2023, for tax services, principally the preparation of income tax returns. The Company was billed or is expected to be billed an aggregate of $17,000 for tax services, principally the preparation of income tax returns for the fiscal year ended December 31, 2022.
All Other Fees
The Applicable law and regulations provide an exemption that permits certain services to be provided by the Company’s outside auditors even if they are not pre-approved. The Company has not relied on this exemption at any time since the Sarbanes-Oxley Act was enacted. The Company did not have any other fees in 2023 and 2022.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules
(a) (1)Financial Statements.
Reference is made to the Index to Financial Statements commencing on Page 28.
(a) (2)Financial Statement Schedule.
Reference is made to the Index to Financial Statements on Page 28. All other schedules have been omitted because the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the Financial Statements or Notes thereto.
(a) (3) Exhibits.
Exhibit No.
Description of Exhibit
3.1
Restated Certificate of Incorporation of Photonics Products Group, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 25, 2004)
3.2
By-Laws of Photonic Products Group, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 25, 2004)
3.3
Certificate of Amendment to Restated Certificate of Incorporation of Photonics Products Group, Inc., dated June 2, 2010 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 7, 2010)
3.4
Certificate of Amendment to Restated Certificate of Incorporation of Photonics Products Group, Inc., dated January 23, 2012 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 23, 2012)
4.1
Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 25, 2004)
4.2
Note dated October 12, 2023, held by Clarex, Ltd (incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on November 15, 2023)
4.3
Note dated October 12, 2023, held by Welland, Ltd. (incorporated by reference to Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on November 15, 2023)
4.4
Description of Securities (incorporated by reference to Exhibit 4.4 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2020)
10.2
2020 Equity Compensation Program (incorporated by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2020)
10.3
Amendment and Extension of Lease, dated July 8, 2019, by and between V&R Costa Management, LLC, and Inrad Optics, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2019)
10.4
Amendment and Extension of Lease dated July 29, 2022, by and between V&R. Costa Management LLC, and Inrad Optics, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 12, 2022)
14.1
Code of Ethics (incorporated by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2006)
21.1
List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2006)
23.1*
Consent of PKF O’Connor Davies, LLP Independent Registered Public Accounting Firm
31.1*
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document
101.SCH*
Inline XBRL Taxonomy Extension Schema Document
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*
The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, has been formatted Inline XBRL
* Filed herewith
** Furnished herewith