S-1

QuickLinks -- Click here to rapidly navigate through this document

As Filed with the Securities and Exchange Commission on August 25, 2004

Registration No.                   

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Photonic Products Group, Inc.

(Exact name of Registrant as specified in its charter)

New Jersey	3679	22-2003247
(State or Other Jurisdiction of Incorporation of Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

181 Legrand Avenue
Northvale, NJ 07647
(201) 767-1910
(Address, including Zip code and Telephone Number Including Area Code, of Registrant's Principal Executive Offices)

William Miraglia
Chief Financial Officer
Photonic Products Group, Inc.
181 Legrand Avenue
Northvale, NJ 07647
Phone (207) 767-1910
Fax (207) 767-9644
(Name, Address, including Zip code and Telephone Number Including Area Code, of Agent for Service)

Copies to:

Alan Wovsaniker
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey 07068
Phone (973) 597-2500
Fax (973) 597-2565

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.

        If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 of the Securities Act of 1933, check the following box.    ý

        If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

        If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

        If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

        If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.    o

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Amount to be Registered	Proposed Maximum Aggregate Offering Price(1)	Amount of Registration Fee
Common Stock, par value .01 per share	3,043,425 shares	$3,318,124(1)	$420.41

(1)

Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) of the Securities Act of 1933, as amended.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting any offers to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED August    , 2004.

3,043,425 Shares

Photonic Products Group, Inc.

Common Stock

        This prospectus relates to (1) the resale of 1,581,000 shares of our common stock, per value $.01 per share ("Common Stock") issued pursuant to our Confidential Private Placement Memorandum dated June 1, 2004 (the "June 2004 Private Placement") by the holders of these shares named in this prospectus, whom we refer to as the "Selling Shareholders," and their transferees and (2) the resale from time to time of up to 1,462,425 shares of our Common Stock issuable upon exercise of warrants at an initial exercise price of $1.35, which warrants were issued pursuant to the June 2004 Private Placement. See "Selling Shareholders". We are registering the shares to provide for freely tradeable securities. We will not receive any of the proceeds from the disposition of shares by the Selling Shareholders, but we have agreed to bear the cost relating to the registration of the shares.

Investing in our Common Stock involves significant risk. You should read this entire prospectus carefully, including the section entitled "Risk Factors".

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

        Some of the shares of Common Stock registered hereunder may be sold upon exercise of warrants from time to time by the holders, and persons exercising the warrants may engage a broker or dealer to sell the shares they receive. For additional information on the possible methods of sales, you should refer to the section of this prospectus entitled "Plan of Distribution".

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that which is contained in this prospectus. We are offering to issue shares of our Common Stock only in jurisdictions where these offers are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our Common Stock.

The date of this prospectus is [                        ], 2004

TABLE OF CONTENTS

RISK FACTORS	1
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	4
USE OF PROCEEDS	5
CAPITALIZATION	6
SELLING SHAREHOLDERS	7
PLAN OF DISTRIBUTION	10
DESCRIPTION OF CAPITAL STOCK	12
OUR BUSINESS	14
MARKET FOR OUR COMMON STOCK AND RELATED SHAREHOLDER MATTERS	21
SELECTED CONSOLIDATED FINANCIAL DATA	24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION	25
DIRECTORS AND EXECUTIVE OFFICERS	35
EXECUTIVE COMPENSATION	38
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	44
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	46
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE	46
DESCRIPTION OF CERTAIN DEBT	47
LEGAL MATTERS	48
EXPERTS	48
WHERE YOU CAN FIND MORE INFORMATION	48

i

RISK FACTORS

Before deciding to invest in our Common Stock, you should carefully consider each of the following risk factors and all of the other information set forth in this prospectus. The following risks and the risks described elsewhere in this prospectus, including "Management's Discussion and Analysis of Financial Condition and Results of Operations," could materially harm our business, financial condition or future results. If that occurs, the trading price of our Common Stock could decline, and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business.

Risks Relating to Our Company and Industry

We have incurred operating losses for the past three years.

        We have suffered significant operating losses for the past three years. As a result there has been a substantial increase in borrowing to provide working capital during this time. Continued losses puts us at risk, in that there are no assurances we will be able to borrow additional funds to sustain operations.

We may not succeed in our strategy of acquiring complementary businesses or in integrating acquired businesses.

        Our business strategy includes expanding our production capacities, product lines and market reach through both internal growth and acquisition of complementary businesses. We may not succeed in finding or completing acquisitions of such businesses, nor can we be assured that we will be able to raise the financial capital needed for an acquisition. Acquisitions may result in substantial per share financial dilution of our Common Stock from the issuance of equity securities. This may also result in the taking on of debt and contingent liabilities, and amortization expenses related to intangible assets acquired, any of which could have a material adverse affect on our business, financial condition or results of operations. Also, acquired businesses may be experiencing operating losses. Any acquisition will involve numerous risks, including difficulties in the assimilation of the acquired company's people, operations and products, uncertainties associated with operating in new markets and working with new customers, and the potential loss of the acquired company's key employees.

We depend on, but may not succeed in, developing and acquiring new products and processes.

        In order to meet our strategic objectives, we must continue to develop, manufacture and market new products, and to develop new processes and to improve existing processes. As a result, we expect to continue to make significant investments in research and development and to continue to consider from time to time the strategic acquisition of businesses, products, or technologies complementary to our business. There can be no assurance that we will be able to develop and introduce new products or enhancements to our existing products and processes in a way that achieves market acceptance or other pertinent targeted results. Nor can we be sure that we will be successful in acquiring complementary businesses, products, or technologies. Failure to do so could have a material adverse affect on our ability to grow our business.

Our business success depends on our ability to recruit and retain key personnel.

        Our existing business and expansion plans depend on the expertise, experience and services of our scientists, engineers, production and management personnel, and on our ability to recruit additional personnel. There is competition for the services of these personnel, and there is no assurance that we will be able to retain or attract the personnel necessary for our success, despite our efforts to do so. The loss of the services of our key personnel could have a material adverse affect on our business and on our results of operations.

1

We face competition.

        We may encounter substantial competition from other companies positioned to serve the same market sectors that we serve. Some competitors may have financial, technical, marketing or other resources more extensive than ours, or may be able to respond more quickly than we can to new or emerging technologies and other competitive pressures. We may not be successful in winning orders against our present or future competitors, which may adversely affect our business, growth objectives, financial condition, and operating results.

Our manufacturing processes require products from limited sources of supply.

        We utilize many relatively uncommon materials and compounds to manufacture our products. Examples include optical grade quartz, specialty optical glasses, scarce natural and man-made crystals, and high purity chemical compounds. Failure of our suppliers to deliver sufficient quantities of these necessary materials on a timely basis, or to deliver contaminated or inferior quality materials, or to markedly increase their prices could have an adverse effect on our business, despite our efforts to secure long term commitments from our suppliers. Adverse results might include reducing our ability to meet commitments to our customers, compromising our relationship with customers, adversely affecting our ability to meet expanding demand for our products, or causing our financial results to deteriorate.

Our operations may be adversely affected if we fail to keep pace with industry developments.

        We serve industries and market sectors which will be affected by future technological developments. The introduction of products or processes utilizing new developments could render our existing products or processes obsolete or unmarketable. Our continued success will depend upon our ability to develop and introduce on a timely and cost-effective basis new products, processes, and manufacturing capabilities that keep pace with developments and address increasingly sophisticated customer requirements. There can be no assurance that we will be successful.

We may not be able to fully protect our intellectual property.

        We do not currently hold any material patents applicable to our most important products or manufacturing processes. We rely on a combination of trade secret and employee non-competition and nondisclosure agreements to protect our intellectual property rights. There can be no assurance that the steps we take will be adequate to prevent misappropriation of our technology. In addition, there can be no assurance that, in the future, third parties will not assert infringement claims against us. Asserting our rights or defending against third-party claims could involve substantial expense, thus materially and adversely affecting our business, results of operations or financial condition.

Product yield problems and product defects that are not detected until products are in service could increase our costs and/or reduce our revenues.

        Changes in our manufacturing processes or in that of our suppliers, or the use of defective or contaminated materials by us, could result in an adverse effect on our ability to achieve acceptable manufacturing yields, delivery performance, and product reliability. To the extent that we do not achieve such yields, delivery performance or product reliability, our business, operating results, financial condition and customer relationships could be adversely affected. Additionally, our customers may discover defects in our products after the products have been put into service in their systems. In addition, some of our products are combined by our customers with products from other vendors, which may contain defects, making it difficult and costly to ascertain whose product carries liability. Any of the foregoing developments could result in increased costs, loss of customers, diversion of technical resources, legal action by our customers, or damage to our reputation.

2

International sales account for a significant portion of our revenues.

        Sales to customers in countries other than the United States accounted for approximately 19%, 19% and 31% of revenues during the years ended December 31, 2003, 2002, and 2001, respectively. We anticipate that international sales will continue to account for a significant portion of our revenues for the foreseeable future. In particular, although our international sales are denominated in U.S. dollars, currency exchange fluctuations in countries where we do business could have a material adverse effect on our business, financial condition or results of operations, by making us less price-competitive than foreign manufacturers.

Future sales of our Common Stock may depress our share price.

        We will have 7,160,903 shares of Common Stock outstanding. Approximately 4,313,694 shares are freely tradable without restriction or further registration under federal securities laws unless purchased by our affiliates. The remaining 2,847,209 shares of Common Stock outstanding will be available for sale in the public market six months after July 30, 2004, although all 2,847,209 shares will be subject to certain volume limitations under Rule 144 of the Securities Act. The foregoing assumes the effectiveness of the lock-up agreements under which holders of shares of our Common Stock and holders of certain outstanding options and subordinated convertible notes have agreed not to sell or otherwise dispose of their shares of Common Stock held or issuable upon exercise or conversion of options or subordinated convertible notes and that have not been waived. The lock-up agreements may, at any time without notice, be released. Sales of substantial amounts of our Common Stock in the public market, or the perception that these sales may occur, could cause the market price of our Common Stock to decline. After the lock-up agreements expire, additional shareholders, including our majority shareholders, will be able to sell their shares, subject to legal restrictions on transfer. We may also sell additional shares of Common Stock in subsequent offerings, which may adversely affect market prices for our Common Stock.

Our stock price may fluctuate.

        Many factors, including, but not limited to, future announcements concerning us, our 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 our industry in the financial press or investment advisory publications, could cause the market price of our stock to fluctuate substantially. In addition, our stock price may fluctuate widely for reasons which may be unrelated to operating results. These fluctuations, as well as general economic, political and market conditions such as recessions, military conflicts, or market or market-sector declines, may materially and adversely affect the market price of our Common Stock. In addition, any information concerning us, including projections of future operating results, appearing in investment advisory publications or on-line bulletin boards or otherwise emanating from a source other than us could in the future contribute to volatility in the market price of our Common Stock.

Many of our customer's industries are cyclical.

        Our business is significantly dependent on the demand our customers experience for their products. Many of their end users are in industries that historically have experienced a cyclical demand for their products, including but not limited to (semiconductor) process control, capital equipment manufacturing, defense electro-optics systems manufacturing, and telecommunications infrastructure expansion. As a result, demand for our products and our financial results of operations are subject to cyclical fluctuations.

As general economic conditions deteriorate, our financial results suffer.

        Significant economic downturns or recessions in the United States or Europe could adversely affect our business, by causing a temporary or longer term decline in demand for the Company's goods and services. Additionally, our revenues and earnings may be affected by general economic factors, such as excessive inflation, currency fluctuations and employment levels.

3

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

        Some of the statements made in this prospectus are forward-looking statements. These forward-looking statements are based upon our current expectations and projections about future events. When used in this prospectus, the words "believe," "anticipate," "intend," "estimate," "expect" and similar expressions, or the negative of such words and expressions, are intended to identify forward-looking statements, although not all forward-looking statements contain such words or expressions. The forward-looking statements in this prospectus are primarily located in the material set forth under the headings "Risk Factors," "Capitalization," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Our Business," but are found in other locations as well. These forward-looking statements generally relate to our plans, objectives and expectations for future operations and are based upon management's current estimates and projections of future results or trends. Although we believe that our plans and objectives reflected in or suggested by these forward-looking statements are reasonable, we may not achieve these plans or objectives. You should read this prospectus completely and with the understanding that actual future results may be materially different from what we expect. We will not update forward-looking statements even though our situation may change in the future.

        Specific factors that might cause actual results to differ from our expectations or may affect the value of the Common Stock, include, but are not limited to:

•

changes in general economic and business conditions, domestically and internationally;



•

reductions in sales to or the loss of any significant customers;



•

rapid technological change in the optical components and laser accessories industries;



•

significant competition in our industry;



•

changes in political, social and economic conditions and local regulations with respect to our international sales;



•

foreign currency fluctuations;



•

disruptions of established supply channels;



•

cancellations, reductions or delays in customers' orders or commitments;



•

changes in government regulations or product certifications;



•

our level of debt and restrictions imposed by our debt instruments;



•

the availability, terms and deployment of capital; and



•

the costs inherent in complying with laws and regulations applicable to public reporting companies, such as the Sarbanes-Oxley Act of 2002.

4

USE OF PROCEEDS

        We are registering the shares to provide for freely tradeable securities for the Selling Shareholders. We will not receive any of the proceeds from the disposition of shares by the Selling Shareholders, but we have agreed to bear the cost relating to the registration of the shares.

5

CAPITALIZATION

        The following table summarizes our cash and cash equivalents and our capitalization as of June 30, 2004 on:

•

an actual basis; and



•

a pro forma basis, giving effect to the June 2004 Private Placement.

        You should read the following table in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Description of Capital Stock" and our consolidated financial statements and related notes appearing elsewhere in this prospectus.

		As of June 30, 2004
		Actual			Pro Forma
Cash and Cash Equivalents		$	1,756,605		$	3,107,605
Debt:
	Secured promissory note(1)		1,700,000			1,700,000
	Other notes payable		144,619			144,619
	Capital lease obligations		139,973			139,973
	Subordinated promissory note(2)		3,500,000			3,500,000
Total Debt			5,484,592			5,484,592
Shareholders' Equity:
	Preferred stock(3)		2,600,000			2,600,000
	Common stock, $0.01 par value; 40,000,000 shares authorized and 5,579,903(4) outstanding, actual; 40,000,000 shares authorized and 7,160,903(4) outstanding, pro forma;		55,799			70,980
	Additional paid-in capital		9,698,003			10,959,193
	Accumulated deficit		(9,809,483	)		(9,809,483	)
	Treasury stock		(14,950	)		(14,950	)
Total Shareholders' Equity			2,529,369			3,805,740
Total Capitalization		$	8,013,961		$	9,290,332

(1)

As of June 30, 2004, we had an outstanding Secured Promissory Note for $1.7 million.

(2)

As of June 30, 2004 we had three outstanding subordinated convertible promissory notes, convertible into an aggregate of 3,500,000 shares of our Common Stock and warrants exercisable for an aggregate of 2,625,000 shares of Common Stock.

(3)

As of June 30, 2004 we had (i) 500 shares of Series A Preferred Stock with a 10% dividend and $500,000 liquidation preference, convertible into 500,000 shares of Common Stock and (ii) 2,100 shares of Series B Preferred Stock with a 10% dividend and $2,100,000 liquidation preference, convertible into 840,000 shares of Common Stock.

(4)

Does not include (i) 1,322,400 shares of Common Stock underlying options, warrants and rights granted to certain employees, officers and directors pursuant to our 1991 Key Employee Compensation Program and our 2000 Equity Compensation Program (the "Plans"), (ii) 3,500,000 shares of Common Stock and 2,625,000 shares of Common Stock underlying warrants issuable pursuant to outstanding subordinated convertible promissory notes; (iii) 200,000 shares of Common Stock underlying outstanding warrants to purchase the Company's Common Stock at $0.425 per share, (iv) 200,000 shares of Common Stock underlying outstanding warrants to purchase the Company's Common Stock at $1.08 per share, (v) 500,000 shares of Common Stock underlying Series A Preferred Stock and 840,000 shares of Common Stock underlying Series B Preferred Stock (vi) 2,488,200 shares of Common Stock which have been reserved for future issuance under the Plans and (vii) 1,462,425 shares of Common Stock underlying warrants issued pursuant to the June 2004 Private Placement.

6

SELLING SHAREHOLDERS

        We are registering for resale shares of our Common Stock held by the shareholders (the "Selling Shareholders") identified below. The Selling Shareholders acquired the resale shares pursuant to a private placement of securities that was not registered with the Securities and Exchange Commission (the "June 2004 Private Placement"). Pursuant to the terms of subscription agreements ("Subscription Agreements") entered into with investors ("Investors") in connection with the June 2004 Private Placement, we issued and sold to Investors Units of securities comprising of (i) an aggregate of 1,581,000 shares of Common Stock and (ii) five-year warrants ("Warrants") to purchase up to an aggregate of 1,185,750 shares of our Common Stock at an exercise price of $1.35 per share, subject to anti-dilution adjustment.

        We also issued five-year warrants ("Placement Agent Warrants") to purchase up to an aggregate of 276,675 shares of our Common Stock to Casimir Capital, LP (the "Placement Agent"), as placement agent for the June 2004 Private Placement. The Placement Agent Warrants have the same terms as the Warrants, except that the Placement Agent Warrants are entitled to a cashless exercise wherein the exercise price for such warrants is payable by the surrender of shares of Common Stock otherwise issuable. The Common Stock, Warrants, Placement Agent Warrants and the Common Stock underlying the Warrants and the Placement Agent Warrants were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act as transactions by an issuer not involving a public offering.

        Under the terms of the Subscription Agreements and a placement agent agreement, we have granted the Investors and the Placement Agent certain registration rights pursuant to which we agreed to register the shares of Common Stock issued pursuant to the June 2004 Private Placement (including, such shares as are issuable pursuant to the Warrants and the Placement Agent Warrants).

        We are now registering the shares of Common Stock issued pursuant to the June 2004 Private Placement (including, such shares as are issuable pursuant to the Warrants and the Placement Agent Warrants). We are bearing the expenses of this registration. We are registering the shares to permit the Selling Shareholders and their pledgees, donees, transferees and other successors-in-interest that receive their shares from the Selling Shareholders as a gift, partnership distribution or other non-sale related transfer after the date of this prospectus to resell the shares when and as they deem appropriate. The following table sets forth:

•

the name of each Selling Shareholder,



•

the number and percent of shares of our Common Stock that each Selling Shareholder beneficially owned prior to the offering for resale of the shares under this prospectus,



•

the number of shares of our Common Stock that may be offered for resale for the account of each Selling Shareholder under this prospectus, and



•

the number and percent of shares of our Common Stock to be beneficially owned by each Selling Shareholder after the offering for resale of the shares under this prospectus (assuming all such shares are sold by each Selling Shareholder).

        The number of shares in the column "Number of Shares Being Offered" represents all of the shares that each Selling Shareholder may offer under this prospectus, including shares underlying warrants acquired pursuant to the June 2004 Private Placement. We do not know how long each Selling Shareholder will hold the shares before selling them or how many shares they will sell and we currently have no agreements, arrangements or understandings with the Selling Shareholders regarding the sale of any of the resale shares. The shares offered by this prospectus may be offered from time to time by each Selling Shareholder listed below.

7

        This table is prepared solely based on information supplied to us by the listed Selling Shareholder, any Schedules 13D or 13G and Forms 3 and 4, and other public documents filed with the SEC, and assumes the sale of all of the shares listed. The applicable percentages of beneficial ownership are based on an aggregate of 7,160,903 shares of our Common Stock issued and outstanding on August 11, 2004.

        Percentages are calculated assuming sale by each individual or entity of the securities and warrants owned by each individual or entity separately without considering the dilutive effect of sales and security conversions by any other individual or entity.

	Shares Beneficially Owned Prior to Offering				Shares Beneficially Owned After Offering
Selling Shareholder				Number of Shares Being Offered(1)
	Number	Percent			Number	Percent
Richard F. Sands (2)	63,200	0.9	%	63,200	0	0	%
Richard F. Sands 1999 Family Trust (2)	15,800	0.2	%	15,800	0	0	%
Wayde Walker (2)	20,000	0.3	%	20,000	0	0	%
Kevin Wilson (2)	7,000	0.1		7,000	0	0	%
Richard Brewster (2)	3,500	*		3,500	0	0	%
Rafael Vasquez (2)	2,000	*		2,000	0	0	%
Matthew Eitner (2)	3,500	*		3,500	0	0	%
Matthew McGovern (2)	20,745	0.3	%	20,745	0	0	%
Nathaniel Clay (2)	5,000	*		5,000	0	0	%
William Poon (2)	5,000	*		5,000	0	0	%
Shraga Faskowitz (2)	5,000	*		5,000	0	0	%
Richard Michalski (2)	1,000	*		1,000	0	0	%
Brian Smith (2)	1,000	*		1,000	0	0	%
James Ahern (2)	1,000	*		1,000	0	0	%
Scott Steele (2)	1,000	*		1,000	0	0	%
Anthony Miller (2)	1,000	*		1,000	0	0	%
Alan Feldman (2)	13,000	0.2	%	13,000	0	0	%
Charles Savage (2)	6,000	*		6,000	0	0	%
David Bloom (2)	1,000	*		1,000	0	0	%
Matthew Donohue (2)	1,000	*		1,000	0	0	%
Kent Mitchell (2)	1,000	*		1,000	0	0	%
Ian O'Brien Rupert (2)	1,000	*		1,000	0	0	%
Trautman Wasserman Private Equity (2)	9,590	0.1	%	9,590	0	0	%
Bob Spiegel (2)	1,920	*		1,920	0	0	%
James Palmer (2)	1,570	*		1,570	0	0	%
Gordon Fallone (2)	1,919	*		1,919	0	0	%
Bob Hill (2)	1,690	*		1,690	0	0	%
Andre McClure (2)	1,591	*		1,591	0	0	%
John Cassidy (2)	350	*		350	0	0	%
Andy Gallion (2)	250	*		250	0	0	%
Kevin Palmer (2)	300	*		300	0	0	%
Michael R. Hamblett (2)	39,375	0.5	%	39,375	0	0	%
Anthony J. Spatacco Jr (2)	19,687	0.3	%	19,687	0	0	%
Starboard Capital Markets LLC (2)	19,688	0.3	%	19,688	0	0	%
Doug Millar	17,500	0.2	%	17,500	0	0	%
Michael Lusk	17,500	0.2	%	17,500	0	0	%
Source One	175,000	2.4	%	175,000	0	0	%
Ron Lucas	17,500	0.2	%	17,500	0	0	%
Dennis R. Lopach	17,500	0.2	%	17,500	0	0	%
George Bowker	8,750	0.1	%	8,750	0	0	%
Christopher J. Whyman IRA	43,750	0.6	%	43,750	0	0	%
Richard M. Biben	17,500	0.2	%	17,500	0	0	%
George R. Martin	17,500	0.2	%	17,500	0	0	%

8

Philippa Trading Inc.	87,500	1.2	%	87,500	0	0	%
Robert Burns	17,500	0.2	%	17,500	0	0	%
Irwin Gruverman	43,750	0.6	%	43,750	0	0	%
Joseph J. McLaughlin, Jr.	43,750	0.6	%	43,750	0	0	%
Richard A. Jacoby	87,500	1.2	%	87,500	0	0	%
Professional Traders Fund, LLC	175,000	2.4	%	175,000	0	0	%
Garry Higdem	52,500	0.7	%	52,500	0	0	%
David Cipolla	43,750	0.6	%	43,750	0	0	%
David R. Beck, SEP—IRA	17,500	0.2	%	17,500	0	0	%
Bruce A. Crawford	3,500	*		3,500	0	0	%
Bhopinder Matharu	8,750	0.1	%	8,750	0	0	%
John P. Ward	8,750	0.1	%	8,750	0	0	%
Richard Meehan	3,500	*		3,500	0	0	%
Greg Dawe	131,250	1.8	%	131,250	0	0	%
Scott S. Monroe	87,500	1.2	%	87,500	0	0	%
Daniel P. Bjornson	17,500	0.2	%	17,500	0	0	%
H.D. Overbeeke	43,750	0.6	%	43,750	0	0	%
Gregory and Carol Herr	8,750	0.1	%	8,750	0	0	%
John Igoe	35,000	0.5	%	35,000	0	0	%
John Younts	10,500	0.1	%	10,500	0	0	%
Steven A. Heggelke	17,500	0.2	%	17,500	0	0	%
Bruce & Victoria Butler	2,625	*		2,625	0	0	%
Gordon Gregoretti	52,500	0.7	%	52,500	0	0	%
Rock II, LLC	262,500	3.7	%	262,500	0	0	%
Richard Fisler	17,500	0.2	%	17,500	0	0	%
Robert E. Goldman	17,500	0.2	%	17,500	0	0	%
Trautman Wasserman 8701 Opportunities Fund, LP	175,000	2.4	%	175,000	0	0	%
Juhani Hokkanen	26,250	0.4	%	26,250	0	0	%
James L. Ericson	38,500	0.5	%	38,500	0	0	%
Gary and Sarah Willoughby	43,750	0.6	%	43,750	0	0	%
Gregory W. & Judy C. Nelson	43,750	0.6	%	43,750	0	0	%
Rocco J. Brescia Jr.	43,750	0.6	%	43,750	0	0	%
Gerald L. Meyr	35,000	0.5	%	35,000	0	0	%
Paul E. Meyr Rev Living Trust	26,250	0.4	%	26,250	0	0	%
Murray Grigg	43,750	0.6	%	43,750	0	0	%
Whalehaven Fund Limited	350,000	4.9	%	350,000	0	0	%
Greenwich Growth Fund Limited	175,000	2.4	%	175,000	0	0	%
Patrick Discepola	8,750	0.1	%	8,750	0	0	%
Gary Meteer	10,500	0.1	%	10,500	0	0	%
R. G. MacDonald	3,500	*		3,500	0	0	%
Bhavanmit Suri	3,500	*		3,500	0	0	%
Joan and Joseph Kump	17,500	0.2	%	17,500	0	0	%
Daniel E. Larson	52,500	0.7	%	52,500	0	0	%
Thomas A. Beyer	8,750	0.1	%	8,750	0	0	%
Cary Ludtke	8,750	0.1	%	8,750	0	0	%
Kenneth R. White and Becki White	8,750	0.1	%	8,750	0	0	%
Howard Girbach	13,125	0.2	%	13,125	0	0	%

*

Less than 0.1%.

(1)

Shares being offered (including Shares underlying warrants) acquired pursuant to the June 2004 Private Placement

(2)

Acquired pursuant to distribution by Casimir Capital, LP from warrants to purchase 276,675 shares of Common Stock issued to Casimir Capital, LP, as placement agent for the June 2004 Private Placement.

9

PLAN OF DISTRIBUTION

        The Selling Shareholders and any of their pledgees, donees, transferees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of Common Stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The Selling Shareholders may use any one or more of the following methods when selling shares:

•

ordinary brokerage transactions and transactions in which the broker-dealer solicits Purchasers;



•

block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;



•

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;



•

an exchange distribution in accordance with the rules of the applicable exchange;



•

privately negotiated transactions;



•

to cover short sales made after the date that this Registration Statement is declared effective by the Commission;



•

broker-dealers may agree with the Selling Shareholders to sell a specified number of such shares at a stipulated price per share;



•

a combination of any such methods of sale; and



•

any other method permitted pursuant to applicable law.

        The Selling Shareholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.

        Broker-dealers engaged by the Selling Shareholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Shareholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The Selling Shareholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved.

        The Selling Shareholders may from time to time pledge or grant a security interest in some or all of the Share of Common Stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell such shares of Common Stock from time to time under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 amending the list of Selling Shareholders to include the pledgee, transferee or other successors in interest as selling shareholders under this prospectus.

        Upon the Company being notified in writing by a Selling Shareholder that any material arrangement has been entered into with a broker-dealer for the sale of Common Stock through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this prospectus will be filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing (i) the name of each such Selling Shareholder and of the participating broker-dealer(s), (ii) the number of shares involved, (iii) the price at which such shares of Common Stock were sold, (iv) the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus, and (vi) other facts material to the transaction. In addition, upon the Company being notified in writing by a Selling Shareholder that a donee or pledge intends to sell more than 500 shares of Common Stock, a supplement to this prospectus will be filed if then required in accordance with applicable securities law.

10

        The Selling Shareholders also may transfer the shares of Common Stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

        The Selling Shareholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, that can be attributed to the sale of securities will be paid by the Selling Shareholder and/or the purchasers. Each Selling Shareholder has represented and warranted to the Company that it acquired the securities subject to this registration statement in the ordinary course of such Selling Shareholder's business and, at the time of its purchase of such securities such Selling Shareholder had no agreements or understandings, directly or indirectly, with any person to distribute any such securities.

        The Selling Shareholders may not use shares registered on this Registration Statement to cover short sales of Common Stock made prior to the date on which this Registration Statement shall have been declared effective by the Commission. If a Selling Shareholder uses this prospectus for any sale of the Common Stock, it will be subject to the prospectus delivery requirements of the Securities Act. The Selling Shareholders will be responsible to comply with the applicable provisions of the Securities Act and Exchange Act, and the rules and regulations thereunder promulgated, including, without limitation, Regulation M, as applicable to such Selling Shareholders in connection with resales of their respective shares under this Registration Statement.

        The Company is required to pay all fees and expenses incident to the registration of the shares, but the Company will not receive any proceeds from the sale of the Common Stock. The Company has agreed to indemnify the Selling Shareholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

11

DESCRIPTION OF CAPITAL STOCK

        The following is a description of our capital stock and the material provisions of our certificate of incorporation, bylaws and other agreements to which we and our shareholders are parties, in each case upon the closing of this offering. The following is only a summary and is qualified by applicable law and by the provisions of our certificate of incorporation, bylaws and other agreements, copies of which have been filed as Exhibits to the Form S-1 registration statement filed with the Securities and Exchange Commission in connection with this offering and are available as set forth under "Where You Can Find More Information."

General

        As of June 30, 2004, 5,579,903 shares of our Common Stock were issued and outstanding, and there were 650 holders of our Common Stock. Upon the closing of the June 2004 Private Placement, our authorized capital stock consisted of an aggregate of 40,000,000 shares of Common Stock, par value $.01 per share, and 1,000,000 shares of preferred stock, without par value, and we will have an aggregate of 10,660,903 shares of Common Stock issued and outstanding and 2,600 shares of preferred stock issued and outstanding. Our Board of Directors has approved an increase of our authorized Capital Stock to 60,000,000 shares subject to shareholder approval. Each such outstanding share of our Common Stock will be validly issued, fully paid and non-assessable. In addition, at such time, 1,851,300 shares of our Common Stock will be reserved for issuance upon exercise of outstanding options.

Common Stock

        Voting.    The holders of our Common Stock are entitled to one vote for each outstanding share of Common Stock owned by that shareholder on every matter properly submitted to the shareholders for their vote. Shareholders are not entitled to vote cumulatively for the election of directors.

        Dividend Rights.    Subject to the dividend rights of the holders of any outstanding series of preferred stock, holders of our Common Stock are entitled to receive ratably such dividends and other distributions of cash or any other right or property as may be declared by our board of directors out of our assets or funds legally available for such dividends or distributions.

        Liquidation Rights.    In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, holders of our Common Stock would be entitled to share ratably in our assets that are legally available for distribution to shareholders after payment of liabilities. If we have any preferred stock outstanding at such time, holders of the preferred stock may be entitled to distribution and/or liquidation preferences. In either such case, we must pay the applicable distribution to the holders of our preferred stock before we may pay distributions to the holders of our Common Stock.

        Conversion, Redemption and Preemptive Rights.    Holders of our Common Stock have no conversion, redemption, preemptive, subscription or similar rights.

        Classification of Board of Directors.    Our board of directors is divided into three classes of directors serving staggered three-year terms. As a result, approximately one-third of the board of directors is elected each year. These provisions, when coupled with the provision of our certificate of incorporation authorizing the board of directors to fill vacant directorships, may deter a shareholder from removing incumbent directors and simultaneously gaining control of the board of directors by filing the vacancies created by such removal with its own nominees.

        Common Stock Issuable upon Exercise of Warrants.    1,185,750 shares of our Common Stock offered by the Selling Shareholders in this prospectus are issuable upon the exercise of 1,185,750 warrants

12

("Warrants") issued pursuant to the June 2004 Private Placement. Each Warrant is exercisable within five (5) years of its issuance to purchase a share of Common Stock at $1.35. All 1,185,750 Warrants are currently outstanding. The number and kind of securities issuable upon exercise of a Warrant and the per share exercise price of the Warrants is subject to adjustment in the event of any stock dividend, stock split, combination or reclassification. Each of the Warrants, among other features, contains weighted average price protection for Common Stock issuances by us below the exercise price of the Warrants, subject to certain exceptions. In addition, 276,675 shares of our Common Stock offered by the Selling Shareholders in this prospectus are issuable upon the exercise of 276,675 warrants ("Placement Agent Warrants") issued to Casimir Capital, LP, as placement agent for the June 2004 Private Placement. The Placement Agent Warrants are entitled to a cashless exercise wherein the exercise price for such warrants is payable by the surrender of shares of Common Stock otherwise issuable.

13

OUR BUSINESS

        Photonic Products Group, Inc. (the "Company" or "PPGI"), incorporated in 1973, develops, manufactures and markets products and services for use in diverse Photonics industry sectors via its distinct business units. Prior to its name change in September, 2003, PPGI was named and did business solely as Inrad, Inc.

        Company management, the Board of Directors, and shareholders approved the name change in 2003, reinforcing the transformation of the Company's business model into that of a portfolio of business units whose branded products conform to the paradigm: Products Enabling Photonics™. In summary, the Company is a component, subassembly, and sub-system supplier to original equipment manufacturers and researchers in the Photonics industry.

        The Company had announced in 2002 that it was implementing its plan to transform the Company into a portfolio of businesses serving the Photonics industry. In November 2003, the Company concluded its first acquisition, that of the assets and certain liabilities of Laser Optics, Inc. of Bethel, CT, via a new subsidiary, Laser Optics Holdings, Inc. Laser Optics, Inc. is a custom optics and optical coating services provider, in business since 1966. We completed the integration of the Bethel team and their operations into the Company's Northvale, NJ operations in the second quarter of 2004.

        PPGI's business units' products continue, at present, to fall into two product categories: optical components (including standard and custom optical components and assemblies, crystals, and crystal components), and laser accessories (including wavelength conversion and waveform metrology products that employ nonlinear crystals to perform the function of wavelength conversion or pulse-width measurement). PPGI expects that in the future its products will also include other product categories. Currently, its optical components product lines and operations are brought to market via two PPGI business units: INRAD and Laser Optics. Laser accessories are brought to market by INRAD.

        The Company develops, manufactures and delivers precision custom optics and thin film optical coating services via its Laser Optics business unit. Glass and crystal substrates are processed using modern manufacturing equipment and techniques to prepare and polish substrates, deposit optical thin films, and assemble sub-components, thereby producing optical components used in advanced Photonic systems of many kinds. The majority of custom optical components and optical coating services supplied are used in inspection and process control systems, in defense electro-optical systems, in laser system applications, and in medical system applications.

        The Company also currently develops, manufactures, and delivers synthetic crystals, crystal components, and laser accessories via its INRAD business unit. INRAD grows synthetic crystals with electro-optic (EO), non-linear and optical properties for use in both its standard products and custom products. The majority of crystals, crystal components and laser accessories supplied are used in laser system, defense EO system, and in R&D applications.

        PPGI's business units' current customers include leading companies in the following industries: commercial laser systems, inspection and process control equipment, and defense electro-optics. The Company's customers also include researchers in industry, in National Laboratories and in universities worldwide.

        The Company is implementing its plan to assemble a portfolio of businesses serving the Photonics industry, and is engaged in ongoing strategic merger and acquisition discussions. The Company is also engaged in discussions regarding the raising of acquisition capital.

14

        The following table summarizes the Company's product sales by product categories during the past three years and for the six months ending June 30, 2004:

		Six Months Ended June 30								Year Ended December 31
		2004				2003				2003				2002			2001
Category
		Sales		%		Sales		%		Sales			%	Sales		%	Sales		%
Optical Components		$	3,129,000	84	%	$	1,901,000	81	%	$	4,469,000	*	83	$	4,325,905	79	$	6,035,049	77
Laser Accessories			594,000	16	%		447,000	19	%		893,000		17		1,155,816	21		1,850,988	23
	TOTAL	$	3,723,000	100	%	$	2,348,000	100	%	$	5,362,000	*	100	$	5,481,721	100	$	7,886,037	100

*

Not included above are (non-product) contract R&D sales of approximately $26,000, $87,000 and $189,000 in 2003, 2002, and 2001, respectively, and $0 during the six months ending June 30, 2004.

Products Manufactured by the Company

Optical Components

a)

Custom Optics and Optical Coating Services

        Manufacturing of high-performance custom optics is at present a major product area for PPGI, that is marketed via its Laser Optics business unit. This business unit was formed in 2003 via the combination of INRAD's Northvale, NJ-based custom optics and optical coating services operations and those of the former Laser Optics, Inc. of Bethel, CT. The Company has been active in the field since 1973, and Laser Optics, Inc. since 1966.

        The "new" Laser Optics business unit ("Laser Optics") provides both standard and custom products. It specializes in the manufacture of optical components, optical coatings (ultra-violet wavelengths through infra-red wavelengths) and subassemblies for military, industrial, process control, photonic instrument, and medical end-use. Planar, prismatic, spherical, and cylindrical components are fabricated from glasses of all kinds and crystals of most kinds, including fused silica, quartz, infra-red materials, calcite, magnesium fluoride, silicon, and yttrium aluminum garnate. Component types include mirrors, lenses, prisms, waveplates, polarizing optics, monochrometers, x-ray mirrors, and cavity optics for lasers.

        To meet performance requirements, most optical components and sub-assemblies require thin film coatings on their surfaces. Depending on the design, optical coatings can refract, reflect, or transmit specific wavelengths. Laser Optics coating service specialties include high laser damage resistance, infra-red, polarizing, high reflective, anti-reflective, and coating to complex custom requirements on a wide range of substrate materials. Laser Optics both coats customer furnished components and components it manufactures. Coating deposition process technologies employed included electron beam, thermal, and ion assist.

b)

Crystals and Crystal Components

        PPGI produces and brings to market crystals and crystal components via its INRAD business unit. Certain synthetic crystals, because of their internal structure, have unique optical, non-linear, or electro-optical properties. Electro-optic and nonlinear crystal devices can alter the intensity, polarization or wavelength of a laser beam. Developing growth processes for high quality synthetic crystals and manufacturing and design processes for crystal components lies at the heart of the INRAD product line. Synthetic crystals currently in production include Lithium Niobate, Beta Barium Borate, Alpha Barium Borate, KDP, deuterated KDP, Lithium Fluoride, Barium Nitrate, and Zinc Germanium Phosphide, among others.

        INRAD has developed and manufactures a line of Q-switches, Pockels Cells (optical shutters) and associated electronics, and has been a leading company in this field since 1973. Pockels cells are used in

15

applications that require the fast switching of the polarization direction of a beam of light. These uses include Q-switching of laser cavities (i.e., to generate laser output pulses), coupling light into and out from regenerative amplifiers, and light intensity modulation. These devices are sold to OEM laser manufacturers and individually to researchers throughout the world. In 2002, the Company developed and introduced a new line of miniature Q-switches, designated the "IMP" series. Additionally, the Company introduced a series of high speed and quick rise-time Q-switch electronic drivers designated the "RapidPulse" series.

        INRAD Pockels Cell products include the following:

•

Single crystal and dual crystal KD*P Pockels Cells



•

PKC-21 and PKC-02



•

9 mm through 25 mm apertures



•

Single crystal Lithium Niobate Pockels Cells



•

PLC-01



•

8.5 mm through 10.5 mm apertures



•

Single crystal BBO Pockels Cells



•

PBC-03



•

2.5 mm × 2.5 mm through 5 mm × 16 mm sizes



•

Electronic drivers



•

Gimbal mounts

        The INRAD crystals and crystal components product lines also include crystalline filter materials, including patent protected materials, that have unique transmission and absorption characteristics that enable them to be used in critical applications in defense systems such as missile warning sensors. Other crystal components, both standard and custom, are used in laser applications research and in commercial laser systems to change the wavelength of laser light.

Laser Accessories

        PPGI designs, manufactures, and brings to market a line of harmonic generation and pulse measurement laser accessories via its INRAD business unit.

a)

Harmonic Generation Systems

        Harmonic generation systems enable the users of lasers to convert the fundamental frequency of the laser to another frequency required for a specific end use. Harmonic generators are currently used in spectroscopy, semiconductor processing, medical lasers, optical data storage and scientific research.

        Many commercial lasers have automatic tuning features, allowing them to produce a range of frequencies. The INRAD Autotracker, when used in conjunction with these lasers, automatically generates tunable ultraviolet light or infrared light for use in spectroscopic applications.

        Products offered for such nano-second laser systems include the following:

•

AT-III—an Autotracker with servo controlled tuning



•

5-200, 5-300—temperature-stabilized crystals



•

Harmonic separators—for ultra-violet (UV), infra-red (IR), and second frequency mixing (SFM)

16

        The Company produces a Harmonic Generator, the 5-050, for use with ultra-fast lasers having pulsewidths in the femtosecond and picosecond regime. This product is sold to OEM manufacturers of ultra fast lasers and to researchers in the scientific community.

b)

Laser Pulse Measurement Instruments

        The Company markets a line of Autocorrelators that can measure extremely short laser pulses. Accurate measurement and characterization of pulses is important in studies of chemical and biological reactions, as well as in the development of high-speed electronics, ultra fast lasers and laser diodes for communications. Since January 2000, a strategic alliance has been in effect with Angewandte Physik & Electronik, GmbH of Berlin, Germany, to market a product line of five Autocorrelators in the U.S., manufactured by Angewandte Physik & Electronik, GmbH. In 2002, the Company was instrumental in conceptualizing and introducing an OEM Autocorrelator for the medical community, the Carpe, that measures the pulsewidth of ultrafast laser excitation pulses used in Multi-Photon Excitation microscopy right at the surface of the specimen under test and interfaces directly with confocal microscopes.

        The other products in the Autocorrelator line include the following:

•

PulseCheck-Built-in color graphic display, options for high sensitivity, low rep rate, LabView® interface.



•

PulseScope-All the features of a PulseCheck, plus a spectrometer.



•

Mini-Compact, built-in display, femtosecond, picosecond operation.



•

Micro-Ultra-compact, wavelength, femtosecond, basic alignment tool for modelocked oscillators.

Research and Development

        The Company's research and development activities currently focus on developing new proprietary crystal products, improving growth processes, and on new manufacturing process technologies for optical components. This combination allows the Company to introduce new products based on crystals, and to enhance its capabilities and productivity in optical component manufacturing.

        Company-funded internal research and development expenditures for the six months ended June 30, 2004 were $52,000 (1.4% of net product sales) and for the years ended December 31, 2003, 2002, and 2001 were $154,000 (2.9% of net product sales), $134,000 (2.5% of net product sales), and $202,000 (2.6% of net product sales), respectively.

Markets

        For the six months ended June 30, 2004 and in the years 2003, 2002 and 2001 the Company's product sales were made to customers in the following market areas:

Market		Six Months Ended June 30, 2004			2003			2002			2001
Laser systems (non-military)		$	792,000	(21%)	$	1,066,000	(20%)	$	1,318,000	(24%)	$	2,602,000	(32%)
Process control & metrology			802,000	(22%)		844,000	(16%)		1,239,000	(22%)		2,051,000	(25%)
Defense/aerospace			1,437,000	(38%)		2,321,000	(43%)		1,738,000	(31%)		867,000	(11%)
Telecomm			30,000	(1%)		58,000	(1%)		102,000	(2%)		947,000	(12%)
Universities & national laboratories			377,000	(10%)		641,000	(12%)		615,000	(11%)		1,025,000	(13%)
Other			285,000	(8%)		458,000	(8%)		557,000	(10%)		583,000	(7%)
	Total	$	3,723,000	(100%)	$	5,388,000	(100%)	$	5,569,000	(100%)	$	8,075,000	(100%)

17

        Major market sectors served by the Company include laser systems (non-military), process control & metrology, defense/aerospace, telecomm, universities and national laboratories, and various other markets not separately classified. The "laser systems" market area consists principally of customers who are OEM manufacturers of industrial, medical, and R&D lasers. The "process control and metrology" area consists of customers who are OEM manufacturers of capital equipment used in manufacturing and quality assurance, such as in semiconductor (i.e., chip) fabrication and testing. The "defense/aerospace" area consists of sales to OEM defense systems and subsystems manufacturers, manufacturers of non-military satellite-based systems and subsystems, and direct sales to governments where the products have the same end-use. The "telecomm" area includes sales of sub-components and components to customers whose products' principal end-use is in the telecommunications equipment industry. "Universities and National Laboratories" is a sector that is an indicator of product sales to researchers. The "other" category represents sales to market areas that, while they may be the object of penetration plans by the Company, are not currently large enough to list individually.

        Within the Laser Systems customer sector, sales for the six months ending June 30, 2004 were up 63% to $792,000, as compared to the prior year first six months. In the full year 2003 sales were down 19% from the prior year, reflecting the impact of declines in shipments of pulsed medical lasers and of laser system shipments for semiconductor inspection equipment by the Company's customers. 2001 had been an exceptionally strong year for the Company and its products serving these sectors. The Company competes for market share to increase its revenue levels for this sector, and the Company continues to develop, and to seek to acquire, complementary products to broaden its product lines. The Company serves the laser industry as a supplier of standard and custom optical components and as such continues to seek opportunities to increase revenues from this customer sector.

        Demand in the Process Control and Metrology market for the Company's products recovered after a two-year downturn. Sales for the six months ended June 30, 2004 were $802,000, up 62% from the first six months of last year Sales in 2003 were down 32% from the prior year. Nevertheless, the optical and x-ray inspection segment of the semiconductor industry offers continued opportunities for the Company's capabilities in precision optics, crystal products, and monochrometers.

        The Company is a provider of optical components, both specialty crystal components and high precision custom optical components for customers in the aerospace and defense electro-optical systems sector. End-use applications include military laser systems, electro-optical systems, satellite-based systems, and missile warning sensors and systems intended to 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. In the post-9/11 era, government spending priorities for such systems have risen sharply and deployment of new systems has been accelerated. The Company's sales of products to this customer sector continued their upward trend, increasing by 34% in 2003 from that in 2002. Sales for the first six months of 2004 were approximately $1,438,000 up 73% from the same period in 2003.

        The Telecommunications customer sector experienced a precipitous downturn in 2001 (the last year in which revenues from customers in this sector were significant), and remained stagnant throughout 2003, with virtually no new sales of components for inspection instruments. The Company's future participation as a supplier to the network component manufacturers will depend upon the technology approaches employed at the time the industry recovers and capital spending resumes.

        Sales to customers within the University and National Laboratories market sector for the six months ended June 30, 2004 were $377,000, up 39% from the same period last year following an increase of 4% in 2003 from that in 2002, as research budgets and priorities stabilized after the precipitous decline a year earlier. This sector remains an important source of revenues and new product introduction opportunities for the Company.

18

        Export sales, primarily to sixteen customers in six countries within Europe, the Near East and Japan, amounted to 11% of product sales for the six months ended June 30, 2004 and amounted to 19%, 19% and 31.4% of product sales in 2003, 2002 and 2001, respectively. No foreign customer accounted for more than 10% of product sales for the six months ended June 30, 2004, or in 2003 or 2002. One foreign customer accounted for 10.7% of product sales in 2001. In the first six months of 2004 one US customer, a major defense electro-optical systems prime contractor, accounted for 16% of product sales and one US customer, a major corporation in the process control and technology sector, accounted for 12% of product sales. In 2003, one U.S. customer accounted for 16% of total sales, and one U.S. customer accounted for 10% of total sales. Both customers are defense industry prime contractors who manufacture electro-optical systems under multi-year production contracts for the U.S. and foreign governments. In the short-term the loss of either of these customers would have a significant negative impact on the company and its business units. In 2002, one U.S. customer accounted for 13.4% of total sales. One U.S. customer accounted for 17.7% of total sales in 2001.

Long-Term Contracts

        Certain of the Company's orders from customers provide for periodic deliveries at fixed prices over a period that may be greater than one year. In such cases, as in most other cases as well, the Company attempts to obtain firm price commitments from its suppliers for the materials necessary to fulfill the order.

Marketing and Business Development

        The Company's two Northvale, NJ-based business units market their products domestically through their own sales and marketing teams, supervised by the Vice President—Marketing and Sales, and a Vice President of Business Development. Independent sales agents are used in countries in major non-U.S. markets, including Canada, Europe, the Near East and Japan. Trade show participation and Internet-based marketing and promotion are coordinated at the Corporate level by the PPGI Vice President for Marketing Communications

Backlog

        The Company's order backlog as of June 30, 2004 was $3,890,000. The backlog as of December 31, 2003 was $2,286,000. As of December 31, 2002 the backlog was $1,328,000 and on December 31, 2001 it was $1,630,000.

Competition

        Within each product category in which the Company's business units are active, there is competition.

        Changes in the Photonics industry have had an effect on suppliers of custom optics. As end users have introduced products requiring large volumes of optical components, suppliers have responded either by carving out niche product areas or by ramping up their own manufacturing capacity and modernizing their manufacturing methods to meet higher volume run rates. Many custom optics manufacturers lack in-house thin film coating capability. As a result, there are fewer well-rounded competitors in the custom optics arena, but they are equipped with modern facilities and progressive manufacturing methods. The Company has judiciously deployed capital towards modernizing its facility, and has staffed the manufacturing group with individuals with comprehensive experience in manufacturing management, manufacturing engineering, advanced finishing processes, thin-film coating processes, and capacity expansion. The Company competes on the basis of providing consistently high quality products, establishing strong customer relations, and continuously improving its labor productivity, cost structure, and product cycle times.

19

        Competition for the Company's systems is limited, but competitors' products are generally lower priced. The Company's systems are considered to be high end and generally offer a combination of features not available elsewhere. Because of the Company's in-house crystal growth capability, the Company's staff is knowledgeable about matching appropriate crystals to given applications.

        For the crystal product area, quality, delivery, and customer service are market drivers. Many of the Company's competitors are overseas and can offer significantly reduced pricing for some crystal species. The Company has been able to retain and grow its customer base by providing the quality and customer service needed by OEM customers. On many occasions, the quality of the crystal component drives the ultimate performance of the component or instrument into which it is installed. Thus, quality and technical support are considered to be valuable attributes for a crystal supplier by many, but not all, OEM customers.

        Although price is the principal factor in most product categories, competition is also based on product design, product performance, 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.

Employees

        As of June 30, 2004, the Company had 62 full-time employees (including 18 hired from Laser Optics, Inc. after acquisition of its assets) and 1 part-time employee.

Patents and Licenses

        The Company relies on its manufacturing and technological expertise, rather than on patents, to maintain its competitive position in the industry. The Company takes precautionary and protective measures to safeguard its design and technical and manufacturing data, and relies on nondisclosure agreements with its employees to protect its proprietary information.

Regulation

        Foreign sales of certain of the Company's products may require export licenses from the United States Department of Commerce or Department of State. Such licenses are generally available to all but a limited number of countries and are obtained when necessary. One product, representing 4.5% of Company sales, required U.S. State Department export approval in 2003, and approvals were granted.

        There are no federal regulations nor 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 and Connecticut.

Properties

        PPGI occupies approximately 31,000 square feet of space located at 181 Legrand Avenue, Northvale, New Jersey pursuant to a net lease expiring on October 31, 2006. PPGI has an option to renew the Northvale lease for an additional term of five years. In November 2003, the Company exercised its option to lease 11,000 square feet of additional adjoining space in the same building, bringing the total square feet of space occupied by PPGI in Northvale, New Jersey to 42,000 square feet. The Company believes that there is sufficient facility space to meet its current and future operating requirements. Laser Optics Holdings, Inc., a subsidiary of the Company, acquired the rights to the lease of 8,000 square feet of space in Bethel, CT, formerly occupied by Laser Optics, Inc., upon purchase of the assets of Laser Optics, Inc. This lease expired in May of 2004, and the Company did not renew the lease, but vacated the premises and relocated the facility to Northvale, NJ. The 2003 annual rent was approximately $238,000 for all properties. The Company also paid real estate taxes and insurance premiums that totaled approximately $48,000 in 2003. The annual rent for 2004 is $283,000 and the real estate taxes and insurance premium for 2004 is projected to be a total of approximately $68,000.

Legal Proceedings

        As of the date of this prospectus, we are not a party to any material legal proceedings. We may, however, become subject to lawsuits from time to time in the course of our business.

20

MARKET FOR OUR COMMON STOCK AND RELATED SHAREHOLDER MATTERS

a)

Market Information

        The Company's Common Stock, par value $0.01 per share, is traded on National Association of Securities Dealers the Over-the-Counter Bulletin Board (the "OTC Bulletin Board") under the symbol PHPG.

        The following table sets forth the range of closing prices for the Company's Common Stock in each fiscal quarter from the quarter ended March 31, 2002 through the quarter ended June 30, 2004, 2003, as reported by the National Association of Securities Dealers OTC Bulletin Board. Such over-the-counter quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

	Price
	High	Low
Quarter ended June 30, 2004	2.05	.46
Quarter ended March 31, 2004	..60	..37
Quarter ended December 31, 2003	..80	..45
Quarter ended September 30, 2003	..58	..35
Quarter ended June 30, 2003	..60	..36
Quarter ended March 31, 2003	..60	..41
Quarter ended December 31, 2002	..57	..30
Quarter ended September 30, 2002	..82	..25
Quarter ended June 30, 2002	1.10	..70
Quarter ended March 31, 2002	1.85	..91

        As of August 10, 2004 the Company's stock price was $.95 per share.

b)

Shareholders

        As of August 10, 2004, there were approximately 710 record owners of the Common Stock.

c)

Dividends

        The Company did not pay any cash dividends on its Common Stock during the years ended December 31, 2003 and 2002 and the six months ended June 30, 2004. The Company paid a Common Stock dividend of 134,000 shares of Common Stock, on its Series A and Series B Convertible preferred stock valued at $165,000 during the six months ended June 30, 2004. The Company paid a Common Stock dividend of 134,000 shares of Common Stock on its Series A and Series B convertible preferred stock in 2003, valued at $54,000. The Company paid a Common Stock dividend of 134,000 shares of Common Stock on its Series A and Series B convertible preferred stock in 2002, valued at $121,000. Payment of cash dividends will be at the discretion of the Company's Board of Directors and will depend, 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 immediate future.

Preferred Stock

        Under our certificate of incorporation, our board of directors is authorized, subject to limitations prescribed by law, to issue up to 1,000,000 shares of preferred stock in one or more series without

21

further shareholder approval. The board has discretion to determine the rights, preferences, privileges and restrictions of, including, without limitation, voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences of, and to fix the number of shares of, each series of our preferred stock. Accordingly, our board of directors could authorize the issuance of shares of preferred stock with terms and conditions that could have the effect of delaying, deferring or preventing a transaction or a change in control that might involve a premium price for holders of our Common Stock or otherwise be in their best interest. As of June 30, 2004 we had (i) 500 shares of Series A Preferred Stock with a 10% dividend and $500,000 liquidation preference, convertible into 500,000 shares of Common Stock and (ii) 2,100 shares of Series B Preferred Stock with a 10% dividend and $2,100,000 liquidation preference, convertible into 840,000 shares of Common Stock.

Limitations on Directors' Liability

        Our certificate of incorporation and bylaws contain provisions indemnifying our directors and officers to the fullest extent permitted by law.

        In addition, as permitted by New Jersey law, our certificate of incorporation provides that no director will be liable to us or our shareholders for monetary damages for breach of certain fiduciary duties as a director. The effect of this provision is to restrict our rights and the rights of our shareholders in derivative suits to recover monetary damages against a director for breach of certain fiduciary duties as a director, except that a director will be personally liable for:

•

any breach of his or her duty of loyalty to us or our shareholders;



•

acts or omissions not in good faith which involve intentional misconduct or a knowing violation of law;



•

the payment of dividends or the redemption or purchase of stock in violation of New Jersey law; or



•

any transaction from which the director derived an improper personal benefit.

        This provision does not affect a director's liability under the federal securities laws.

        To the extent that our directors, officers and controlling persons are indemnified under the provisions contained in our certificate of incorporation or New Jersey law, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Provisions of Our Certificate of Incorporation and Bylaws and New Jersey Law that May Have an Anti-Takeover Effect

Certificate of Incorporation and Bylaws

        Certain provisions in the our certificate of incorporation and bylaws summarized below may be deemed to have an anti-takeover effect and may delay, deter or prevent a tender offer or takeover attempt that a shareholder might consider to be in its best interests, including attempts that might result in a premium being paid over the market price for the shares held by shareholders.

        Our certificate of incorporation and bylaws contain provisions that permit us to issue, without any further vote or action by the shareholders, up to 1,000,000 shares of preferred stock in one or more series and, with respect to each such series, to fix the number of shares constituting the series and the designation of the series, the voting powers (if any) of the shares of the series, and the preferences and relative, participating, optional and other special rights, if any, and any qualifications, limitations or restrictions, of the shares of such series.

22

        Our board of directors is divided into three classes of directors serving staggered three-year terms. As a result, approximately one-third of the board of directors is elected each year. These provisions, when coupled with the provision of our certificate of incorporation authorizing the board of directors to fill vacant directorships, may deter a shareholder from removing incumbent directors and simultaneously gaining control of the board of directors by filing the vacancies created by such removal with its own nominees.

        The foregoing provisions of our certificate of incorporation and bylaws could discourage potential acquisition proposals and could delay or prevent a change in control. These provisions are intended to enhance the likelihood of continuity and stability in the composition of the board of directors and in the policies formulated by the board of directors and to discourage certain types of transactions that may involve an actual or threatened change of control. These provisions are designed to reduce our vulnerability to an unsolicited acquisition proposal. The provisions also are intended to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares and, as a consequence, they also may inhibit fluctuations in the market price of our Common Stock that could result from actual or rumored takeover attempts. Such provisions also may have the effect of preventing changes in our management.

New Jersey Takeover Statute

        We are subject to Sections 14A:10A-4 and 14A:10A-5 of the New Jersey Business Corporation Act (the NJBCA"), which, subject to certain exceptions, prohibits a New Jersey corporation from engaging in any "business combination" (as defined below) with any "interested stockholder" (as defined below) for a period of five years following the date that such stockholder became an interested stockholder, unless: (A) prior to such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder and (1) on or subsequent to such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least [two-thirds] of the outstanding voting stock that is not owned by the interested stockholder or (2) the aggregate amount of the cash and the market value of the consideration other than cash to be received per share by the holders of outstanding shares of our Common Stock meets certain specified minimum amounts.

        Section 14A:10A-3 of the NJBCA defines "business combination" to include: (1) any merger or consolidation involving the corporation and the interested stockholder; or (2) any sale, lease, exchange, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder. In general, Section 14A:10A-3 defines an "interested stockholder" as any entity or person beneficially owning 10% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by such entity or person.

The National Association of Securities Dealers Over-The-Counter Bulletin Board

        Our Common Stock trades on the National Association of Securities Dealers over-the-counter bulletin board under the symbol "PHPG.OB."

Transfer Agent and Registrar

        The transfer agent and registrar for our Common Stock is American Stock Transfer and Trust Company.

23

SELECTED CONSOLIDATED FINANCIAL DATA

        The consolidated financial data as of and for the years ended December 31, 1999 and 2000 and the consolidated balance sheet data as of December 31, 2001 have been derived from our audited consolidated financial statements that are not included in this prospectus. The consolidated statement of operations data and other financial data for the years ended December 31, 2001, 2002 and 2003 and the consolidated balance sheet data as of December 31, 2002 and 2003 are derived from our audited consolidated financial statements that appear elsewhere in this document. The consolidated statement of operations data and other financial data for the six months ended June 30, 2004 and 2003 are derived from our unaudited financial statements that also appear elsewhere in this prospectus. Our results for interim periods are not necessarily indicative of our results for a full year's operations. You should read the following financial information together with the information under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes appearing elsewhere in this prospectus.

Basis of Presentation

        The unaudited interim consolidated financial statements reflect all adjustments, which are of a normal recurring nature, and disclosures which, in the opinion of management, are necessary for a fair statement of results for the interim periods.

		As of December 31, or For the Year Ended December 31,													Six Months Ended June 30,
Consolidated Statements of Operations Data:
		2003(1)			2002			2001			2000		1999		2004		2003
Revenues		$	5,388,184		$	5,569,118		$	8,075,205		$	7,909,967	$	6,206,092	3,723,123		2,347,960
Net (loss) profit			(1,777,309	)		(1,715,972	)		43,634			707,869		21,789	(755,065	)	(796,054	)
Net (loss) profit applicable to common shareholders			(1,830,909	)		(1,836,572	)		(111,366	)		657,869		21,789	(919,885	)	(849,654	)
Net (loss) profit per common share
	Basic		(.35	)		(.35	)		(.02	)		.14		.01	(.17	)	(.16	)
	Diluted		(.35	)		(.35	)		(.02	)		.12		.01	(.17	)	(.16	)
Weighted average shares
	Basic		5,287,849			5,210,322			5,046,666			4,563,350		4,096,078	5,457,759		5,283,690
	Diluted		5,287,849			5,210,322			5,046,666			5,608,513		4,096,078	5,457,759		5,283,690
Dividends paid			53,600			120,600			155,000			50,000			164,820		53,600
Total assets			8,851,121			8,508,925			8,599,072			7,829,755		4,113,227	9,245,966		7,668,402
Long-term obligation			4,405,576			1,188,512			287,170			326,059		350,000	5,329,128		2,848,326
Shareholders' equity			3,284,439			5,049,879			6,745,489			6,388,780		2,995,161	2,529,369		4,265,704

(1.)

The Company completed the acquisition of Laser Optics, Inc.'s assets and liabilities at the end of November, 2003. The comparability of information in the selected financial data was not materially impacted by the inclusion of financial activity of Laser Optics Holdings, Inc. for a one-month period.

24

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 un-audited consolidated financial statements presented elsewhere in this document. 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 polices are described in Note 1 of the consolidated financial statements, that 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 estimates and judgments that affect the results of its operations and the value of assets and liabilities the Company reports. The Company's actual results may differ from these estimates.

        The Company believes that the following summarizes critical accounting polices that require significant judgments and estimates in the preparation of the Company's consolidated financial statements.

Revenue Recognition

        The Company records revenue, other than on Contract R&D revenues, when a product is shipped. Revenue on Contract R&D is accounted for using the percentage-of-completion method, whereby revenue and profits are recognized throughout the performance of the contracts. Percentage-of-completion is determined by relating the actual cost of work performed to date to the estimated total cost for each contract. Losses on contracts are recorded when identified.

Accounts Receivable

        The Company records an allowance for doubtful accounts receivable as a charge against earnings for revenue for items that have been reviewed and carry a risk of non-collection in the future. The Company has not experienced a non-collection of accounts receivable materially affecting the results of operations.

Inventory

        The Company records slow moving inventory reserve as a charge against earnings for all products on hand that have not been sold to customers in the past twelve months. An additional reserve is recorded for product on hand that may not be sold to customers within the upcoming twelve months.

        From time to time, estimated accruals are recorded as a charge against earnings based on known circumstances where it is probable that a liability has been incurred or is expected to be incurred and the amount can be reasonably estimated.

25

Six Months Ended June 30, 2004 Compared To Six Months Ended June 30, 2003 and Three Months Ended June 30, 2004 Compared To Three Months Ended June 30, 2003

RESULTS OF OPERATIONS

Total Revenues

        Total sales for the three months ended June 30, 2004 were $1,917,000 as compared with total sales of $1,147,000 for the same three months in 2003; up 67%. Total sales for the six months ended June 30, 2004 were $3,723,000 as compared with $2,348,000 for the same period last year; up 59%.

        Bookings for the quarter ended June 30, 2004 were $2,400,000 as compared with $1,798,000 for the same period in 2003, up 34%. Bookings for the six months ended June 30, 2004 were $5,429,000 vs. $2,912,000 for the same period in 2003, up 86%.

        The book-to-bill ratio for the quarter ended June 30, 2004 was 1.25 compared with 1.59 for the same period in 2003. The book-to-bill ratio for the six months ended June 30, 2004 was 1.45 vs. 1.25 for the first half of 2003.

        The backlog at June 30, 2004 was up 106% to $3,890,000 as compared to $1,890,000 on June 30, 2003. The Backlog increased from $2,286,000 on December 31, 2003 primarily due to increased bookings from the OEM and Defense sectors.

Cost of Goods Sold

        For the six-month period ended June 30, 2004, the cost of goods sold as a percentage of product revenues was 78.3% vs. 79.5% for the same period in 2003. For the full year 2003, the actual cost of good sold percentage was 83.9%. Gross profit margin for the six month period ended June 30, 2004 was 21.7%, compared with 20.5% for the six month period ended June 30, 2003.

        In dollar terms, the cost of goods sold was $2,914,000 for the first half of 2004 compared with $1,847,000 for first half of 2003, up 58%. Product revenues were up 60% year to year for the same period.

        The increase in gross margin percentage in the first six months in comparison to the same period last year, was the result of increased sales volume as well as the capitalization of certain overhead costs associated with the building renovations required as a result of the relocation of Laser Optics, Inc. from Bethel, Connecticut to Northvale, New Jersey.

Selling, General and Administrative Expenses

        Selling, general and administrative expenses for the six-month period ending June 30, 2004 were $1,362,000 vs. $1,094,000 for the six month period ended June 30, 2003, up 24%. Expenses for the quarter ended June 30, 2004 were $706,000 vs. $554,000 for the same period in 2003. The expenses increased due to increases in selling and general management personnel resulting from the acquisition of the assets of the former Laser Optics, Inc., and merger of their operations and personnel with INRAD custom optics to form the "new" Laser Optics business unit of PPGI. The increase was also attributable to increased costs of advisory services and travel expenses incurred in connection with the company's merger and acquisition program, as well as increased costs for advertising and travel expenses related to increased sales efforts during the period. At the beginning of FY 2004 officers' salary reductions of 15% that went into effect during FY 2002 were restored. Also, all temporary layoffs affecting other personnel were eliminated during FY 2004. As a result, labor costs increased without a corresponding increase in the number of employees.

26

Internal Research and Development Expenses

        Research and development expenses for the quarter ended June 30, 2004 were $17,000 compared to $25,000 for the quarter ended June 30, 2003. Independent research and Development expenditures for the first half of 2004 were $52,000 compared with $81,000 in the first half of 2003. The decrease was the result of partially re-focusing engineering efforts to production in this quarter.

Interest expense

        Interest expense for the first half of 2004 was $154,000 compared to $106,000 incurred in the first half of 2003. Interest expense increased over prior periods due to the increased borrowing needs experienced by the Company, and 1.5% higher interest rates. Borrowing needs increased due to the need for capital for the laser Optics acquisition. During 2003, a secured note in the principle amount of $1,700,000 at 6.0% interest was issued to pay off bank debt that was at rates approximating the prime rate of interest. [In 2002 the Company issued a $1,000,000 subordinated convertible note,] in 2003, a $1,500,000 subordinated convertible note and in 2004 a $1,000,000 subordinated convertible note were issued to provide funds for acquisition purposes. Interest on the secured and convertible notes is accrued, and payment is due upon the maturity of the notes

Net Loss

        Net loss for the six months ended June 30, 2004 was $(755,000) compared to a net loss of $(796,000) as compared to the same period in FY 2003. Net loss for the quarters ending June 30 was $(265,000) for FY 2004 and $(438,000) for FY 2003.

        Loss from operations for the six months ended June 30, 2004 was $(604,000) as compared with $(693,000) for the period ended June 30, 2003. Second quarter operating loss was $(190,000) in 2004 and $(368,000) in 2003.

Earnings Per Share

        Basic earnings per share available to common shareholders was calculated by adjusting the net loss by $165,000 for the six months ended June 30, 2004 and by $54,000 for the six months ended June 30, 2003 for the Common Stock dividend paid on Company preferred stock, divided by the weighted shares outstanding. Diluted earnings per share for the six months ended June 30, 2004 and June 30, 2003 were not calculated because the effect of outstanding options, warrants and convertible securities was anti-dilutive.

27

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002 and Year Ended December 31, 2001

Results of Operations

        The following table summarizes the Company's product sales by product categories during the past three years:

		Year Ended December 31,
		2003				2002			2001
Category
		Sales			%	Sales		%	Sales		%
Optical components		$	4,469,000	*	83	$	4,325,905	79	$	6,035,049	77
Laser accessories			893,000		17		1,155,816	21		1,850,988	23
	Total	$	5,362,000	*	100	$	5,481,721	100	$	7,886,037	100

*

a) 2003 Optical Component sales include $78,000 from operations acquired from Laser Optics, Inc.

b)

   Not included above are (non-product) contract R&D sales of approximately $26,000, $87,000 and $189,000 in 2003, 2002, and 2001, respectively.

        The following table sets forth, for the past three years, the percentage relationship of statement of operations categories to total revenues.

		Year ended December 31,
		2003		2002		2001
Revenues:
	Product sales	100.0	%	100.0	%	100.0	%
Costs and expenses:
	Cost of goods sold	72.7	%	83.7	%	62.9	%
	Gross profit margin	27.3	%	16.3	%	37.1	%
Selling, general and administrative expenses		44.3	%	40.9	%	31.0	%
Internal research and development		2.9	%	2.4	%	2.6	%
	Special charges	10.8	%	—	%	3.7	%
(Loss) from operations		(30.6	)%	(27.0	)%	(0.01	)%
Net (loss) profit		(32.9	)%	(30.1	)%	.5	%

Revenues

        Sales were approximately $5,388,000, $5,569,000 and $8,075,000, in 2003, 2002 and 2001 respectively. Total revenues declined 2% in 2003 to $5,388,000, from $5,482,0000 in 2002, reflecting "flat" product sales year to year, as demand from several industry sectors remained sluggish in 2003. 2002 sales were off 30% from $7,886,000 in 2001 reflecting the deep recession pervasive in the Photonics industry throughout that year.

        New bookings in 2003 increased to $6,018,000, 16% higher than in 2002. New bookings in 2002 were $5,190,000, approximately 14% lower than in 2001. The main market sector contributing to the increase in 2003 was Defense/Aerospace.

        The annualized product book to bill ratio in 2003 was greater than 1.0 for the first time in three years at 1.1, reflecting a positive change overall across market sectors served. The product book-to-bill ratio was 0.96 and 0.76 in 2002 and 2001, respectively.

28

        The Company's backlog of product orders as of December 31, 2003 was approximately $2,286,000, an increase of 76% over the approximately $1,300,000 backlog as December 31, 2002. The backlog on December 31, 2001 was $1,541,000.

        Revenues declined for the second successive year in the non-military Laser Systems sector, down $252,000, or 19%, from the prior year. This downward trend reflected the impact of decline in industry shipments of pulsed medical lasers and of laser system shipments for semiconductor inspection equipment by our customer community. Sales to this sector accounted for 20%, 24%, and 32% of total sales in 2003, 2002, and 2001, respectively.

        Revenues declined as well for the second consecutive year in the Process Control and Metrology sector, down $395,000, or 32% from 2002. Demand from customers in the Process Control and Metrology sector continued its downward trend for the second straight year, as the semiconductor industry's investments in new plant and equipment spending continued to be adversely affected by the deepest and longest downturn in years. Sales to this sector accounted for 16%, 22%, and 25% of total sales in 2003, 2002, and 2001, respectively.

        Sales to the Defense/Aerospace sector increased sharply for the second consecutive year, to $2,321,000 up $583,000, or 34%, from 2002. Sales of $1,738,000 in 2002 were up 31% from sales of $867,000 in 2001. Increased military spending on electro-optical systems and R&D in the post-9/11 era has boosted demand for the Company's products. Sales to this sector accounted for 43%, 31%, and 11% of total sales in 2003, 2002, and 2001, respectively.

        While accounting for $947,000, or 12%, of sales in 2001, sales to the Telecom sector are no longer material, accounting for 1% of total sales in 2003 and 2% in 2002. It is unlikely that sales to the sector will rebound in the near future for the Company's current product lines.

        Sales to Universities, National Labs and "Other" (i.e. non-separately classified) sectors have remained relatively steady at 20% to 21% of total Company revenues for the past three years.

Cost of Goods Sold and Gross Profit Margin

        As a percentage of product sales, cost of goods sold was 72.7%, 83.7% and 62.9% for the years ended December 31, 2003, 2002 and 2001, respectively. Gross profit margin as a percentage of product sales was 27.3%, 16.3%, and 37.1% for 2003, 2002, and 2001, respectively.

        In 2003 the cost of goods sold percentage decreased as a result of successful implementation of cost containment policies. Such polices included executive salary reductions, temporary layoffs, salary freezes and reductions in discretionary spending. As a result, gross margins increased despite the drop in overall sales volume. In 2002 the cost of goods sold percentage increased due to a declining sales volumes and a draw-down of inventories. In 2001 the cost of goods sold percentage increased due to increased manufacturing overhead costs for newly formed departments including production control and manufacturing engineering and the absorption of additional overhead costs in production that resulted from decreased volumes in Contract R&D sales.

        Fixed costs are a major component of the Company's total cost structure. Management and the Board of Directors decided to reduce such costs in 2002 only up to the point where further reductions would impede the Company's ability to perform for its current customers or to rebound in the future when macroeconomic conditions improve. This philosophy continued throughout 2003. The implementation of head-count reduction, reduced work-hours, and other cost saving measures decreased overhead expenses by approximately 9% in 2003 and 15% in 2002 over the respective prior years.

        Costs of purchased components have been relatively stable in 2003, 2002 and 2001. Unit costs of raw materials such as crystal quartz and high grade optical glasses have increased in the last year.

29

Selling, General and Administrative Expenses

        Selling, general and administrative expenses in 2003 increased $113,000 or 5% compared to 2002. In 2002, selling, general and administrative expenses decreased $226,000 or 9.0% compared to 2001.

        The increase in SG&A costs in 2003 was due in part to increased professional services costs and travel expenses relative to the Company's merger and acquisition program. SG&A expenses also increased due to increased travel for customer visits by all sales and business development personnel. Other contributing factors to the increase was the accelerated increase in patent reserves and an overall increase in insurance costs. Management continued to implement its philosophy of increasing, not decreasing, expenditures on direct selling and business development activities in a period of declining top line performance.

        The decrease in SG&A costs in 2002 was attributable to overall reduction in personnel costs as well as cost savings implemented in other expense areas. The costs decreased overall, while the Company implemented its plan to augment its sales force during that year.

Internal Research and Development Expenses

        Company-funded research expenditures during the years ended December 31, 2003, 2002, and 2001 were $154,000 (2.9% of net product sales), $134,000 (2.5% of net product sales), and $202,000 (2.6% of net product sales), respectively.

        During 2003, 2002 and 2001, the Company narrowed its focus of internal research and development efforts onto new crystal products and production methods, and new optical component manufacturing technologies. As a result, internal R&D expenditures remained relatively constant in 2003, and are expected to continue at this level in 2004.

Special Charges

        During 2003, the Company acquired the assets and liabilities of Laser Optics, Inc. A strategic decision was made at that time to relocate the assets and employees from Bethel, CT to Northvale, NJ and to combine the Laser Optics, Inc. business lines with the Custom Optics business line. The entity created by this combination is now a PPGI business unit called Laser Optics. The assets acquired and employees will be relocated to Northvale, NJ into consolidated operations during the spring of 2004. The costs of relocating employees included relocation costs, stay on bonuses and relocation bonuses, that were accrued in 2003. The accrual amounted to $107,000 ($0.02 per share on a basic and diluted basis) and has been included in the consolidated statement of operations as a special charge.

        During 2003 the Company determined that there was excess inventory, relative to forecasted future needs, of certain crystals and solutions. Based on this determination, a reserve was taken in the amount of $475,000 ($0.09 per share on a basic and diluted basis) in order to recognize the diminished future economic benefit of the inventory. The increased reserve has been included in the consolidated statement of operations as a special charge.

        At the end of 2000, the Company announced a sweeping manufacturing process re-engineering program to modernize manufacturing methods, implement modern production machinery, incorporate a production control function for planning and scheduling, modernize and reconfigure its physical plant for efficient operational flow, increase labor productivity, improve operating margins, and lead ultimately to ISO certification of the Company. The special charges associated with this program were $299,763 ($0.06 per share on a basic and diluted basis) for the year ended December 31, 2001. This effort continued throughout 2002, although at a greatly diminished rate.

30

Operating Income

        Losses from operations in 2003 were $(1,654,329) compared to operating losses in 2002 of $(1,504,400) and $(6,104) in 2001. Losses during 2003, 2002, and 2001 were due to slackened and continuing weak demand in major market sectors served by the Company and its products. These losses occurred despite strict cost containment measures, and they were absorbed. The cost containment program implemented by Management and the Board stopped short, by design, of impeding the ability of the Company's operations to perform again in the future, or of impeding the Company's ability to find new customers for its products. Management's efforts to restore profitability to operations are focused on building the Company's top line through its mergers and acquisition program and through continued focus on business development and selling activities.

Other Income and Expenses

        Interest expense increased over prior periods due to the increased borrowing needs experienced by the Company. The company's average borrowings in 2003 were approximately $3,300,000 versus $2,000,000 in 2002. Interest rates in 2003 were approximately 1.5% higher than in 2002. Borrowing needs increased due to the acquisition made during 2003 and as a result of continued losses from operations. During 2003, a secured note replaced bank debt. Also in 2003 a subordinated convertible note was placed for acquisition purposes. Interest on the secured and convertible notes is accrued, and payment is due upon the maturity of the notes. During 2001, the Company received $44,800 from the sale of 40,000 Common Stock warrants received as part of the compensation from the sale of its tunable mid-IR laser technology in 2000.

Preferred Stock Dividend

        During 2003 dividends in Common Stock valued at $53,600 were issued to holders of the Company's Class B preferred stock (84,000 shares of Common Stock valued at $0.40 per share) and the holder of the Company's Class A preferred stock (50,000 shares valued at $0.40 per share). During 2002 dividends in Common Stock valued at $120,600 were issued to holders of the Company's Class B preferred stock (84,000 shares of Common Stock valued at $0.90 per share) and the holder of the Company's Class A preferred stock (50,000 shares valued at $0.90 per share). During 2001 dividends in Common Stock valued at $155,000 were issued to holders of the Company's Class B preferred stock (42,000 shares of Common Stock valued at $2.50 per share) and the holder of the Company's Class A preferred stock (50,000 shares of Common Sock at $1.00 per share). Net income used in earnings per share calculations included these charges in 2003, 2002 and 2001 in order to derive net income available to common shareholders.

Income Taxes

        During 2003 the Company sold its New Jersey net operating loss for $135,235. The sale was made under the State's Technology Tax transfer Certificate program. The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. Deferred tax liabilities and assets are determined based on the difference between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. At December 31, 2003, the Company had a net deferred tax asset of approximately $3,348,000, the primary component of which was its significant net operating loss carryforward. The Company has established a valuation allowance to offset this deferred tax asset in the event that the tax asset will not be realized in the future. In 2002, $100,000 of the deferred tax asset previously classified as an asset was reserved due to the Company's recurring losses and uncertainty as to the Company's ability to generate taxable income in future years.

31

Inflation

        The Company's policy is to periodically review pricing of its products to keep pace with current costs, market demands, and competitive factors. As to special and long-term contracts, management endeavors to take potential inflation into account in pricing decisions. The impact of inflation on the Company's business has not been material to date.

Liquidity and capital resources

        As shown in the accompanying financial statements, the Company reported net losses of approximately ($755,000) for the first six months of 2004, ($1,777,000) for 2003 and ($1,716,000) for 2002. Net cash provided (used) in operations was $123,000, ($283,000) and ($807,000) for the first six months of 2004 and for 2003 and 2002. During the past two and a half years, the Company's working capital requirements were met by additional bank borrowings, issuance of secured and subordinated convertible notes and the issuance of common and preferred stock to shareowners.

        The Company announced in 2002 that it is intent on implementing a plan to transform the Company into a portfolio of businesses serving the Photonics industry. A merger and acquisitions advisory firm was employed in the fourth quarter of 2002 to assist management in this process. Capital needed to make the acquisitions or mergers will be obtained through the issuance of equity-based instruments, as necessary. The first acquisition was completed in November 2003 and the necessary capital was raised via a $1,500,000 subordinated convertible note. The Company currently has capital to continue the acquisition plan. The Company continues to search for additional sources for infusion of equity based capital to be used for acquisitions for the next three years.

        Capital expenditures, including purchases and a portion of applicable internal labor and overhead charges, for the six months ended June, 2004 and 2003 were $561,000 and $52,000, respectively. The increase in costs represent expenditures for replacement of capital equipment at the end of its useful life and for the restructuring of the Northvale, NJ operations to accommodate the merge-in of operations from the former Connecticut -based operations of Laser Optics. Capital expenditures, including internal labor and overhead charges, for the years ended December 31, 2003, 2002 and 2001 were approximately $101,000, $554,000, and $2,224,000, respectively. Capital expenditures in 2002 and 2001 were used for expansion and renovation of facilities and for the acquisition of equipment. The expenditures were financed in part from capital raised in the 2000 private offering of series B convertible preferred stock and in part by an asset loan secured in the second quarter of 2002.

        Management will continue to make investments in capital acquisitions from time to time, both in equipment and acquisition of complementary businesses, to pursue its objective of growth in shareholder value and to maintain a competitive edge in the markets that it serves.

        During the six month period ended June 30, 2004, cash outflows were funded from cash proceeds from a subordinated convertible promissory note received in 2002. Where possible, the Company will seek to increase sales, and improve margins to improve future operating results and cash flows. Management expects that cash flow from operations and use of its existing cash reserves, will provide adequate liquidity for the Company's operations in 2004. The quarter ended June 30, 2004 yielded positive cash flow from operations in the amount of $123,000.

        At the end of the fourth quarter of 2002 the Company received $1,000,000 in proceeds from the issuance of a Subordinated Convertible Promissory Note. The Note is due in January 2006 and bears an interest rate of 6%. The note was amended in 2004 to clarify its conversion features. Interest accrues yearly and along with principal may be converted into Common Stock, (and/or securities convertible into common shares), at a conversion rate equal to the purchase price of stock issued (and/or securities issued that are convertible into Common Stock) for cash after the date of the Note

32

to an unrelated third party investor. The Holder of the Note is a related party to a major shareholder of the Company.

        In the second quarter of 2002 the Company secured an asset loan from Wachovia Bank. In January 2003 the Company was in violation of certain financial covenants required under the loan agreements. As a result Wachovia Bank sold both the asset based loan and working capital revolver to APC Investments. In June of 2003 the Company paid off the loan held by APC with $1,700,000 in proceeds received from the issuance of a Secured Promissory Note that is held by a major investor in the Company. The Secured Promissory Note was for a period of 36 months and bears interest at the rate of 6% per annum. The Company's Board of Directors approved the issuance of 200,000 warrants to Clarex, Ltd. as a fee for the issuance of the Note and in the 2nd quarter of 2004 approved the issuance of an additional 200,000 warrants as a fee for extending the note to June 30, 2007. The warrants are exercisable at $0.425 per share and $1.08 per share, respectively, approximately a 20% discount to market, and expire in March 2008 and May 2008. The Note is secured by all assets of the Company.

        At the end of the fourth quarter of 2003 the Company received $1,500,000 in proceeds from the issuance of a Subordinated Convertible Promissory Note. The Note is due in January 2006 and bears an interest rate of 6%. The note was amended in 2004 to clarify its conversion features. Interest accrues yearly and along with principal may be converted into Common Stock, and/or securities convertible into Common Stock, at a conversion rate equal to the purchase price of stock issued, and/or securities issued that are convertible into Common Stock, for cash after the date of the Note to an unrelated third party investor. The Holder of the Note is a related party to a major shareholder of the Company. The proceeds from the Note are intended for use in the Company's acquisition program.

        In April 2004 the Company received $1,000,000 in proceeds from the issuance of a Subordinated Convertible Promissory Note. The Note is due in March 2007 and bears an interest rate of 6%. Interest accrues yearly and along with principal may be converted into Common Stock, (and/or securities convertible into common shares), at a conversion rate equal to the purchase price of stock issued (and/or securities issued that are convertible into Common Stock) for cash after the date of the Note to an unrelated third party investor. The Holder of the Note is a related party to a major shareholder of the Company.

        During the 2nd quarter of 2004 the Company entered into an agreement with an investment banking firm to raise equity via a private placement that was not registered with the Securities and Exchange Commission. In July 2004 the Company issued 1,581,000 Units consisting of 1,581,000 shares and warrants to acquire an additional 1,185,750 shares at $1.35 per share (In addition, 262,276 Warrants were issued to Casimir Capital, LP, the placement agent for the private placement). This private placement resulted in net proceeds to the Company of approximately $1,350,000. The funds are to be utilized in the furtherance to the company's M&A program, capital equipment purchases and to meet general working capital requirements. The conversion of the above convertible notes in the aggregate principal amount of $3,500,000 is subject to a conversion price equal to the price at which equity is first raised for cash. As a result of the private placement the Notes are now convertible into an aggregate of 3,500,000 Units consisting of 3,500,000 shares of Common Stock and Warrants to acquire 2,625,000 shares of Common Stock at a price of $1.35 per share.

33

        A summary of the Company's contractual cash obligations at June 30, 2004 is as follows:

Contractual Obligations	TOTAL		Less than 1 Year		1-3 Years		3-5 Years		Greater Than 5 Years
Notes payable	$	1,700,000	$	—	$	1,700,000	$	—	$	—
Convertible notes payable		3,500,000		—		—		3,500,000		—
Note payable—other		185,020		68,292		116,728		—		—
						—		—		—
Operating leases		944,000		304,000		640,000		—		—
Capital leases including interest		220,020		124,543		95,477		—		—
(a) Total contractual cash obligations	$	5,549,040	$	496,835	$	2,552,205	$	2,500,000	$	—

Quantitative and Qualitative Disclosures About Market Risk

        The Company believes that it has limited exposure to changes in interest rates from investments in certain money market accounts. The Company does not utilize derivative instruments or other market risk sensitive instruments to manage exposure to interest rate changes. The Company believes that a hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would not materially affect the fair value of the Company's interest sensitive money market accounts at June 30, 2004.

Financial Statements and Supplementary Data

        The financial statements and supplementary financial information required to be filed under this Item are presented commencing on page F-1 of the Registration Statement filed in connection with this resale, and are incorporated herein by reference.

Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

        None

34

DIRECTORS AND EXECUTIVE OFFICERS

        The following table sets forth certain information regarding our directors and executive officers on the date of this prospectus.

Name and Age	Since	Positions; Business Experience
Thomas Lenagh, 78	1998	Chairman of the Board of Directors (May 2000–Present).
			Management Consultant (1990–Present) Past Chairman and CEO, Systems Planning Corporation Financial Vice President, the Aspen Institute Treasurer and Chief Investment Officer, The Ford Foundation Captain, US Navy Reserve (ret.)
Daniel Lehrfeld, 60	1999	Director
			President and Chief Executive Officer (2000–present), President and Chief Operating Officer(1999–2000), Vice President/General Manager (1995–1999) Raytheon/GM Hughes Electro-Optics Center, President (1989–1991) New England Research Center, (subsidiary) Deputy General Manager (1989–1995) & Director, Business Development, International Business, Operations, Cryogenic Products Magnavox Electronic Systems E. Coast Div., Deputy Sector Director & Program Director Philips Laboratories Briarcliff North American Philips subs. Philips Electronics NV, Group Leader/Project Leader Grumman Aerospace Corporation
Frank Wiedeman, 88	1998	Director
			Executive Director (1980–Present) American Capital Management Inc.
Jan Winston, 67	2000	Director
			Principal (1997–Present) Winston Consulting, Division Director/General Manager (1981–1997) IBM Corporation. Executive positions held in Development, Finance and Marketing.
John Rich, 66	2000	Director
			Vice President/General Manager (1999–2002) Power Electronics Division, C&D technologies President (1990–1999), Raytheon/GM Hughes Optical Systems Vice President (1983–1989), Perkin Elmer Microlithography, Electro-Optics, and Systems Colonel, Commander, Air Force Avionics Laboratory and Air Force Weapons Laboratory

        The directors hold office for staggered terms of three years.

35

Executive Officers of the Registrant

        The following table sets forth the name and age of each executive officer of the Company, the period during which each such person has served as an executive officer and the positions with the Company held by each such person:

Name and Age	Since	Position With the Company
Daniel Lehrfeld, 60	1999	President and Chief Executive Officer
Maria Murray, 46	1993	Vice President—Special Projects
William S. Miraglia, 54	1999	Chief Financial Officer and Secretary
Devaunshi Sampat, 50	1999	Vice President—Marketing Communication

        Daniel Lehrfeld has served as Chief Executive Officer and President since May 2000. He joined the Company in 1999 as President and Chief Operating Officer. Prior to joining the Company, Mr. Lehrfeld held the position of Vice President and General Manager of Electro-Optic Systems, a division, successively, of the Raytheon, GM/Hughes Electronics and Magnavox Electronic Systems Corporations. He has also held executive positions with Philips Laboratories Briarcliff and Grumman Aerospace Corporation. Mr. Lehrfeld holds B.S. and M.S. degrees from Columbia University School of Engineering and Applied Science and an M.B.A. degree from the Columbia Graduate School of Business.

        Maria Murray joined the Company in January 1989, became Vice President of R&D Programs in 1993, and was appointed INRAD's Sr. Vice President, Business Development in 1999. In 2003 she also assumed the title of Vice President of Special Projects at PPGI. Prior to joining the Company, Ms. Murray held positions in electronic design engineering in the laser and communication industries. She holds a B.S. degree in Electrical Engineering from the University of Central Florida.

        William S. Miraglia joined the Company as Secretary and Chief Financial Officer in June 1999. Previously, he held the position of Vice President of Finance for a division of UNC, Inc., a New York Stock Exchange aviation company. Prior to his last position, Mr. Miraglia has held management positions in the aerospace industry and in public accounting. He holds a B.B.A. from Pace University, and an M.B.A from Long Island University and is a Certified Public Accountant.

        Devaunshi Sampat joined the Company in 1998. In 1999 she was appointed Vice President of Marketing and Sales. In 2003 she also assumed the title of Vice President for Marketing Communications for PPGI. Prior to joining the Company, Ms. Sampat held sales management positions within the Photonics industry with Princeton Instruments and Oriel Instruments. Ms. Sampat holds a B.S. in Medical Technology from the University of Bridgeport.

        Each of the executive officers has been elected by the Board of Directors to serve as an officer of the Company until the next election of officers, as provided by the Company's by-laws.

Committees of the Board of Directors

        Composition of the Board of Directors.    Since the adoption of the Sarbanes-Oxley Act in July 2002, there has been a growing public and regulatory focus on the independence of directors. Requirements relating to independence are imposed by the Sarbanes-Oxley Act with respect to members of the Audit Committee. The Board of Directors has determined that the members of the Audit Committee satisfy all such definitions of independence.

        Audit Committee.    During 2003, the Audit Committee was comprised of 3 Directors: John Rich, Thomas Lenagh and Jan Winston. The Audit Committee is empowered by the Board of Directors to, among other things, serve as an independent and objective party to monitor the Company's financial

36

reporting process, internal control system and disclosure control system, review and appraise the audit efforts of the Company's independent accountants, assume direct responsibility for the appointment, compensation, retention and oversight of the work of the outside auditors and for the resolution of disputes between the outside auditors and the Company's management regarding financial reporting issues, and provide an open avenue of communication among the independent accountants, financial and senior management, and the Company's Board of Directors.

        Audit Committee Financial Expert.    The Board of Directors of the Company has determined that Mr. John Rich is "audit committee financial expert", as such term is defined by the SEC. Mr. Rich, as well as Mr. Thomas Lenagh and Mr. Jan Winston, have been determined to be "independent" within the meaning of SEC regulations.

        Compensation Committee.    During 2003, the Compensation Committee was comprised of Mr. Frank Wiedeman, Mr. Jan Winston and Mr. John Rich. The Compensation Committee reviews, approves and makes recommendations to the Board of Directors on matters regarding the compensation of the Company's senior executive officer(s).

37

EXECUTIVE COMPENSATION

Summary of Cash and Certain Other Compensation

        The following table sets forth, for the years ended December 31, 2003, 2002 and 2001, the cash compensation paid by the Company and its subsidiaries, with respect to the Company's officers, whose total annual salary and bonus exceeded $100,000, for services rendered in all capacities as an executive officer during such period:

Summary Compensation Table

Name and Principal Position	Year	Salary		Bonus			Stock Options
Daniel Lehrfeld, President and Chief Executive Officer	2003 2002 2001	$	156,000 148,000 156,000	$	— 32,500 —	*	85,000 110,000 —
Maria Murray, Vice President, Special Projects	2003 2002 2001		112,000 107,000 115,000		— — —		40,000 89,000 —
Devaunshi Sampat, Vice President, Marketing Communications	2003 2002 2001		113,000 105,000 139,000		— — —		50,000 59,500 —
William Miraglia, Vice President, Chief Financial Officer	2003 2002 2001		104,000 101,000 105,000		— — —		40,000 45,000 —

*

Reflects deferred payout of bonus granted in recognition of asset sale in 2000. Full proceeds invested in Company Series B Preferred stock.

Executive Employment Contract

        The Company is party to an employment agreement with Mr. Dan Lehrfeld, President and CEO, that provides for a minimum annual salary during its term, and severance benefits under certain conditions that include change of control of the Company.

        The aggregate minimum commitment under this agreement is as follows:

Year Ending December 31,
2004	$175,000
2005	$175,000
2006	$175,000
2007	$175,000
2008	$175,000

        Should Mr. Lehrfeld be terminated without cause during this contract period he would be entitled to one year's salary.

        During fiscal year 2003, 2002 and 2001, respectively, no officer received any perquisites or other personal benefits in excess of the lesser of $50,000 or 10% of such individual's reported salary and bonus, nor were any granted.

38

Compensation of Directors

        Each non-employee director was paid $400 during fiscal year 2003 and 2002, respectively, for each board meeting he/she attended, and $200 during fiscal year 2003 and 2002, respectively, for each conference call meeting in which he/she participated.

Compensation Committee Interlocks and Insider Participation in Compensation Committee

        The following directors of the Company serve as members of the Compensation Committee of the Company's Board of Directors: Mr. Frank Wiedeman, Mr. Jan Winston and Mr. John Rich. Officer's compensation is guided by overall job performance and the market salaries for those positions for companies of the same relative size and within industries similar to the Company's industry, as well as relativity to other salaries within the Company.

Equity Compensation Program

        Under the Company's 2000 Equity Compensation Program (the "2000 Program") 4,000,000 shares are reserved for issuance of stock options, stock appreciation rights and performance shares. The Company's Board of Directors as approved the increase of the shares reserved for issuance under the 2000 Program to 6,000,000, subject to shareholder approval. As of June 30, 2004 approximately 1,847,000 options were outstanding under the 2000 Program and 2,153,000 shares remained available for awards under the 2000 Program. The 2000 Program was adopted by the Board of Directors in May 2000 and approved by the Shareholders in August 2000.

Purpose

        The purpose of the 2000 Program is to help attract and retain superior directors, officers, key employees and consultants of the Company and its subsidiaries and to encourage them to devote their abilities and industry to the success of the Company.

Eligibility

        All directors, officers, employees and consultants of the Company and its subsidiaries are eligible to receive awards under the 2000 Program. The Company estimates that as of June 30, 2004, there were approximately 70 individuals eligible to participate in the 2000 Program.

Determination of Eligibility; Administration of the Program

        The 2000 Program is administered by a committee appointed by the Board (the "Committee", or the "Program Administrator"). The Program Administrator has full discretion and authority to: (a) interpret the 2000 Program; (b) define its terms; (c) prescribe, amend and rescind rules and regulations relating to the 2000 Program; (d) select eligible individuals to receive options, stock appreciation rights, and performance shares under the 2000 Program; (e) determine when options, stock appreciation rights, or performance shares shall be granted under the Program; (f) determine the type, number, and terms and conditions of awards to be granted and the number of shares of stock to which awards will relate, and any other terms and conditions of options, stock appreciation rights, and performance shares; and (g) make all other determinations that may be necessary or advisable for the administration of the 2000 Program.

39

Types of Awards

        The 2000 Program is comprised of four parts: (i) the Incentive Equity Compensation Program ("Incentive Program"), (ii) the Supplemental Equity Compensation Program ("Supplemental Program"), (iii) the Stock Appreciation Rights Program ("SAR Program"), and (iv) the Performance Share Program.

        Incentive Program.    The Company intends that options granted pursuant to the provisions of the Incentive Program will qualify and will be identified as "incentive stock options" ("ISOs") within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). The Program Administrator may grant ISOs to purchase Common Stock to any employee of the Company or its subsidiaries. These options shall expire on the date determined by the Program Administrator, but they shall not expire later than 10 years from the date the options are granted. Any ISO granted to any person who owns more than 10% of the combined voting power of all classes of stock of the Company or any of its subsidiaries shall expire no later than 5 years from the date it was granted.

        The exercise price of ISOs may not be less than the fair market value of the Company's Common Stock on the date of grant. However, the exercise price of an ISO granted to a 10% or more stockholder may not be less than 110% of the fair market value of the Company's Common Stock on the date of grant. The aggregate fair market value, determined at the time of grant, of the shares of Common Stock with respect to which ISOs are exercisable for the first time by an optionee during any calendar year may not exceed $100,000.

        Supplemental Program.    Options granted under this Supplemental Program shall not be ISOs as defined in Section 422 of the Code. The Program Administrator may grant supplemental stock options to eligible participants in the 2000 Program. These options shall expire on the date determined by the Program Administrator, but they shall not expire later than 10 years from the date the options are granted. The exercise price of supplemental stock options shall be determined by the Program Administrator at the time of grant.

        SAR Program.    The Program Administrator may grant stock appreciation rights ("SARs") to eligible participants in the 2000 Program. These SARs may be granted either together with supplemental stock options or ISOs ("Tandem Options") or as naked stock appreciation rights ("Naked Rights"). Tandem Options entitle the holder to receive from the Company an amount equal to the fair market value of the shares of Common Stock which the recipient would have been entitled to purchase on that date upon the surrender of the unexpired option, less the amount the recipient would have been required to pay to purchase the shares upon the exercise of the option. Naked Rights entitle the holder to receive the excess of fair market value of those rights at the end of a designated period over the fair market value of those rights when they are granted. Payments to recipients who exercise SARs may be made, at the discretion of the Program Administrator, in cash by bank check, in shares of Common Stock with a fair market value equal to the amount of payment, in a note in the payment amount, or any combination of these totaling the payment amount.

        Performance Share Program.    The Program Administrator may grant performance shares to eligible participants in the 2000 Program. Each grant confers upon the recipient the right to receive a specified number of shares of Common Stock of the Company contingent upon the achievement of specified performance objectives within a specified period (including the recipient's continued employment with or service to the Company).

        Payment may be made, in the discretion of the Program Administrator, in shares of Common Stock, a check for the fair market value of the shares of Common Stock to which the performance share award relates (the "payment amount"), a note in the payment amount, or any combination of

40

these totaling the payment amount. The Program Administrator shall specify the performance objectives, determine the duration of the performance objective period (not to be less than 1 year nor more than 10 years from the date of the grant) and determine whether performance objectives have been met during the designated period. All determinations by the Program Administrator with respect to the achievement of performance objectives shall be final, binding on and conclusive with respect to each recipient.

Exercise

        Options may be exercised by providing written notice to the Company, specifying the number of shares to be purchased and accompanied by payment for such shares, and otherwise in accordance with the applicable option agreement. Payment may be made in cash, other shares of Common Stock or by a combination of cash and shares. The Program Administrator may also permit cashless exercises pursuant to procedures approved by the Program Administrator.

Vesting of Options

        Unless otherwise provided by the Program Administrator at the time of grant or accelerated, stock options vest in 3 annual installments commencing one year after the date of grant.

Transferability of Awards

        Grants of stock options and other awards are generally not transferable except by will or by the laws of descent and distribution, except that the Program Administrator may, in its discretion, permit transfers of supplemental stock options and/or stock appreciation rights granted in tandem with such options for estate planning or other purposes subject to any applicable restrictions under federal securities laws. Common Stock which represents performance shares may not be sold, pledged, assigned or transferred in any manner prior to the satisfaction of the stated performance objectives and the expiration of the stated performance objective periods.

Award Limitations

        The maximum number of shares of Common Stock subject to options, separately exercisable stock appreciation rights or other awards that an individual may receive in any calendar year is [600,000].

Acceleration of Vesting; Change in Control

        The Program Administrator may, in its discretion, accelerate the exercisability of any option or stock appreciation right or provide that all restrictions, performance objectives, performance objective periods and risks of forfeiture pertaining to a performance share award shall lapse upon the occurrence of a "change in control" of the Company, as defined in the 2000 Program.

        If a change in control occurs pursuant to a merger or consolidation or sale of assets as described above, then each outstanding option, stock appreciation right, and performance share award shall be assumed or an equivalent benefit shall be substituted by the entity determined by the Board to be the successor corporation unless the successor does not so agree at least 15 days prior to the merger, consolidation or sale of assets. In that instance, each option, stock appreciation right, or performance share award shall be deemed to be fully vested and exercisable.

41

Effect of Termination of Employment or Service as a Director or Consultant

        Except as otherwise provided in any agreement evidencing an award or option:

(a)

in the event that a participant's employment or service with the Company is terminated for "cause," any outstanding options and awards of such participant shall terminate immediately;



(b)

in the event that a participant's employment or service with the Company terminates due to death or disability (within the meaning of Section 22(e)(3) of the Code), all options and stock appreciation rights of such participant (other than Naked Rights) will lapse unless exercised, to the extent exercisable at the date of termination, within one year following such date of termination, all performance awards for which all performance objectives and conditions have been achieved and satisfied (other than continued employment or status as a consultant) shall be paid in full (any remaining awards of such participant will be forfeited), and all Naked Rights shall be fully paid by the Company as of the date of death or disability; and



(c)

in the event that a participant's employment or service with the Company terminates for any other reason: (i) any outstanding options and awards (other than Naked Rights) shall be exercisable, to the extent exercisable on the date of termination, for a period of 90 days after the date of such termination if the recipient resigned, and 12 months after the date of such termination if it was an involuntary termination other than for cause; (ii) all Naked Rights not payable on the date of termination shall terminate immediately; and (iii) all performance share awards shall terminate immediately unless the performance objectives have been achieved and the performance objective period has expired.

Amendment, Suspension or Termination of the Program

        The 2000 Program will terminate on the day preceding the tenth anniversary of its adoption, unless sooner terminated by the Board. Prior to that date, the Program Administrator may amend, modify, suspend or terminate the Program, provided, however, that (a) stockholder approval is obtained when required by law, and (b) no such amendment, modification, suspension or termination by the Program Administrator shall adversely affect the rights of participants, without their consent, under any outstanding option, stock appreciation right, or performance share.

Option Exercises and Holdings

        The following table provides information concerning options exercised during 2003 and the value of unexercised options held by each of the executive officers named in the Summary Compensation Table at December 31, 2003.

42

Option Values at December 31, 2003

			Number of Securities Underlying Unexercised Options at December 31, 2003 (# of shares)
					Value of In-the-Money Options at December 31, 2003 ($)(1)
Name	Shares Acquired on Exercise (# shares)	Value Realized
			Exercisable	Unexercisable	Exercisable	Unexercisable
Daniel Lehrfeld	0	0	396,300	123,700	0	0
Maria Murray	0	0	106,370	83,630	0	0
Devaunshi Sampat	0	0	67,135	63,865	0	0
William Miraglia	0	0	29,504	59,496	0	0

(1)

Based on $0.50 per share, the closing price of the Company's Common Stock, as reported by the OTC Bulletin Board, on December 31, 2003.

Options/SAR Grants in Last Fiscal Year

Individual Grants								Potential Floatable Values at Assumed Annual Rates of Stock Price Appreciation for Option Term	Alternative to (f) and (g) Grant Date Value
(a)	(b)	(c)		(d)		(e)	(f)	(g)	(f)
Name	Number of Securities Underlying Options/ SARs Granted	% of Total Options/ SARs Granted to Employees in the Last Fiscal Year and the Six Months ended June 30, 2004		Expiration or Base Price ($/Sh)		Expiration Date	5% ($)	10% ($)	Grant Date Payment Value ($)
Dan Lehrfeld	50,000	16.7	%	$	0.50	Jun 2013			$	0.48	(1)
Maria Murray	24,000	8.0	%	$	0.50	Jun 2013			$	0.48	(1)
Devaunshi Sampat	24,000	8.0	%	$	0.50	Jun 2013			$	0.48	(1)
William Miraglia	24,000	8.0	%	$	0.50	Jun 2013			$	0.48	(1)

1.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The following range of weighted-average assumptions were used for grants during the year ended December 31, 2003:

Dividend yield	0.00%
Volatility	127.16%
Risk-free interest rate	5.2%
Expected life	10 years

43

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table presents certain information with respect to the security ownership of the directors and named executive officers of the Company and the security ownership of each individual or entity known by the Company to be the beneficial owner of more than 5% of the Company's Common Stock outstanding (7,160,903 shares) as of August 1, 2004. 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. The Company has been advised that all individuals, or entities, listed have the sole power to vote and dispose of the number of shares set opposite their names in the table. Unless otherwise indicated, the address of each beneficial owner is c/o Photonic Products Group, Inc., 181 Legrand Avenue, Northvale, New Jersey 07674.

Name and Address of Beneficial Owner	Number of Shares		Percent of Common Stock
Clarex, Ltd. & Welland Ltd. Bay Street and Rawson Square P.O. Box N 3016 Nassau, Bahamas	9,971,914	(1)	68.4	%
Warren Ruderman 45 Duane Lane Demarest, NJ 07627	1,222,400		17.1	%
Daniel Lehrfeld C/O PPGI 181 Legrand Ave Northvale, NJ 07647	615,000	(2)	8.0	%
Hoechst Celanese Corp. Routes 202-206 North Box 2500 Somerville, NJ 08876	300,000		4.2	%
Thomas Lenagh C/O PPGI 181 Legrand Ave Northvale, NJ 07647	106,085	(3)	1.5	%
Frank Wiedeman C/O PPGI 181 Legrand Ave Northvale, NJ 07647	122,100	(4)	1.7	%
John Rich C/O PPGI 181 Legrand Ave Northvale, NJ 07647	34,900	(5)	0.5	%
Jan Winston C/O PPGI 181 Legrand Ave Northvale, NJ 07647	24,100	(6)	0.3	%
Maria Murray C/O PPGI 181 Legrand Ave Northvale, NJ 07647	171,825	(7)	2.3	%

44

William Miraglia C/O PPGI 181 Legrand Ave Northvale, NJ 07647	67,790	(8)	0.9	%
Devaunshi Sampat C/O PPGI 181 Legrand Ave Northvale, NJ 07647	106,085	(9)	1.5	%
Directors and Executive Officers as a group (8 persons)	1,322,400	(10)	19.0	%

(1)

Including (i) 900,000 shares subject to convertible preferred stock (ii) 3,500,000 shares of Common Stock and warrants to purchase 2,625,000 shares of Common Stock at $1.35 underlying convertible promissory notes (iii) 200,000 shares of Common Stock underlying outstanding warrants to purchase the Company's Common Stock at $0.425 per share and (iv) 200,000 shares of Common Stock underlying outstanding warrants to purchase the Company's Common Stock at $1.08 per share.

(2)

Including 48,000 shares subject to convertible preferred stock and 450,200 shares subject to options exercisable within 60 days.

(3)

Including 93,700 shares subject to options exercisable within 60 days.

(4)

Including 43,700 shares subject to options exercisable within 60 days.

(5)

Including 12,000 shares subject to convertible preferred stock and 18,700 shares subject to options exercisable or convertible within 60 days.

(6)

Including 4,000 shares subject to convertible preferred stock and 18,700 shares subject to options exercisable or convertible within 60 days.

(7)

Including 20,000 shares subject to convertible preferred stock, and 144,550 shares subject to options exercisable or convertible within 60 days.

(8)

Including 7,200 shares subject to convertible preferred stock, and 58,070 shares subject to options exercisable or convertible within 60 days.

(9)

Including 8,000 shares subject to convertible preferred stock, and 95,285 shares subject to options exercisable or convertible within 60 days.

(10)

Including 99,200 shares subject to convertible preferred stock and 922,905 shares subject to options exercisable or convertible within 60 days.

45

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        During the years ended December 31, 2003, 2002 and 2001 approximately 3%, 4%, and 3%, respectively, of the Company's net product sales were through a foreign agent, in which, Warren Ruderman, a principal shareholder of the Company, has an investment. Terms of sales to this foreign agent were substantially the same as to unrelated foreign agents.

        In April 2004 the Company received $1,000,000 from Clarex Ltd., a major shareholder of the Company, in exchange for the issuance pursuant to Regulation D of a three-year Subordinated Convertible Promissory Note. The Note will bear interest at the rate of 6% per annum and has a maturity ddate of March 31, 2007. Interest will accrue yearly and along with principal may be converted into Common Stock, (and/or securities convertible into common shares), at a conversion rate equal to the purchase price of stock issued (and/or securities issued that are convertible into Common Stock) for cash after the date of the Note to an unrelated third party investor, or if no such issuance takes place within twelve months of the date of the Note, April 2004, at a price mutually agreed upon as fair value by the Issuer and Holder.

        In 2003, the Company issued a Subordinated Convertible Promissory Note pursuant to Regulation D for proceeds of $1,500,000. The Holder of the Note, Clarex, Ltd., is a major shareholder of the Company. The Note bears interest at the rate of 6% per annum and has a maturity date of January 31, 2006. The Note is convertible into Common Stock of the Company at a conversion price that shall be (a) the price at which Common Stock is first issued for cash after the date of the Note to an unrelated third party investor or (b) the price mutually agreed upon by the Issuer and Holder as its then fair market value if no such issuance has occurred within 12 months of the date of the Note, December 31, 2003.

        In June of 2003 we issued a $1,700,000 Secured Promissory Note to Clarex, Ltd., a major shareholder of the Company. The Secured Promissory Note was for a period of 36 months and bears interest at the rate of 6.% per annum. The Company's Board of Directors approved the issuance of 200,000 warrants to Clarex, Ltd. as a fee for the issuance of the Note and in the 2^nd quarter of 2004 approved the issuance of an additional 200,000 warrants as a fee for extending the note to June 30, 2007. The warrants are exercisable at $0.425 per share and $1.08 per share, respectively, approximately a 20% discount to market, and expire in March 2008 and May 2008. The Note is secured by all assets of the Company.

        In 2002, the Company issued a Subordinated Convertible Promissory Note pursuant to Regulation D for proceeds of $1,000,000. The Holder of the Note, Welland, Ltd., is a related party to Clarex Ltd., a major shareholder of the Company. The Note bears interest at the rate of 6% per annum and has a maturity date of January 31, 2006. The Note is convertible into common shares of the Company at a conversion price that shall be (a) the price at which Common Stock is first issued for cash after the date of the Note to an unrelated third party investor or (b) the price mutually agreed upon by the Issuer and Holder at its then fair market value if no such issuance has occurred within 24 months of the date of the Note, December 31, 2002.

        During the 2^nd quarter of 2004 the Company entered into an agreement with an investment banking firm to raise equity via a private placement that was not registered with the Securities and Exchange Commission. In July 2004 the Company issued 1,581,000 Units consisting of 1,581,000 shares and warrants to acquire an additional 1,185,750 shares at $1.35 per share. In addition, 262,276 Warrants were issued to Casimir Capital, LP, the placement agent for the private placement. The conversion of the above convertible notes in the aggregate principal amount of $3,500,000 is subject to a conversion price equal to the price at which equity is first raised for cash. As a result of the private placement the Subordinated Convertible Promissory Notes are now convertible into an aggregate of 3,500,000 Units consisting of 3,500,000 shares of Common Stock and Warrants to acquire 2,625,000 shares of Common Stock at a price of $1.35 per share.

46

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

        Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors and officers, and persons who own more than 10% of a registered class of the Company's equity securities, to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission. These persons are required by the Securities and Exchange Commission to furnish the Company with copies of all Section 16(a) reports that they file. Based solely on the Company's review of these reports and written representations furnished to the Company, the Company believes that in 2003 each of the reporting persons complied with these filing requirements, except that reports on Form 4 were not filed reporting the grant of stock options in January 2, 2003 to the following individuals in the amounts set forth next to their names:

Mr. Dan Lehrfeld	50,000 options
Ms. Maria Murray	24,000 options
Ms. Devaunshi Sampat	24,000 options
Mr. William S. Miraglia	24,000 options
Mr. Thomas Lenagh	12,000 options
Mr. Frank Wiedeman	12,000 options
Mr. Jan Winston	12,000 options
Mr. John Rich	12,000 options

        All options granted on this date expire on January 1, 2013. These late filings were inadvertent, and the required filings have been made.

DESCRIPTION OF CERTAIN DEBT

        The following is a summary of the material provisions of the agreements evidencing our material debt in effect on the date of this prospectus. The following is only a summary and it does not include all of the provisions of our material debt, copies of which have been filed as exhibits to our registration statement filed in connection with this offering and are available as set forth under "Where You Can Find More Information." This description assumes that proceeds from this offering will not be used to repay such debt, that the accrued interest and principal on our convertible notes have converted into shares of our Common Stock substantially on the same terms as our June 2004 private placement. See "Use of Proceeds." Set forth below is a summary of the principal terms of our secured promissory note. Certain of the terms and conditions described below are subject to important qualifications and exceptions.

Secured Promissory Notes

        On June 30, 2003, we issued approximately $1.7 million in aggregate principal amount of a 6% secured promissory note due June 30, 2007.

Principal, Maturity and Interest

        We currently have issued and outstanding approximately $1.7 million principal amount of a secured promissory note. The secured promissory note matures on June 30, 2007. Interest on the secured promissory note accrues at the rate of 6% per annum and is payable on the maturity date.

Ranking and Security

        The secured promissory note is secured by a first-priority lien, subject to permitted encumbrances, on substantially all of our assets.

47

Optional Prepayment

        The secured promissory note may be prepaid by us at our option, in whole or in part, at any time without premium or penalty upon written notice at least ten (10) business days prior to such prepayment.

Events of Default

        The secured promissory note contains events of default, including, but not limited to (1) defaults in the payment of principal or interest, (2) a merger or consolidation with or into any entity in which PPGI is not the surviving entity or the sale, transfer, lease or other disposition of all or any substantial portions of our assets, (3) the adoption of a plan of liquidation or dissolution by us, (4) our bankruptcy or other insolvency events.

LEGAL MATTERS

        The validity of the shares of Common Stock offered hereby will be passed upon for us by Lowenstein Sandler PC.

EXPERTS

        The consolidated financial statements as of December 31, 2003 and 2002, and for each of the three years in the period ended December 31, 2003, included in this prospectus and the related financial statement schedule included elsewhere in the registration statement have been audited by Holtz Rubenstein & Co., LLP, independent auditors, as stated in their report appearing herein (which report expresses an unqualified opinion, and have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

        We have filed with the SEC a registration statement on Form S-1 (including the exhibits, schedules, and amendments to the registration statement) under the Securities Act with respect to the shares of Common Stock offered by this prospectus. This prospectus does not contain all the information set forth in the registration statement. For further information with respect to us and the shares of Common Stock to be sold in this offering, we refer you to the registration statement. Statements contained in this prospectus as to the contents of any contract, agreement or other document to which we make reference are not necessarily complete. In each instance, we refer you to the copy of such contract, agreement or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by the more complete description of the matter involved.

        We are subject to the reporting and information requirements of the Securities and Exchange Act of 1934, as amended, and, as a result, file periodic and current reports, proxy statements, and other information with the SEC. You may read and copy this information at the Public Reference Room of the SEC located at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. Copies of all or any part of the registration statement may be obtained from the SEC's offices upon payment of fees prescribed by the SEC. The SEC maintains an Internet site that contains periodic and current reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of the SEC's website is http://www.sec.gov.

48

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance sheets as of June 30, 2004 (unaudited) and December 31, 2003	F-2
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2004 (unaudited)	F-3
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 and 2003 (unaudited)	F-4
Notes to Consolidated Financial Statements (unaudited)	F-5
Report of Holtz Rubenstein & Co., LLP, Independent Certified Public Accountants	F-8
Consolidated Balance Sheets as of December 31, 2003 and 2002	F-9
Consolidated Statements of Operations for the years ended December 31, 2003, 2002 and 2001	F-10
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2003, 2002 and 2001	F-11
Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001	F-12
Notes to Consolidated Financial Statements	F-13

F-1

PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

			June 30, 2004			December 31, 2003
			Unaudited
Assets
Current assets:
	Cash and cash equivalents		$	1,755,605		$	1,282,160
	Accounts receivable (after allowance for doubtful accounts of $40,000 in 2004 and 2003)			805,890			973,415
	Inventories			2,125,511			2,219,116
	Unbilled contract costs			—			191,767
	Other current assets			109,951			76,941
		Total Current Assets		4,874,957			4,743,399
Plant and equipment,
	Plant and equipment at cost			10,385,421			9,824,498
	Less: Accumulated depreciation and amortization			(6,893,095	)		(6,572,278	)
	Total plant and equipment			3,492,326			3,252,220
Precious Metals				309,565			309,565
Intangible Assets				443,750			443,750
Other Assets				203,368			102,187
		Total Assets	$	9,245,966		$	8,851,121
Liabilities and Shareholders' Equity
Current Liabilities:
	Note payable—Other		$	55,800		$	68,292
	Accounts payable and accrued liabilities			1,232,005			993,150
	Current obligations under capital leases			99,664			99,664
		Total current liabilities		1,387,469			1,161,106
Secured and Convertible Notes Payable				5,200,000			4,200,000
Other Long Term Notes				88,819			116,728
Capital Lease Obligations				40,309			88,848
		Total liabilities		6,716,597			5,566,682
Shareholders' equity:
	10% convertible preferred stock, Series A no par value; 500 shares issued and outstanding respectively			500,000			500,000
	10% convertible preferred stock, Series B no par value; 2,100 shares issued and outstanding respectively			2,100,000			2,100,000
	Common stock: $.01 par value; 40,000,000 authorized 5,579,903 shares issued at June 30, 2004 and 5,445,953 issued December 31, 2003			55,799			54,459
	Capital in excess of par value			9,698,003			9,534,523
	Accumulated deficit			(9,809,483	)		(8,889,593	)
				2,544,319			3,299,389
	Less—Common stock in treasury, at cost (4,600 shares respectively)			(14,950	)		(14,950	)
		Total Shareholders' Equity		2,529,369			3,284,439
		Total Liabilities & Shareholders' Equity	$	9,245,966		$	8,851,121

        See Notes to Consolidated Financial Statements

F-2

Photonic Products Group, Inc.
Consolidated Statements of Operations
(Unaudited)

		Three Months Ended June 30,						Six Months Ended June 30
		2004			2003			2004			2003
Total Revenue			1,917,221			1,147,117			3,723,123			2,347,960
Cost and Expenses:
	Cost of goods sold		1,384,632			945,261			2,913,536			1,866,018
	Selling, general & administrative expenses		705,667			544,477			1,361,505			1,093,744
	Internal R & D expenses		16,688			25,343			52,096			80,911
Total Cost and Expenses			2,106,987			1,515,081			4,327,137			3,040,673
Operating loss			(189,766	)		(367,964	)		(604,014	)		(692,713	)
Other income (expense):
	Interest expense		(76,470	)		(71,383	)		(153,537	)		(105,837	)
	Other		1,514			1,160			2,486			2,496
Net Loss			(264,722	)		(438,187	)		(755,065	)		(796,054	)
Preferred stock dividends			(164,820	)		(53,600	)		(164,820	)		(53,600	)
Net loss applicable to common shareholders		$	(429,542	)	$	(491,787	)	$	(919,885	)	$	(849,654	)
Net loss per common share—basic and diluted		$	(0.08	)	$	(0.09	)	$	(0.17	)	$	(0.16	)
Weighted average shares outstanding			5,480,386			5,283,690			5,457,759			5,283,690

        See Notes to Consolidated Financial Statements

F-3

PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

			Six Months Ended June 30,
			2004			2003
			(Unaudited)
Cash flows from operating activities:
	Net loss		$	(755,065	)	$	(796,045	)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
	Depreciation and amortization			320,817			284,170
	401K common stock contribution			—			11,870
	Changes in operating assets and liabilities:
	Accounts receivable			167,525			207,868
	Inventories			93,605			(221,578	)
	Unbilled contract costs			191,769			75,301
	Other current assets			(33,010	)		(28,778	)
	Other assets			(101,181	)		(2,603	)
	Accounts payable and accrued liabilities			238,855			46,943
	Total adjustments			878,378			373,193
		Net cash provided by (used in) operating activities		123,313			(422,852	)
Cash flows from investing activities:
	Capital expenditures			(560,928	)		(52,205	)
		Net cash used in investing activities		(560,928	)		(52,205	)
Cash flows from financing activities:
	Proceeds from secured notes payable						1,700,000
	Proceeds from senior convertible debenture			1,000,000
	Principal payments of bank debt			(1,678,623	)
	Principal payments of notes			(40,401	)		(74,950	)
	Principal payments of capital lease obligations			(48,539	)		(49,719	)
Net cash provided by (used in) financing activities				911,060			(103,292	)
Net increase (decrease) in cash and cash equivalents				473,445			(578,349	)
Cash and cash equivalents at beginning of period				1,282,160			1,155,074
Cash and cash equivalents at end of period			$	1,755,605		$	576,725

        See Notes to Consolidated Financial Statements

F-4

PHOTONIC PRODUCTS GROUP, Inc.
Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1—SUMMARY OF ACCOUNTING POLICIES

Basis of Presentation

        The accompanying unaudited interim consolidated financial statements of PHOTONIC PRODUCTS GROUP, Inc. (the "Company") reflect all adjustments, which are of a normal recurring nature, and disclosures which, in the opinion of management, are necessary for a fair statement of results for the interim periods. It is suggested that these consolidated financial statements be read in conjunction with the audited consolidated financial statements as of December 31, 2003 and 2002 and for the years then ended and notes thereto included in the Company's report on Form 10-K, filed with the Securities and Exchange Commission.

Inventory Valuation

        Inventories are valued on a lower of cost (first-in-first-out basis) or market basis (net realizable value). Work In Process inventory for the period is stated at actual cost, not in excess of estimated realizable value.

        Inventories are comprised of the following:

	June 30, 2004		December 31, 2003
Raw materials	$	548,836	$	543,116
Work in process, including manufactured parts and components		1,002,106		1,275,000
Finished goods		574,569		401,000
	$	2,125,511	$	2,219,116

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 statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. A valuation allowance is established when deferred tax assets are not likely to be realized.

Net Loss Per Share

        Basic and diluted net loss per share is computed using the weighted average number of common shares outstanding for the period ended June 30, 2004. The potential dilutive effect of securities, which are common share equivalents, options, warrants, convertible notes and convertible preferred stock and their associated dividends have been excluded from the diluted computation because their effect is antidilutive.

Stock Based Compensation

        The Company accounts for stock-based compensation arrangements in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to

F-5

Employees. Accordingly, no compensation costs for options has been recognized in the financial statements. The chart below set forth the company's net loss per share for the three and six months ended June 30, 2004 and 2003, as reported on a pro forma basis as if the compensation cost of stock options had been determined in accordance with SFAS 123.

		For the three months ended						For the six months end
		June 30, 2004			June 30, 2003			June 30, 2004			June 30, 2003
Net Loss, as reported		$	(429,542	)	$	(491,787	)	$	(919,885	)	$	(849,654	)
	Deduct: Total stock-based employee Compensation expense determined under fair value based method for all awards, net of related tax effects		(33,414	)		(47,124	)		(66,827	)		(94,248	)
Pro forma net loss		$	(462,956	)	$	(538,911	)	$	(986,712	)	$	(943,902	)
Basic and diluted income per share:
	As Reported		(.08	)		(.09	)		(.17	)		(.16	)
	Pro forma		(.08	)		(.16	)		(.18	)		(.18	)

NOTE 2—CHANGES IN LONG TERM DEBT

        At the end of the fourth quarter of 2002 the Company received $1,000,000 in proceeds from the issuance of a Subordinated Convertible Promissory Note. The Note is due in January 2006 and bears an interest rate of 6%. The note was amended in 2004 to clarify its conversion features. Interest accrues yearly and along with principal may be converted into Common Stock, (and/or securities convertible into common shares), at a conversion rate equal to the purchase price of stock issued (and/or securities issued that are convertible into Common Stock) for cash after the date of the Note to an unrelated third party investor, or if no such issuance takes place within twenty four months of the date of the Note, at a price mutually agreed upon as fair value by the Issuer and Holder. The Holder of the Note is a related party to a major shareholder of the Company.

        In January 2003 the Company was in violation of certain financial covenants required under the loan agreements. As a result Wachovia Bank sold both the asset based loan and working capital revolver to APC Investments. In June 2003 the Company paid off the loan held by APC with $1,700,000 in proceeds received from the issuance of a Secured Promissory Note that is held by a major investor in the Company. The Secured Promissory Note is for a period of 30 months and bears interest at the rate of 6.5% per annum. The Company's Board of Directors approved the issuance of 200,000 warrants to the major investor as a fee for the issuance of the Note and in the 1st quarter of 2004 approved the issuance of an additional 200,000 warrants as a fee for extending the note to January 31, 2005. The warrants are exercisable at $0.425 per share and $1.08 per share, respectively, approximately a 15% discount to market, and expire in March 2008 and May 2008. The Note is secured by all assets of the Company.

        At the end of the fourth quarter of 2003 the Company received $1,500,000 in proceeds from the issuance of a Subordinated Convertible Promissory Note. The Note is due in January 2006 and bears

F-6

an interest rate of 6%. The note was amended in 2004 to clarify its conversion features. Interest accrues yearly and along with principal may be converted into Common Stock, and/or securities convertible into Common Stock, at a conversion rate equal to the purchase price of stock issued, and/or securities issued that are convertible into Common Stock, for cash after the date of the Note to an unrelated third party investor, or if no such issuance takes place within twelve months of the date of the Note, at a price mutually agreed upon as fair value by the Issuer and Holder. The Holder of the Note is a related party to a major shareholder of the Company. The proceeds from the Note are intended for use in the Company's acquisition program.

        In April 2004 the Company received $1,000,000 in proceeds from the issuance of a Subordinated Convertible Promissory Note. The Note is due in March 2007 and bears an interest rate of 6%. Interest accrues yearly and along with principal may be converted into Common Stock, (and/or securities convertible into common shares), at a conversion rate equal to the purchase price of stock issued (and/or securities issued that are convertible into Common Stock) for cash after the date of the Note to an unrelated third party investor, or if no such issuance takes place within twenty four months of the date of the Note, at a price mutually agreed upon as fair value by the Issuer and Holder. The Holder of the Note is a related party to a major shareholder of the Company.

        The conversion of the above convertible notes in the aggregate principal amount of $3,500,000 is subject to a conversion price equal to the price at which equity is first raised for cash after the issuance of the notes. During the 2nd quarter of 2004 the Company entered into an agreement to raise equity via a private placement, as described in the Capital and Liquidity Resources section. As a result of the private placement the Notes are now convertible into an aggregate of 3,500,000 Units consisting of 3,500,000 shares of common stock and Warrants to acquire 2,625,000 shares of common stock at a price of $1.35 per share.

F-7

Independent Auditors' Report

         Board of Directors and Shareholders
Photonic Products Group, Inc. and Subsidiaries
Northvale, New Jersey

        We have audited the accompanying consolidated balance sheets Photonic Products Group, Inc. and Subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of operations, shareholders' equity and cash flows for the three years ended December 31, 2003. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Photonic Products Group, Inc. and Subsidiaries as of December 31, 2003 and 2002 and the results of their operations and their cash flows for the three years then ended, in conformity with accounting principles generally accepted in the United States of America.

HOLTZ RUBENSTEIN & CO., LLP

Melville, New York
March 25, 2004

F-8

PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

			December 31,
			2003			2002
Assets
Current assets:
	Cash and cash equivalents		$	1,282,160		$	1,155,074
	Accounts receivable (after allowance for doubtful accounts of $40,000 in 2003 and 2002)			973,415			1,041,262
	Inventories			2,219,116			2,082,932
	Unbilled contract costs			191,767			341,541
	Other current assets			76,941			80,675
		Total Current Assets		4,743,399			4,701,484
Plant and equipment,
	Plant and equipment at cost			9,824,498			9,307,753
	Less: Accumulated depreciation and amortization			(6,572,278	)		(6,008,008	)
	Total plant and equipment			3,252,220			3,299,745
Precious Metals				309,565			309,565
Intangible Assets				443,750
Other Assets				102,187			198,131
		Total Assets	$	8,851,121		$	8,508,925
Liabilities and Shareholders' Equity
Current Liabilities:
	Notes Payable—Bank		$	—		$	751,074
	Note payable—Other			68,292			124,917
	Current portion of long term debt			—			927,549
	Accounts payable and accrued liabilities			993,150			368,337
	Current obligations under capital leases			99,664			98,657
		Total current liabilities		1,161,106			2,270,534
Related Party Covertible and Secured Notes Payable				4,200,000			1,000,000
Other Long Term Notes				116,728			—
Capital Lease Obligations				88,848			188,513
		Total liabilities		5,566,682			3,459,047
Shareholders' equity:
	10% convertible preferred stock, Series A no par value; 500 shares issued and outstanding respectively			500,000			500,000
	10% convertible preferred stock, Series B no par value; 2,100 shares issued and outstanding respectively			2,100,000			2,100,000
Common stock: $.01 par value; 40,000,000 authorized 5,445,903 shares issued at December 31, 2003 and 5,283,640 issued at December 31, 2002				54,459			52,836
	Capital in excess of par value			9,534,523			9,470,676
	Accumulated deficit			(8,889,593	)		(7,058,684	)
				3,299,389			5,064,828
	Less—Common stock in treasury, at cost (4,600 shares respectively)			(14,950	)		(14,950	)
		Total Shareholders' Equity		3,284,439			5,049,878
		Total Liabilities & Shareholders' Equity	$	8,851,121		$	8,508,925

See Notes to Consolidated Financial Statements

F-9

PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

		Years Ended December 31,
		2003			2002			2001
REVENUES
	Net sales	$	5,388,184		$	5,569,118		$	8,075,205
COST AND EXPENSES
	Cost of goods sold		3,917,123			4,662,599			5,078,352
	Selling, general and admistrative expense		2,389,547			2,276,495			2,501,621
	Internal research and development expense		153,843			134,424			201,603
	Special charges		—			299,733
			7,042,513			7,073,518			8,081,309
OPERATING LOSS			(1,654,329	)		(1,504,400	)		(6,104	)
OTHER INCOME (EXPENSE)
	Gain on sale of technology		—			—			44,800
	Interest expense		(270,946	)		(135,001	)		(91,154	)
	Interest income		4,781			10,883			50,919
	Other		8,950			13,126			(38,071	)
			(257,215	)		(110,992	)		(33,506	)
LOSS BEFORE INCOME TAX BENEFIT (PROVISION) AND PREFERRED STOCK DIVIDENDS			(1,911,544	)		(1,615,392	)		(39,610	)
INCOME TAX BENEFIT (PROVISION)			134,235			(100,580	)		83,244
NET (LOSS) PROFIT			(1,777,309	)		(1,715,972	)		43,634
PREFERRED STOCK DIVIDENDS			(53,600	)		(120,600	)		(155,000	)
NET LOSS APPLICABLE TO TO COMMMON SHAREHOLDERS		$	(1,830,909	)	$	(1,836,572	)	$	(111,366	)
NET LOSS PER COMMON SHARE-BASIC		$	(0.35	)	$	(0.35	)	$	(0.02	)
NET LOSS PER COMMON SHARE-DILUTED		$	(0.35	)	$	(0.35	)	$	(0.02	)

See notes to consolidated financial statements

F-10

PHOTONIC PRODUCTS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

				Preferred Stock (Series A)			Preferred Stock (Series B)
	Common Stock
										Capital in excess of par value					Payable/ Receivable			Treasury Stock			Total Shareholders' Equity
	Shares	Amount		Shares	Amount		Shares	Amount				Deficit
Balance, December 31, 2000	4,957,678	$	49,577	500	$	500,000	2,100	$	2,100,000	$	9,084,898	$	(5,110,745	)	$	(220,000	)	$	(14,950	)	$	6,388,780
Exercise of Options	29,250		293	—		—	—		—		30,833		—			—			—			31,126
Exercise of Warrants	51,675		516	—		—	—		—		56,683		—			—			—			57,199
Dividend on Preferred Stock	92,000		920	—		—	—		—		154,080		(155,000	)		—			—			—
Subscription received	—		—	—		—	—		—		—		—			220,000			—			220,000
Contribution	5,000		50	—		—	—		—		4,700		—			—			—			4,750
Net income for the year	—		—	—		—	—		—		—		43,633			—			—			43,633
Balance, December 31, 2001	5,135,603		51,356	500		500,000	2,100		2,100,000		9,331,194		(5,222,112	)		—			(14,950	)		6,745,488
401K contribution	14,037		140	—		—	—		—		20222		—									20,362
Dividend on Preferred Stock	134,000		1,340	—		—	—		—		119260		(120,600	)								—
Net loss for the year	—		—	—		—	—		—		—		(1,715,972	)		—			—			(1,715,972	)
Balance, December 31, 2002	5,283,640		52,836	500		500,000	2,100		2,100,000		9,470,676		(7,058,684	)		—			(14,950	)		5,049,878
401K contribution	28,263		283	—		—	—		—		11,587		—			—			—			11,870
Dividend on Preferred Stock	134,000		1,340	—		—	—		—		52,260		(53,600	)		—			—			—
Net loss for the period	—		—	—		—	—		—		—		(1,777,309	)		—			—			(1,777,309	)
Balance, December 31, 2003	5,445,903	$	54,459	500	$	500,000	2,100	$	2,100,000	$	9,534,523	$	(8,889,593	)	$	—		$	(14,950	)	$	3,284,439

See notes to consolidated financial statements

F-11

PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

			Years Ended December 31,
			2003			2002			2001
Cash flows from operating activities:
	Net (loss) profit		$	(1,777,309	)	$	(1,715,972	)	$	43,634
Adjustments to reconcile net loss to cash used in operating activities:
	Depreciation and amortization			566,764			508,510			349,980
	Deferred taxes			—			100,000			(100,000	)
	401K common stock contribution			11,870			20,362			4,750
	Allowance for uncollectible accounts						(14,000	)		—
	Inventory reserve			475,000
	Changes in assets and liabilities:
	Accounts receivable			244,670			268,132			(58,344	)
	Inventories			(319,892	)		273,953			(594,195	)
	Unbilled contract costs			149,774			50,215			132,347
	Other current assets			7,656			59,691			(78,059	)
	Other assets			102,097			3,329			117,876
	Accounts payable and accrued liabilities			255,987			(361,055	)		(287,929	)
	Total adjustments			1,493,926			909,137			(513,574	)
		Net cash used in operating activities		(283,383	)		(806,835	)		(469,940	)
Cash flows from investing activities:
	Capital expenditures			(101,045	)		(553,556	)		(2,223,850	)
	Net cash used for acquisition of business			(183,780	)		—			—
		Net cash used in investing activities		(284,825	)		(553,556	)		(2,223,850	)
Cash flows from financing activities:
	Proceeds from preferred stock									220,000
	Proceeds from notes payable			3,200,000			2,125,991			750,000
	Proceeds from evercise of warrants and options			—			—			88,325
	Principal payments of notes payable			(727,425	)		(72,452	)		—
	Principal payments of bank debt			(1,678,623	)		—			—
	Principal payments of capital lease obligations			(98,658	)		(87,023	)		(49,464	)
		Net cash provided by financing activities		695,294			1,966,516			1,008,861
Net increase (decrease) in cash and cash equivalents				127,086			606,125			(1,684,929	)
Cash and cash equivalents at beginning of the year				1,155,074			548,949			2,233,878
Cash and cash equivalents at end of the year			$	1,282,160		$	1,155,074		$	548,949

See Notes to Consolidated Financial Statements

F-12

PHOTONIC PRODUCTS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED DECEMBER 31, 2003

1.    Nature of Business and Summary of Significant Accounting Policies

        a.    Nature of Operations

        PHOTONIC PRODUCTS GROUP, Inc. and Subsidiaries (the "Company", formerly known as Inrad, Inc.) is a manufacturer of crystals, crystal devices, electro-optic and optical components, and sophisticated laser subsystems and instruments. The Company's principal customers include commercial instrumentation companies and OEM laser manufacturers, research laboratories, government agencies, and defense contractors. The Company's products are sold domestically using its own sales staff, and in major overseas markets, principally Europe and the Far East, using independent sales agents.

        b.    Principles of consolidation

        The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned Subsidiaries. Upon consolidation, all intercompany accounts and transactions are eliminated.

        c.    Allowance for doubtful accounts

        Management must make estimates of the uncollectability of accounts receivable. Management specifically analyzes accounts receivable and analyzes historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts.

        d.    Depreciation and amortization

        Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Amortization of leasehold improvements is computed using the straight-line method over the estimated useful lives of the related assets or the remaining term of the lease, whichever is shorter. Maintenance and repairs of property and equipment are charged to operations and major improvements are capitalized. Upon retirement, sale or other disposition of property and equipment, the cost and accumulated depreciation are eliminated from the accounts and gain or loss is included in operations.

        e.    Inventories

        Inventories, including certain precious metals consumed in the manufacturing process, are stated at the lower of cost (first-in, first-out method) or market.

        f.    Income taxes

        Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

        g.    Impairment of long-lived assets

        In accordance with SFAS No. 144, long-lived assets, such as property, plant and equipment and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimate undiscounted future cash flows expected to be generated by the asset. If the carrying amount

F-13

of an asset exceeds its estimated future cash flows, and impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

        Goodwill and intangible assets not subject to amortization are tested annually for impairment and are tested for impairment more frequently if events and circumstances indicate that the assets might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset's fair value.

        h.    Intangible assets resulting from business acquisition

        Intangible assets resulting from the Company's business acquisition principally consists of non-contractual customer relationships that approximated $446,000. The intangible assets are amortized on a straight-line basis over the assets' estimated useful life up to 14 years. The Company periodically evaluates whether events or circumstances have occurred indicating the carrying amount of intangible assets may not be recoverable. When factors indicate that intangible assets should be evaluated for possible impairment, the Company uses an estimate of the associated undiscounted future cash flows compared to the related carrying amount of assets to determine if an impairment loss should be recognized.

        The gross carrying amount of intangible assets as of December 31, 2003 was $446,000. Accumulated amortization related to intangible assets approximates $2,000 as of December 31, 2003. Amortization expense was approximately $2,000 for the year ended December 31, 2003. Aggregate amortization for the five succeeding years ending December 31, 2004 through December 31, 2009 approximates $32,000.

        i.    Stock-based compensation

        The Company accounts for stock-based compensation arrangements in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and accounts for stock issued for services provided by other than employees in accordance with and complies with the disclosure provisions of SFAS No. 123, Accounting for Stock-Based Compensation. Under APB No. 25, compensation expense is based on the difference, if any, on the date of the grant, between the fair value of the Company's stock and the exercise price. During December 2003, the Company issued all stock options at fair market value. A new measurement date for purposes of determining compensation is established when there is a substantive change to the terms of an underlying option.

         (ii)  The Company has elected the disclosure-only provisions of Statement of Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation" ("FASB 123") in accounting for its employee stock options. Accordingly, no compensation expense has been recognized. Had the Company recorded compensation expense for the stock options based on the fair value at the grant date for awards, consistent with the provisions of FASB 123, the Company's net income (loss) and net income

F-14

(loss) per share applicable to common shareholders would have changed to the following pro forma amounts:

				Years Ended December 31,
				2003			2002			2001
Net (loss) income:
		As reported		$	(1,830,909	)	$	(1,836,572	)	$	(111,366	)
		Pro forma			(1,907,464	)		(2,188,584	)		(320,423	)
	Income (loss) per share:
		Basic:
			As reported	$	(.35	)	$	(.35	)	$	(.02	)
			Pro forma		(.36	)		(.42	)		(.06	)
		Diluted:
			As reported	$	(.35	)	$	(.35	)	$	(.02	)
			Pro forma		(.36	)		(.42	)		(.06	)

        The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The following range of weighted-average assumptions were used for grants during the years ended December 31, 2003, 2002 and 2001:

	Years Ended December 31,
	2003		2002		2001
Dividend yield	0.00	%	0.00	%	0.00	%
Volatility	127.16	%	128.11	%	168.67	%
Risk-free interest rate	5.2	%	5.2	%	6.0	%
Expected life	10 years		10 years		10 years

        j.    Revenue recognition

        The company records revenue, other than on Contract R&D, when the product is shipped. Revenues from sponsored research and development are recorded using the percentage-of-completion method. Under this method, revenues are recognized based on direct labor and other direct costs incurred compared with total estimated direct costs. Contract R&D costs include allocations of plant overhead and general and administrative costs. Losses on contracts are recorded when identified.

        k.    Internal research and development costs

        Internal research and development costs are charged to expense as incurred.

        l.    Precious metals

        Precious metals not consumed in the manufacturing process are valued at cost, cost being determined on the first-in, first-out basis.

F-15

        m.    Use of estimates

        The preparation of financial statements in conformity with generally accepted accounting principles 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 during the reporting period. Actual amounts could differ from those estimates.

        n.    Advertising costs

        Advertising costs are charged to operations when the advertising first takes place. Included in selling, general and administrative expenses are advertising costs of $32,000, $62,000 and $45,000 for the years ended December 31, 2003, 2002 and 2001.

        o.    Statements of cash flows

        For purposes of the consolidated statements of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

        Interest paid during the years ended December 31, 2003, 2002 and 2001 was $114,946, $135,001 and $91,154, respectively.

        Income taxes paid were $1,000 in 2003, $580 in 2002, $16,756 in 2001.

        p.    Concentration of risk

        The Company invests its excess cash in deposits and money market accounts with major financial institutions and in commercial paper of companies with strong credit ratings. Generally, the investments mature within ninety days, and therefore, are subject to little risk. The Company has not experienced losses related to these investments.

        The concentration of credit risk in the Company's accounts receivable is mitigated by the Company's credit evaluation process, reasonably short collection terms and the geographical dispersion of revenue.

        The Company utilizes many relatively uncommon materials and compounds to manufacture its products. Therefore, any failure by its suppliers to deliver materials of an adequate quality and quantity could have an adverse effect on the Company's ability to meet the commitments of its customers.

        q.    Net (loss) income per common share

        The basic net (loss) income per share is computed using weighted average number of common shares outstanding for the applicable period. The diluted (loss) income per share is computed using the weighted average number of common shares plus common equivalent shares outstanding, except if the effect on the per share amounts, including equivalents, would be anti-dilutive.

        r.    Shipping and handling costs

        The Company has included freight out as a component of selling, general and administrative expenses that amounted to $26,643 in 2003, $30,242 in 2002 and $42,675 in 2001.

F-16

        s.    Recently issued accounting pronouncements

        In November 2002, the FASB issued FASB Interpretation (FIN) No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements No. 5, 57 and 107 and Rescission of FASB Interpretation No. 34". FIN 45 elaborates on the existing disclosure requirements for most guarantees, including loan guarantees such as standby letters of credit and warranty obligations. It also clarifies that at the time a company issues a guarantee, a company must recognize an initial liability for the fair value of the obligations it assumes under that guarantee and must disclose that information in its interim and annual financial statements. The provisions of FIN 45 relating to initial recognition and measurement must be applied on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of the initial recognition and measurement provisions did not have a significant impact on the Company's financial condition or results of operations. The disclosure requirements of FIN 45 were effective for both interim and annual periods that end after December 15, 2002. The adoption of FIN No. 45 did not have a material impact on the Company's consolidated financial statements.

        The Financial Accounting Standards Board (FASB) issued interpretation No. 46 (FIN 46), "Consolidation of Variable Interest Entities," in January 2003, and amended the Interpretation in December 2003. FIN 46 requires an investor with a majority of the variable interests (primary beneficiary) in a variable interest entity (VIE) to consolidate the entity and also requires majority and significant variable interest investors to provide certain disclosures. A VIE is an entity in which the voting equity investors do not have a financial controlling interest, or the equity investment at risk, is sufficient to finance the entity's activities without receiving additional subordinated financial support from the other parties. Development-stage entities that have sufficient equity invested to finance the activities they are currently engaged in and entities that are businesses, as defined in the Interpretation, are not considered VIE's. The provisions of FIN. 46 were effective immediately for all arrangements entered into with new VIE's created after January 31, 2003. The adoption of FIN No. 46 did not have a material impact on the Company's consolidated financial statements.

        In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". This Statement clarifies accounting and reporting for derivative instruments, including certain embedded derivatives, and for hedging activities under SFAS No. 133. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The guidance should be applied prospectively. The adoption of SFAS No. 149 did not have a material impact on the Company's consolidated financial statements.

        In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". This Statement was developed to respond to concerns expressed by users of financial statements about issuers' classification in the statement of financial position of certain financial instruments that have characteristics of both liabilities and equity but that have been presented either entirely as equity or between the liabilities section and the equity section of the statement of financial position "mezzanine equity"). This Statement also addresses questions about the classification of certain financial instruments that embody obligations to issue equity shares. SFAS No. 150 aims to eliminate diversity in practice by requiring certain types of "freestanding" financial instruments, such as mandatorily redeemable instruments, to be reported as liabilities. Preferred

F-17

dividends on these instruments are now classified as interest expense. Retroactive reclassification of amounts reported in historical financial statements for periods prior to the effective date of SFAS No. 150 is not permitted. The provisions of SFAS No. 150, which also include a number of new disclosure requirements, was effective for instruments entered into or modified after May 31, 2003 and pre-existing instruments as of the beginning of the first interim period that commenced after June 15, 2003.

2.    Inventories

        Inventories are comprised of the following:

	December 31,
	2003		2002
Raw materials	$	543,116	$	379,838
Work in process, including manufactured parts and components		1,275,000		1,510,890
Finished goods		401,000		192,204
	$	2,219,116	$	2,082,932

3.    Property and Equipment

        Property and equipment are comprised of the following:

	December 31,
	2003		2002
Office and computer equipment	$	919,725	$	863,603
Machinery and equipment		7,544,364		7,106,236
Leasehold improvements		1,360,409		1,337,914
		9,824,498		9,307,753
Less accumulated depreciation and amortization		6,572,278		6,008,008
	$	3,252,220	$	3,299,745

4.    Bank Loans

        In January 2002, the Company repaid its obligation with its bank and entered into a new agreement with another bank. This agreement provided for a $1,000,000 Line of Credit at the bank's prime rate, and a $1,000,000 Asset Based Loan at 5.61%.

        In January 2003, the Company was in violation of certain financial covenants required under the loan agreements the Bank agreed to extend the loans through March 2003. As a result of the violations of the covenants all bank debt had been classified as a current liability in 2002.

F-18

        In June 2003, the Bank sold the then outstanding loans aggregating approximately $1,680,000 to a third party who demanded payment due to default of certain financial covenants contained in the loan documents. In June 2003, the Company received $1,700,000 from a major Shareholder and Debt Holder of the Company. The proceeds of the note were used to pay the outstanding bank debt. The note is secured by the assets of the Company. The note bears interest at the rate of 6% per annum and is due January 2005.

5.    Subordinated Convertible Promissory Note

        In 2003, the Company issued a Subordinated Convertible Promissory Note for proceeds of $1,500,000. The note was amended in 2004 to clarify its conversion features. The Holder of the Note is a major Shareholder and Debt Holder of the Company. The note bears interest at the rate of 6% per annum and has a maturity date of January 31, 2006. The note is convertible into common shares (and/or securities convertible into common shares) of the Company at a conversion price that shall be (a) the price at which common stock (or securities convertible into common stock) is first issued for cash after the date of the Note to an unrelated third party investor or (b) the price mutually agreed upon by the Issuer and Holder at its then fair market value if no such issuance has occurred within 12 months of December 31, 2003, the date of the Note.

        In 2002, the Company issued a Subordinated Convertible Promissory Note for proceeds of $1,000,000. The note was amended in 2004 to clarify its conversion features. The Holder of the Note is a related party to a major Shareholder of the Company. The note bears interest at the rate of 6% per annum and has a maturity date of January 31, 2006. The note is convertible into common shares (and/or securities convertible into common shares) of the Company at a conversion price that shall be (a) the price at which common stock (or securities convertible into common stock) is first issued for cash after the date of the Note to an unrelated third party investor or (b) the price mutually agreed upon by the Issuer and Holder at its then fair market value if no such issuance has occurred within 24 months of December 31, 2002, the date of the Note.

6.    Notes Payable Other

        At the time of the purchase of Laser Optics, Inc., the Company converted certain liabilities to notes payable. Notes totaling $100,728 were issued to former officers of Laser Optics, Inc. for back pay and unreimbursed business expenses. These notes are for a three year period and carry an interest rate defined as the prime rate in the United States as published in the Wall Street Journal. A note in the amount of $86,777 was issued to the former landlord for back rent. It is a 36-month note with an interest rate of 2% per annum. At the time of the closing a former officer of Laser Optics, Inc. received a $15,000 prepayment on his note. All note balances are payable monthly commencing January 2004.

F-19

        Notes payable other consist of the following:

		December 31,
		2003		2002
	Notes payable, payable in aggregate monthly installments of $5,017, including interest at rates ranging from 2.0% to prime (4% at December 31, 2003) expiring in November 2006,	$	185,020	$	—
	Less current portion		68,292		—
Long-term debt, excluding current portion		$	116,728	$	—

        Notes payable other, mature as follows:

2004	$	68,292
2005		57,490
2006		59,238
	$	185,020

7.    Accounts Payable and Accrued Expenses

        Accounts payable and accrued expenses are comprised of the following:

	December 31,
	2003		2002
Trade accounts payable and accrued purchases	$	318,090	$	131,903
Accrued vacation		251,794		79,017
Accrued payroll		92,391		100,267
Accrued interest		156,000
Accrued relocation costs		107,000
Accrued expenses—other		67,875		57,150
	$	993,150	$	368,337

F-20

8.    Capital Leases

        Capital leases consist of the following:

	December 31,
	2003		2002
Capital leases, payable in aggregate monthly installments of $10,000, including interest at rates ranging from 11.0% to 11.6% expiring through October 2005, collateralized by equipment	$	188,512	$	287,169
Less current portion		99,664		98,657
Long-term debt, excluding current portion	$	88,848	$	188,512

        Maturities of capital leases are as follows:

Year Ending December 31,
2004		124,543
2005		95,477
Total minimum payments		220,020
Less amounts representing interest		31,508
Present value of minimum payments	$	188,512

        Capital lease obligations are collateralized by property and equipment with cost and related accumulated depreciation approximating $415,000 and $134,000 respectively at December 31, 2003.

9.    Income Taxes

        A reconciliation of the income tax (benefit) computed at the statutory Federal income tax rate to the reported amount follows:

	Year Ended December 31,
	2003			2002			2001
Federal statutory rate		34	%		34	%		34	%
Tax provision (benefit) at Federal statutory rates	$	(604,255	)	$	(549,233	)	$	14,836
Loss in excess of available benefit		604,255			549,233			—
Change in valuation allowance		—			100,000			(114,836	)
State taxes		(134,235	)		580			16,756
	$	(134,235	)	$	100,580		$	(83,244	)

        At December 31, 2003, the Company has Federal and State net operating loss carryforwards for tax purposes of approximately $8,814,000 and $1,497,000, respectively. The tax loss carryforwards expire at various dates through 2023.

        The State of New Jersey has enacted a program that allows new or emerging technology and biotechnology businesses to sell their unused Net Operating Loss (NOL) carryover to any corporation

F-21

for at least 75% of the value of the tax benefits. In 2003, the Company sold $1,767,783 of their NOL for $135,235.

        Internal Revenue Code Section 382 places a limitation on the utilization of Federal net operating loss and other credit carryforwards when an ownership change, as defined by the tax law, occurs. Generally, this occurs when a greater than 50 percentage point change in ownership occurs. Accordingly, the actual utilization of the net operating loss and carryfowards for tax purposes may be limited annually to a percentage (approximately 6%) of the fair market value of the Company at the time of any such ownership change.

        The provision (benefit) for income taxes consists of the following:

			Years Ended December 31,
			2003			2002		2001
Current:
	State		$	(134,235	)	$	580	$	16,756
Deferred:
	Federal			—			100,000		(100,000	)
	State			—			—		—
		Total	$	(134,235	)	$	100,580	$	(83,244	)

        Deferred tax assets (liabilities) comprise the following:

	December 31,
	2003			2002
Inventory reserves	$	240,000		$	50,000
Vacation liabilities		101,000			32,000
Other		32,000			83,000
Depreciation		(21,000	)		(3,000	)
Loss carryforwards		2,996,000			2,500,000
Gross deferred tax assets		3,348,000			2,662,000
Valuation allowance		(3,348,000	)		(2,662,000	)
	$	—		$	—

10.    Related Party Transactions

        During the years ended December 31, 2003, 2002 and 2001 approximately 3%, 4%, and 3%, respectively of the Company's net product sales were through a foreign agent, in which Warren Ruderman, a principal shareholder has an investment. Terms of sales to this foreign agent were substantially the same as to unrelated foreign agents.

F-22

        During 2003 Clarex, LTD. A shareowner and debt holder received a 6% Secured Promissory Note for $1,700,000 due December 2005. In October 2003 Clarex, LTD received a $1,500,000, 6% Convertible Promissory Note due January 2006.

        During 2002, Welland Ltd., a related party to Clarex, Ltd., received a 6% Subordinated Convertible Promissory Note due January 31, 2006, resulting in proceeds to the Company of $1,000,000.

11.    Commitments

        a.    Lease commitment

        PPGI occupies approximately 31,000 square feet of space located at 181 Legrand Avenue, Northvale, New Jersey pursuant to a net lease expiring on October 31, 2006. PPGI has an option to renew the Northvale lease for an additional term of five years. In November 2003, the Company exercised its option to lease 11,000 square feet of additional adjoining space in the same building, bringing the total square feet of space occupied by PPGI in Northvale, New Jersey to 42,000 square feet. Laser Optics Holdings, Inc., a subsidiary of the Company, acquired the rights to lease 8,000 square feet of space in Bethel, CT, formerly occupied by Laser Optics, Inc., upon the acquisition of Laser Optics, Inc. This lease expires in May 2004, and the Company has the right to renew the lease on a month-by-month basis, at its sole option, for three months. The Company does not plan to renew the lease, and it intends to vacate the premises upon the expiration of such lease in May 2004 and relocate the facility to Northvale, NJ. Rental expense was approximately $238,000, $224,000 and $212,000 in 2003, 2002 and 2001, respectively, and real estate taxes were $48,000, $41,000 and $39,000 in 2003, 20021 and 2001, respectively.

        Future minimum annual rentals are payable as follows:

Year Ending December 31,
2004	$	304,000
2005	$	315,000
2006	$	325,000

        b.    Retirement plans

        The Company maintains a 401(k) savings plan for all eligible employees (as defined in the plan). The 401(k) plan allows employees to contribute from 1% to 15% of their compensation on a salary reduction, pre-tax basis. The 401(k) plan also provides that the Company, at the discretion of the Board of Directors, may match employee contributions. The Company contributed $12,945 in the form of 25,891 shares of the Company's common stock in 2003, distributed in March 2004. The Company contributed $11,870 in the form of 28,263 shares of the Company's common stock in 2002, distributed in March 2003

F-23

        c.    Employment agreements

        The Company is party to an employment agreement with an officer that provides for a minimum annual salary. The aggregate minimum commitment under this agreement is as follows:

Year Ending December 31,
2004	$	175,000
2005	$	175,000
2006	$	175,000
2007	$	175,000
2008	$	175,000

        Should the agreement be terminated without cause during the term of the contract, the officer would be entitled to one year's salary.

12.    Product Sales, Foreign Sales and Sales to Major Customers

        The Company's sales for each major category of its product line are as follows:

	2003			2002			2001
Category
	Sales		%	Sales		%	Sales		%
Optical Components	$	4,469,000	83	$	4,325,905	79	$	6,035,049	77
Laser Accessories		893,000	17		1,155,816	21		1,850,988	23
TOTAL	$	5,362,000	100	$	5,481,721	100	$	7,886,037	100

        Export sales, primarily to approximately sixteen customers in six countries within Europe, Asia and Canada, amounted to 19%, 19% and 31% of net product sales in 2003, 2002 and 2001, respectively.

        No foreign customer accounted for more than 10% of product sales in 2003 or 2002. One foreign customer accounted for 10.7% of product sales in 2001. In 2003, two U.S. customers accounted for 16.0% and 10.0% of total sales. In 2002 one U.S. customer accounted for 13.4% of total sales. One U.S. customer accounted for 17.7% of total sales in 2001.

13.    Shareholders' Equity

        a.    Common shares reserved

        Common shares reserved at December 31, 2003, are as follows:

1991 Stock option plan	314,500
2000 Stock option plan	4,000,000
Convertible preferred stock	1,340,000
Subordinated convertible notes	5,380,952

F-24

        b.    Preferred stock

        The Company has authorized 1,000,000 shares of preferred stock, no par value, which the Board of Directors has the authority to issue from time to time in a series. The Board of Directors also has the authority to fix, before the issuance of each series, the number of shares in each series and the designation, preferences, rights and limitations of each series.

        For the years ended December 31, 2003, 2002 and 2001, the Company paid a common stock dividend on preferred stock equal to $54,000, $121,000 and $155,000, respectively.

        c.    Stock options

        The Company has adopted two stock option plans that provide for the granting of options to employees, officers, directors, and others who render services to the Company. Under these plans in the aggregate, options to purchase no more than 4,500,000 shares of common stock may be granted, at a price that may not be less than the fair market value per share.

        Under the 1991 Stock Option Plan the Company may grant options to purchase up to 500,000 shares of Common Stock to its officers, key employees and other who render services to the Company. The 1991 Stock Option Plan expired in December 2001.

        The Equity Compensation Program authorizes the issuance of incentive stock options. At the annual Shareholders' meeting held in 2003, shareholders' approved a recommendation by the Board to increase the number of options to be granted under the 2000 Equity Compensation Program, from 1,500,000 to 4,000,000. The 2000 equity compensation plan expires in August 2010.

        A summary of the status of the Company's program as of December 31, 2003, 2002 and 2001, and changes during the years then ended is presented below:

		Years Ended December 31,
		2003				2002			2001
Fixed Stock Options		Shares		Weighted Average Exercise Price		Shares	Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
	Outstanding, beginning of year	1,173,800		$	1.69	698,600	$	2.20	729,500		$	1.96
	Granted	299,900			0.50	475,200		0.94	289,700			4.97
	Exercised	—			—	—		—	(29,250	)		1.05
Expired		—			—	—		—	(15,500	)		1.25
	Forfeited	(24,600	)		2.26	—		—	(276,350	)		1.90
	Outstanding, end of year	1,449,100			1.42	1,173,800		1.69	698,600			2.20
Options exercisable, end of year		881,424			1.88	402,163		.98	242,650			1.70
Weighted-average fair values of options granted during year				$	.48		$	.91			$	4.97

F-25

        The following table summarizes information about stock options outstanding at December 31, 2003:

	Options Outstanding				Options Exercisable
Range of Exercise Price	Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Outstanding	Weighted Average Exercise Price
$0.50 - $2.00	1,292,000	8.59 yrs.	$	1.14	724,324	$	1.48
$3.00 - $5.00	157,100	7.27 yrs.	$	3.72	157,100	$	3.72

        d.    Warrants

        In 2001, warrants were exercised resulting in net proceeds to the Company of $57,200.

        e.    Income per common share

        A reconciliation of income from continuing operations andbasic to diluted share amounts is presented below.

		Years Ended December 31,
		2003				2002				2001
		(Loss)			Average Shares	(Loss)			Average Shares	Income			Average Shares
(Loss) income before preferred dividends		$	(1,777,309	)		$	(1,715,972	)		$	43,634
Less: preferred stock dividends			(53,600	)			(120,600	)			(155,000	)
Basic:
	Available to common shareholders		(1,830,909	)	5,287,849		(1,836,572	)	5,210,322		(111,366	)	5,046,666
	Dilutive effect of convertible preferred stock and stock options		—		—		—		—		—		—
Diluted:
	Available to common shareowners and assumed conversions	$	(1,830,909	)	5,287,849	$	(1,836,572	)	5,608,513	$	(111,366	)	5,046,666

14.    Fair Value of Financial Instruments

        The methods and assumptions used to estimate the fair value of the following classes of financial instruments were:

        Current Assets and Current Liabilities:    The carrying amount of cash, current receivables and payables and certain other short-term financial instruments approximate their fair value.

F-26

        Long-Term Debt:    The fair value of the Company's long-term debt, including the current portion, for notes payable and subordinated convertible debentures, was estimated using a discounted cash flow analysis, based on the Company's assumed incremental borrowing rates for similar types of borrowing arrangements. The carrying amount of variable and fixed rate debt at December 31, 2003 approximates fair value.

15.    Quarterly Data (Unaudited)

        Summary quarterly results were as follows:

Year 2003	First			Second		Third		Fourth
Net sales	$	1,200,853		1,147,117		1,405,663		1,634,551
Gross profit		279,963		201,856		285,690		228,552
Net (loss)		(357,857	)	(491,787	)	(380,473	)	(600,792	)
Net income per share—Basic(a)		(0.07	)	(0.09	)	(0.07	)	(0.11	)
Net income per share—Diluted(a)		(0.07	)	(0.09	)	(0.07	)	(0.11	)

Year 2002	First			Second		Third		Fourth
Net sales	$	1,220,465		1,685,964		1,344,569		1,318,120
Gross profit		46,599		425,675		237,553		196,691
Net (loss)		(476,688	)	(322,209	)	(409,056	)	(628,619	)
Net income per share—Basic(a)		(0.09	)	(0.06	)	(0.08	)	(0.12	)
Net income per share—Diluted(a)		(0.09	)	(0.06	)	(0.08	)	(0.12	)

(a)

Quarterly income per share amounts may not total to the annual amounts due to changes in weighted-average shares outstanding during the year.

16.    Special Charges

        During 2003 the Company accrued certain expenses related to the relocation of 17 employees from Bethel, CT to its facility in Northvale, NJ. The special charges accrued amounted to $107,000 ($.02 per share on a basic and diluted basis) and included the costs for permanent relocation, stay on bonuses and relocation bonuses, anticipated to be expended in the next fiscal year.

        During 2003 the Company determined that there was excess inventory, relative to forecasted future needs, of certain crystals and solutions. Based on this determination, a reserve was taken in the amount of $475,000 ($.09 per share on a basic and diluted basis) in order to recognize the diminished future economic benefit of the inventory.

        At the end of 2000, the Company announced a process engineering redesign program to formalize production operations, and improve profitability through margin improvement. The special charges associated with this program were $299,763 ($.06 per share on a basic and diluted basis) for the year ended December 31, 2001.

F-27

17.    Acquisitions

        In November 2003, the Company acquired the assets and liabilities of Laser Optics, Inc. an optical manufacturing and thin films coating operation. Capital assets along with the employees of Laser optics, Inc, will be relocated from Bethel, CT to the Company's facility in Northvale, NJ during the second quarter of 2004.

        The assets acquired and liabilities assumed were recorded at estimated fair values as determined by the Company's management based on information currently available and on current assumptions as to future operations. The Company has obtained independent appraisals of the fair values of the acquired property, plant & equipment. A summary of the assets acquired and liabilities assumed in the acquisition follows:

Estimated fair values
	Assets acquired	$	894,725
	Liabilities assumed		(1,158,422	)
	Intangible assets acquired		446,000
Net assets acquired		$	182,303

        As a result of the acquisition, the Company plans to incur integration expenses for the incremental costs to consolidate activities at the Northvale, NJ location. Generally accepted accounting principles require that integration expenses that are associated with future revenues and have future economic benefit must be expensed as incurred. See footnote 15.

F-28

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.    Other Expenses of Issuance and Distribution

        The following table sets forth the various expenses payable by us in connection with the sale and distribution of the securities being registered. All amounts shown are estimates, except the Securities and Exchange Commission registration fee.

SEC registration fee		$	380
Accounting fees and expenses			*
Legal fees and expenses			*
Printing and engraving expenses			*
Transfer agent fees and expenses			*
Miscellaneous fees and expenses			*
	Total	$	*

*

To be completed by amendment.

Item 14.    Indemnification of Directors and Officers

        Section 14A:3-5 of the New Jersey Business Corporation Act provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed actions, suits or proceedings in which such person is made a party by reason of such person being or having been a director, officer, employee or agent to Photonics Products Group, Inc. The New Jersey Business Corporation Act provides that Section 14A:3-5 is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of shareholders.

        Article IX and Article X of Photonics Products Group, Inc.'s certificate of incorporation provides that a director or officer of Photonics Products Group, Inc. shall not be liable to the Corporation or its shareholders for damages for breach of fiduciary duty as a director to the fullest extent permitted by New Jersey law. In addition, Article Seventh of Photonics Products Group, Inc.'s certificate of incorporation provides that the Corporation shall indemnify its directors and officers to the fullest extent permitted by New Jersey law, including the right to be paid by the Corporation the expenses incurred in defending or otherwise participating in any proceeding in advance of its final disposition.

        Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling our company pursuant to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable.

Item 15.    Recent Sales of Unregistered Securities

        (d)    Recent Sales of Unregistered Securities

        In April 2004 the Company received $1,000,000 from Clarex Ltd., a major shareholder of the Company, in exchange for the issuance pursuant to Regulation D of a three-year Subordinated Convertible Promissory Note. The Note will bear interest at the rate of 6% per annum and has a maturity date of March 31, 2007. Interest will accrue yearly and along with principal may be converted into Common Stock, (and/or securities convertible into common shares), at a conversion rate equal to the purchase price of stock issued (and/or securities issued that are convertible into Common Stock)

II-1

for cash after the date of the Note to an unrelated third party investor, or if no such issuance takes place within twelve months of the date of the Note, April 2004, at a price mutually agreed upon as fair value by the Issuer and Holder. The Holder of the Note is a related party to a major shareholder of the Company.

        In 2003, the Company issued a Subordinated Convertible Promissory Note pursuant to Regulation D for proceeds of $1,500,000. The Holder of the Note, Clarex, Ltd., is a major Shareholder of the Company. The Note bears interest at the rate of 6% per annum and has a maturity date of January 31, 2006. The Note is convertible into common shares of the Company at a conversion price that shall be (a) the price at which Common Stock is first issued for cash after the date of the Note to an unrelated third party investor or (b) the price mutually agreed upon by the Issuer and Holder at its then fair market value if no such issuance has occurred within 12 months of the date of the Note, December 31, 2003.

        In 2002, the Company issued a Subordinated Convertible Promissory Note pursuant to Regulation D for proceeds of $1,000,000. The Holder of the Note, Welland, Ltd., is a related party to Clarex Ltd., a major Shareholder of the Company. The Note bears interest at the rate of 6% per annum and has a maturity date of January 31, 2006. The Note is convertible into common shares of the Company at a conversion price that shall be (a) the price at which Common Stock is first issued for cash after the date of the Note to an unrelated third party investor or (b) the price mutually agreed upon by the Issuer and Holder at its then fair market value if no such issuance has occurred within 24 months of the date of the Note, December 31, 2002.

        During the 2nd quarter of 2004 the Company entered into an agreement with an investment banking firm to raise equity via a private placement that was not registered with the Securities and Exchange Commission. In July 2004 the Company issued 1,581,000 Units consisting of 1,581,000 shares and warrants to acquire an additional 1,185,750 shares at $1.35 per share. In addition, 262,276 Warrants were issued to Casimir Capital, LP, the placement agent for the private placement. The Securities issued via the private placement were issued pursuant to Regulation D and relied upon the exemption from registration provided by Section 4(2) of the Securities Act for transactions by an issuer not involving a public offering. The private placement resulted in net proceeds to the Company of approximately $1,350,000. The funds are to be utilized in the furtherance to the company's M&A program, capital equipment purchases and to meet general working capital requirements. The conversion of the above convertible notes in the aggregate principal amount of $3,500,000 is subject to a conversion price equal to the price at which equity is first raised for cash. As a result of the private placement the Notes are now convertible into an aggregate of 3,500,000 Units consisting of 3,500,000 shares of Common Stock and Warrants to acquire 2,625,000 shares of Common Stock at a price of $1.35 per share.

Item 16.

(a)   Exhibits

Exhibit No.	Document
3.1	Restated Certificate of Incorporation of Photonics Products Group, Inc.
3.2	By-Laws of Photonic Products Group, Inc.
4.1	Specimen Common Stock Certificate
4.2	Form of Warrants issued pursuant to June 2004 Private Placement
4.3	Form of Placement Agent Warrants issued pursuant to June 2004 Private Placement

II-2

4.4	Promissory Note Dated June 30, 2003
4.5	Subordinated Convertible Promissory Note dated April 1, 2004
4.6	Subordinated Convertible Promissory Note dated October 31, 2003
4.7	Subordinated Convertible Promissory Note dated December 31, 2002
5.1	Opinion of Lowenstein Sandler PC
10.1	2000 Equity Compensation Program
10.2	Warrant dated March 31, 2004 issued to Clarex, Ltd.
10.3	Warrant dated May 19, 2004 issued to Clarex, Ltd.
10.4	Daniel Lehrfeld Employment Contract
11.1	An Exhibit showing the computation of per share earnings is omitted because the computation can be clearly determined from the material contained in this document.
21.1	List of Subsidiaries
23.1	Consent of Holtz Rubenstein & Co., LLP, Independent Auditors
23.2	Consent of Lowenstein Sandler PC (contained in Exhibit 5.1)
24.1	Power of Attorney (included on signature page of the Registration Statement)

(b)   Financial Statement Schedules

REPORT OF REGISTERED CERTIFIED PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULE

        The audits referred to in our report dated March 25, 2004 relating to the consolidated financial statements of Photonic Products Group, Inc. and Subsidiaries, which is contained in Item 16 of this Form S-1, included the audits of the financial statement schedule listed in the accompanying Schedule II for the years ended December 31, 2003, 2002 and 2001. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based upon our audits.

        In our opinion such financial statement schedule presents fairly, in all material respects, the information set forth therein.

Holtz Rubenstein & Co., LLP
Melville, New York

March 25, 2004

II-3

        Schedule II—Valuation and Qualifying Accounts

PHOTONICS PRODUCTS GROUP, INC.
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
(in thousands)

	Balance At Beginning of Period		Charged (Credited) to Cost And Expenses		Acquired Balance	Deductions		Balance At End of Period
Allowance for Doubtful Accounts:
Year ended December 31, 2003	$	40,000	$		$	$		$	40,000
Year ended December 31, 2002		54,000					14,000		40,000
Year ended December 31, 2001		54,000							54,000
Six months ended June 30, 2004		40,000							40,000
Reserve for Inventory Obsolescence:
Year ended December 31, 2003	$	125,139	$	474,861	$	$		$	600,000
Year ended December 31, 2002		125,139							125,139
Year ended December 31, 2001		145,139					20,000		125,139
Six months ended June 30, 2004		600,000		160,948					760,948

Item 17.    Undertakings

(a)

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons of the Registrant pursuant to the provisions described in "Item 14—Indemnification of Directors and Officers" above, or otherwise, the Registrant has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification by the Registrant against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.



(b)

The undersigned Registrant hereby undertakes that:

        (1)   To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:

(a)

To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933,



(b)

To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price

II-4

represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement,

(c)

To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement.

        (2)   That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

        (3)   To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

II-5

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, Photonic Products Group, Inc. has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of                        , State of New Jersey, on August 25, 2004.

PHOTONIC PRODUCTS GROUP, INC.
By:	/s/  DANIEL LEHRFELD Daniel Lehrfeld President and Chief Executive Officer Dated: August 25, 2004

        Pursuant to the requirements of the Securities Act of 1933, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/  THOMAS LENAGH Thomas Lenagh	Chairman of the Board of Directors	August 25, 2004
/s/  DANIEL LEHRFELD Daniel Lehrfeld	President, Chief Executive Officer and Director	August 25, 2004
/s/  FRANK WIEDEMAN Frank Wiedeman	Director	August 25, 2004
/s/  JOHN RICH John Rich	Director	August 25, 2004
/s/  JAN WINSTON Jan Winston	Director	August 25, 2004
/s/  WILLIAM S. MIRAGLIA William S. Miraglia	Chief Financial Officer and Secretary	August 25, 2004

II-6

POWER OF ATTORNEY

        KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Daniel Lehrfeld and William Miraglia, his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him/her and in his/her name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this registration statement (and any registration statement filed pursuant to Rule 462 under the Securities Act of 1933, as amended, for the offering which this registration statement relates) and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

/s/  DANIEL LEHRFELD Daniel Lehrfeld	President, Chief Executive Officer and Director (Principal Executive Officer)	August 25, 2004
/s/  WILLIAM S. MIRAGLIA William S. Miraglia	Chief Financial Officer and Secretary	August 25, 2004
/s/  THOMAS LENAUGH Thomas Lenaugh	Chairman of the Board of Directors	August 25, 2004
/s/  FRANK WIEDEMAN Frank Wiedeman	Director	August 25, 2004
/s/  JOHN RICH John Rich	Director	August 25, 2004
/s/  JAN WINSTON Jan Winston	Director	August 25, 2004

II-7

EXHIBIT INDEX

Exhibit No.	Document
3.1	Restated Certificate of Incorporation of Photonics Products Group, Inc.
3.2	By-Laws of Photonic Products Group, Inc.
4.1	Specimen Common Stock Certificate
4.2	Form of Warrants issued pursuant to June 2004 Private Placement
4.3	Form of Placement Agent Warrants issued pursuant to June 2004 Private Placement
4.4	Promissory Note Dated June 30, 2003
4.5	Subordinated Convertible Promissory Note dated April 1, 2004
4.6	Subordinated Convertible Promissory Note dated October 31, 2003
4.7	Subordinated Convertible Promissory Note dated December 31, 2002
5.1	Opinion of Lowenstein Sandler PC
10.1	2000 Equity Compensation Program
10.2	Warrant dated March 31, 2004 issued to Clarex, Ltd.
10.3	Warrant dated May 19, 2004 issued to Clarex, Ltd.
10.4	Daniel Lehrfeld Employment Contract
11.1	An Exhibit showing the computation of per share earnings is omitted because the computation can be clearly determined from the material contained in this document.
21.1	List of Subsidiaries
23.1	Consent of Holtz Rubenstein & Co., LLP, Independent Auditors
23.2	Consent of Lowenstein Sandler PC (contained in Exhibit 5.1)
24.1	Power of Attorney (included on signature page of the Registration Statement)

II-8

QuickLinks

TABLE OF CONTENTS
RISK FACTORS
Risks Relating to Our Company and Industry
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
USE OF PROCEEDS
CAPITALIZATION
SELLING SHAREHOLDERS
PLAN OF DISTRIBUTION
DESCRIPTION OF CAPITAL STOCK
OUR BUSINESS
MARKET FOR OUR COMMON STOCK AND RELATED SHAREHOLDER MATTERS
SELECTED CONSOLIDATED FINANCIAL DATA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
Summary Compensation Table
Option Values at December 31, 2003
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
DESCRIPTION OF CERTAIN DEBT
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND MORE INFORMATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Photonic Products Group, Inc. Consolidated Statements of Operations (Unaudited)
PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
PHOTONIC PRODUCTS GROUP, Inc. Notes to Consolidated Financial Statements (Unaudited)
Independent Auditors' Report
PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
PHOTONIC PRODUCTS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
PHOTONIC PRODUCTS GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE YEARS ENDED DECEMBER 31, 2003
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
PHOTONICS PRODUCTS GROUP, INC. SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (in thousands)
SIGNATURES
POWER OF ATTORNEY
EXHIBIT INDEX

EX-3.1

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 3.1

RESTATED CERTIFICATE OF INCORPORATION

OF

PHOTONIC PRODUCTS GROUP, INC.

Pursuant to N.J.S. 14A:9-5(4)

Dated as of May 24, 2003, 2004

The undersigned corporation certifies that it has adopted the following Restated Certificate of Incorporation:

ARTICLE I

        The name of the corporation is Photonic Products Group, Inc. (the "Corporation").

ARTICLE II

        The address of the current registered office of the Corporation in this state is 181 Legrand Avenue, Northvale, New Jersey 07647.

ARTICLE III

        The name of the current registered agent therein and in charge thereof upon whom process against the Corporation may be served is William Miraglia.

ARTICLE IV

        The members of the board shall be divided into three classes, the respective terms of office of which shall end in successive years. The number of directors in each class shall be specified in the bylaws and shall be as nearly equal as possible. Unless they are elected to fill vacancies, the directors in each class shall be elected to hold office until the third successive annual meeting of shareholders after their election and until their successors have been elected and qualified. At each annual meeting of shareholders, the directors of only one class shall be elected, except directors elected to fill vacancies. An affirmative vote of the holders of at least two-thirds of the outstanding shares of the Corporation's common stock shall be required to amend or repeal this provision.

        The number of directors constituting the current board of directors of the Corporation is five; the names and addresses of the current directors are as follows:

Name	Address
Thomas Lenagh	181 Legrand Avenue, Northvale, New Jersey 07647
Daniel Lehrfeld	181 Legrand Avenue, Northvale, New Jersey 07647
Frank Wiedeman	181 Legrand Avenue, Northvale, New Jersey 07647
Jan Winston	181 Legrand Avenue, Northvale, New Jersey 07647
John Rich	181 Legrand Avenue, Northvale, New Jersey 07647

ARTICLE V

        The objects for which the Corporation is formed are to engage in any activity for which corporations may be organized under the New Jersey Business Corporation Act.

ARTICLE VI

        The total authorized capital stock of the Corporation shall be 41,000,000 shares, consisting of:

        (1)   1,000,000 shares of Preferred Stock, without par value; and

        (2)   40,000,000 shares of Common Stock, par value $.01 per share.

        Shares of authorized capital stock of each class may be issued for such consideration (not less than the par value thereof in the case of stock with par value) as may be determined from time to time by the board of directors.

        The voting powers and designations, preferences and relative, participating, optional or other special rights, and the qualifications, restrictions or limitations thereof are as follows:

        A.    PREFERRED STOCK.    Shares of Preferred Stock may be issued in one or more series as may be determined from time to time by the board of directors. Each such series shall be distinctly designated by the board of directors. Before any dividends shall be paid on the Common Stock, shares of Preferred Stock of any series shall be entitled to receive dividends at the rate established for such series by the board of directors. Before any distribution is made with respect to the Common Stock upon dissolution, liquidation, or winding up of the affairs of the Corporation, shares of Preferred Stock of any series shall be entitled to receive the full amount payable upon dissolution, liquidation, or winding up of the affairs of the Corporation specified for such series by the board of directors in connection with the creation of that series. Except in respect of the particulars permitted hereby to be fixed by the board of directors for each series permitted hereby, all shares of Preferred Stock shall be of equal rank and shall be identical. All shares of any one series of Preferred Stock shall be alike in every particular except that, in the case of a series entitled to cumulative dividends, shares issued at different times may differ as to the dates from which dividends thereon shall be cumulative.

        The preferences and relative, participating, optional and other special rights of each series and the qualifications, limitations and restrictions thereof, if any, may differ from those of any other series at any time outstanding to the extent permitted by law and by this Restated Certificate of Incorporation. The board of directors of the Corporation is hereby expressly granted authority to fix, by resolutions duly adopted prior to the issuance of any shares of a particular series (to the extent permitted by law in effect when such resolutions are adopted), the designations, preferences and relative, participating, optional and other special rights and the qualifications, limitations and restrictions of such series, including the following:

        1.     The number of shares constituting such series;

        2.     The rate and times at which, and the terms and conditions on which, dividends on Preferred Stock of such series will be paid;

        3.     The right, if any, of the holders of the Preferred Stock of such series to convert the same into, or exchange the same for, shares of other classes or series of stock of the Corporation and the terms and conditions of such conversion or exchange, including provision for adjustment of the conversion price or rate in such events as the board of directors shall determine;

        4.     The redemption price or prices and the time or times at which, and the terms and conditions on which, Preferred Stock of such series may be redeemed;

        5.     The rights of the holders of Preferred Stock of such series upon the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation;

        6.     The terms or amount of any sinking fund provided for the purchase or redemption of the Preferred Stock of such series;

        7.     Provisions making dividends payable with respect to Preferred Stock of such series cumulative, non-cumulative or partially cumulative;

2

        8.     Provisions giving the Preferred Stock of such series special, limited, multiple or no voting rights and to specify those voting rights, if any; and

        9.     Provisions making dividends payable with respect to the Preferred Stock of such series fully participating, partially participating, or non-participating.

        B.    COMMON STOCK    

        1.     Dividends.—Subject to the preferences and other rights of the Preferred Stock as fixed in the resolution or resolutions of the board of directors providing for the issue of such Preferred Stock, such dividends (payable in cash, stock or otherwise) as may be determined by the board of directors may be declared and paid out of funds legally available therefor upon the Common Stock from time to time.

        2.     Rights Upon Liquidation, Dissolution, or Winding Up.—In the event of any liquidation, dissolution, or winding up of the affairs of the Corporation, after payment to the holders of Preferred Stock of the full amounts to which they are entitled pursuant to resolution or resolutions of the board of directors providing for the issuance of such Preferred Stock, the holders of the Common Stock shall be entitled to share ratably per share without regard to class in all assets then remaining subject to distribution to the stockholders.

ARTICLE VII

        Every person who is a corporate agent of the Corporation, or of any corporation which he served as such at the request of the Corporation, shall be indemnified by the Corporation to the fullest extent permitted by law against all expenses and liabilities reasonably incurred by or imposed upon him, in connection with any proceeding to which he may be made, or threatened to be made, a party, or in which he may become involved by reason of his being or having been a corporate agent of the Corporation, or of such other corporation, whether or not he is a corporate agent of the Corporation, or such other corporation, at the time the expenses or liabilities are incurred.

ARTICLE VIII

        This Restated Certificate of Incorporation shall become effective when filed in the office of the Secretary of State of New Jersey.

ARTICLE IX

Personal Liability of Directors

        So long as permitted by law, no director of the Corporation shall be personally liable to the Corporation or its shareowners for damages for breach of any duty owed by such person to the Corporation or its shareowners; provided, however, that this Article IX shall not relieve any person from liability to the extent provided by applicable law for any breach of duty based upon an act or omission (a) in breach of such person's duty of loyalty to the Corporation or its shareowners, (b) not in good faith or involving a knowing violation of law or (c) resulting in receipt by such person of an improper personal benefit. No amendment to or repeal of this Article IX and no amendment, repeal or termination of effectiveness of any law authorizing this Article IX shall apply to or have any effect on the liability or alleged liability of any director for or with respect to any acts or omissions of such director occurring prior to such amendment, repeal or termination of effectiveness.

3

ARTICLE X

Personal Liability of Officers

        So long as permitted by law, no officer of the Corporation shall be personally liable to the Corporation or its shareowners for damages for breach of any duty owed by such person to the Corporation or its shareowners; provided, however, that this Article X shall not relieve any person from liability to the extent provided by applicable law for any breach of duty based upon an act or omission (a) in breach of such person's duty of loyalty to the Corporation or its shareowners, (b) not in good faith or involving a knowing violation of law or (c) resulting in receipt by such person of an improper personal benefit. No amendment to or repeal of this Article X and no amendment, repeal or termination of effectiveness of any law authorizing this Article X shall apply to or have any effect on the liability or alleged liability of any officer for or with respect to any acts or omissions of such officer occurring prior to such amendment, repeal or termination of effectiveness.

ARTICLE XI

SERIES A 10% CONVERTIBLE PREFERRED STOCK,
NO PAR VALUE

Section 1.    Designation and Amount; Rank

        There is hereby established a series of preferred stock which is designated "Series A 10% Convertible Preferred Stock" (referred to herein as "Series A Preferred Stock"). The number of shares which will constitute such series shall be Five Hundred (500). The Series A Preferred Stock shall rank senior to the Corporation's Common Stock with respect to the payment of dividends and to the distribution of assets upon liquidation, dissolution or winding up.

Section 2.    Dividends.

        (A)  For purposes of this Section 2, each April 1 on which any shares of Series A Preferred Stock shall be outstanding shall be deemed to be a "Dividend Payment Date." On each Dividend Payment Date, the holder of any share of Series A Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors of the Corporation out of funds legally available therefor, cumulative dividends at the rate of 10% per year on each share of Series A Preferred Stock and no more. Dividends payable on the Series A Preferred Stock for the initial dividend period and for any period less than a full annual period shall be computed on a basis of a 360-day year of twelve 30 day months.

        (B)  All dividends shall be payable in shares of the Company's Common Stock, valued at $1.00 per share, subject to Section 4 below.

        (C)  On each Dividend Payment Date all dividends which shall have accrued on each share of Series A Preferred Stock outstanding on such Dividend Payment Date shall accumulate and be deemed to become "due". Any dividend which shall not be paid on the Dividend Payment Date on which it shall become due shall be deemed to be "past due" until such dividend shall be paid or until the share of Series A Preferred Stock with respect of which such dividend became due shall no longer be outstanding, whichever is the earlier to occur. No interest or sum of money in lieu of interest shall be payable in respect of any dividend payment or payments which are past due. Dividends paid on shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accumulated and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding.

        (D)  So long as any shares of the Series A Preferred Stock are outstanding, no dividend (other than a dividend or distribution in Common Stock or in any other stock ranking junior to the Series A Preferred Stock as to dividends and upon liquidation, dissolution or winding up) shall be declared or

4

paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to, or on a parity with, the Series A Preferred Stock as to dividends or upon liquidation, dissolution or winding up, nor shall any Common Stock or any other stock of the Corporation ranking junior to, or on a parity with, the Series A Preferred Stock as to dividends or upon liquidation, dissolution or winding up, be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except for conversion of such junior or parity stock into, or exchange of such junior or parity stock for, stock of the Corporation ranking junior to the Series A Preferred Stock as to dividends and upon liquidation, dissolution, or winding up) unless, in each case, the full cumulative dividends on all outstanding shares of the Series A Preferred Stock shall have been paid or declared and set aside for payment for all past dividend payment periods.

Section 3.    General, Class and Series Voting Rights.

        Except as provided in this Section 3 and in Section 4 hereof or as otherwise from time to time required by applicable law, the Series A Preferred Stock shall have no voting rights.

        So long as any shares of Series A Preferred Stock remain outstanding, the consent of the holders of at least a majority of the shares of Series A Preferred Stock outstanding at the time (voting separately as a class together with all other series of Preferred Stock ranking on a parity with the Series A Preferred Stock either as to dividends or the distribution of assets upon liquidation, dissolution or winding up and upon which like voting rights have been conferred and are exercisable) given in person or by proxy, either in writing or at any special or annual meeting called for the purpose, shall be necessary to permit, effect or validate any one or more of the following:

          (i)  The creation, authorization or issuance of, or reclassification of any authorized stock of the Corporation into, or creation, authorization or issuance of any obligation or security convertible into or evidencing a right to purchase any shares of, or increase in the authorized or issued amount of, any class or series of stock (including any class or series of Preferred Stock) ranking prior (as that term is hereinafter defined in this Section 3) to the Series A Preferred Stock with respect to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up; or

         (ii)  The amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Restated Certificate of Incorporation (or any certificate amendatory thereof or supplemental thereto providing for the capital stock of the Corporation including, without limitation, this Restated Certificate) which would directly, materially and adversely affect the preferences, rights, powers or privileges of holders of shares of the Series A Preferred Stock or of such other series of Preferred Stock of the Corporation; provided, however, that in the event that any such amendment, alteration or repeal would materially or adversely affect the rights of only holders of shares of Series A Preferred Stock, then such amendment, alteration or repeal may be effected only with the affirmative vote or consent of the holders of a majority of the shares of Series A Preferred Stock then outstanding. Any increase in the amount of authorized Preferred Stock or the creation and issuance of other series of Preferred Stock ranking on a parity with or junior to the Series A Preferred Stock with respect to dividends and upon liquidation, dissolution or winding up shall not be deemed to affect adversely the rights of the holders of shares of Series A Preferred Stock.

        The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of Series A Preferred Stock shall have been redeemed or sufficient funds shall have been deposited in trust to effect such redemption.

5

        Any class or classes of stock of the Corporation shall be deemed to rank:

          (i)  prior to the Series A Preferred Stock as to dividends or as to distribution of assets upon liquidation, dissolution or winding up if the holders of such class shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up as the case may be, in preference or priority to the holders of Series A Preferred Stock; and

         (ii)  on a parity with the Series A Preferred Stock as to dividends or as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates, or redemption or liquidation prices per share thereof be different from those of the Series A Preferred Stock, if the holders of such class of stock and the Series A Preferred Stock shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority one over the other.

Section 4.    Optional Redemption.

        (A)  At any time and from time to time, the shares of Series A Preferred Stock are redeemable, in whole or in part, at the option of the Corporation at the redemption price of $1,000 per share of Series A Preferred Stock, plus accrued and unpaid dividends thereon to the date fixed for redemption;

        (B)  In the event the Corporation shall elect to redeem the shares of Series A Preferred Stock, the Corporation shall give notice to the holders of record of shares of the Series A Preferred Stock being so redeemed, not less than 30 days prior to such redemption, by first class mail, postage prepaid, at their addresses as shown on the stock registry books of the Corporation, that said shares are being redeemed, provided that without limiting the obligation of the Corporation hereunder to give the notice provided in this Section 4(B), the failure of the Corporation to give such notice shall not invalidate any corporate action by the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of shares of Series A Preferred Stock to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date; and (vi) that such holder has the right to convert such shares into a number of shares of Common Stock prior to the close of business on the tenth (10th) day preceding such redemption date.

        (C)  In the event that fewer than all the outstanding shares of Series A Preferred Stock are to be redeemed, the number of shares to be redeemed shall be determined by the Board of Directors of the Corporation and the shares to be redeemed shall be determined pro rata or by lot as may be determined by the Board of Directors of the Corporation or by any other method as may be determined by the Board of Directors of the Corporation in its sole discretion to be equitable provided that such method satisfies any applicable requirements of any securities exchange on which the Series A Preferred Stock is listed.

        (D)  Notice having been mailed as aforesaid, from and after the applicable redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price), dividends on the shares of Series A Preferred Stock to be redeemed on such redemption date shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease; provided that, notwithstanding the foregoing, if notice of redemption has been given pursuant to this Section 4 and any holder of shares of Series A Preferred Stock shall, prior to the close of business on the tenth (10th) day preceding the redemption date, surrender for conversion any or all of the shares to be redeemed held by such holder in accordance with Section 5, then the conversion of such shares to be redeemed shall become effective as provided in Section 5.

6

Upon surrender of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof.

        (E)  Any shares of Series A Preferred Stock which shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series, until such shares are once more designated as part of a particular series by the Board of Directors of the Corporation.

Section 5.    Conversion.

        (A)  The holder of any share of Series A Preferred Stock shall have the right, at such holder's option (but if such share is called for redemption, then in respect of such share only to and including but not after the close of business on the tenth (10th) day preceding the date fixed for such redemption, provided that no default by the Corporation in the payment of the applicable redemption price (including any accrued and unpaid dividends) shall have occurred and be continuing on the date fixed for such redemption) to convert such share into that number of fully paid and non-assessable shares of Common Stock (calculated as to each conversion to the nearest whole share) obtained by dividing $1000.00 by the Conversion Price then in effect. The Conversion Price shall initially be $1.00 per share and shall be subject to adjustment as set forth below.

        (B)  In order to exercise the conversion privilege, the holder of shares of Series A Preferred Stock shall surrender the certificates representing such shares, accompanied by transfer instruments satisfactory to the Corporation and sufficient to transfer the Series A Preferred Stock being converted to the Corporation free of any adverse interest, at any of the offices or agencies maintained for such purpose by the Corporation ("Conversion Agent") and shall give written notice to the Corporation at such Conversion Agent that the holder elects to convert such shares. Such notice shall also state the names, together with addresses, in which the certificates for shares of Common Stock which shall be issuable on such conversion shall be issued. As promptly as practicable after the surrender of such shares of Series A Preferred Stock as aforesaid, the Corporation shall issue and shall deliver at such Conversion Agent to such holder, or on his written order, a certificate for the number of full shares of Common Stock issuable upon the conversion of such shares in accordance with the provisions hereof. Balance certificates will be issued for the remaining shares of Series A Preferred Stock in any case in which fewer than all of the shares of Series A Preferred Stock represented by a certificate are converted. Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which shares of Series A Preferred Stock shall have been so surrendered and such notice received by the Corporation as aforesaid, and the persons in whose names any certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holders of record of the Common Stock represented thereby at such time, unless the stock transfer books of the Corporation shall be closed on the date on which shares of Series A Preferred Stock are so surrendered for conversion, in which event such conversion shall be deemed to have been effected immediately prior to the close of business on the next succeeding day on which such stock transfer books are open, and such persons shall be deemed to have become such holders of record of the Common Stock at the close of business on such later day. In either circumstance, such conversion shall be at the Conversion Price in effect on the date upon which such share shall have been surrendered and such notice received by the Corporation.

        (C)  In the case of any share of Series A Preferred Stock which is converted after any record date with respect to the payment of a dividend on the Series A Preferred Stock and on or prior to the Dividend Payment Date related to such record date, the dividend due on such Dividend Payment Date shall be payable on such Dividend Payment Date to the holder of record of such share as of such

7

proceeding record date notwithstanding such conversion. Except as provided in this paragraph, no payment or adjustment shall be made upon any conversion on account of any dividends accrued on shares of Series A Preferred Stock surrendered for conversion or on account of any dividends on the Common Stock issued upon conversion.

        (D)  No fractional shares or scrip representing fractions of shares of Common Stock shall be issued upon conversion of any shares of Series A Preferred Stock. Instead of any fractional interest in a share of Common Stock which would otherwise be deliverable upon the conversion of a share of Series A Preferred Stock, the Corporation shall pay to the holder of such share of Series A Preferred Stock an amount in cash (computed to the nearest cent, with one-half cent being rounded upward) equal to such fraction multiplied by the reported closing price (as defined below) of the Common Stock at the close of business on the day on which such share or shares of Series A Preferred Stock are surrendered for conversion in the manner set forth above, or if such date is not a trading date, on the next succeeding trading date. If more than one certificate representing shares of Series A Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Series A Preferred Stock represented by such certificates, or the specified portions thereof to be converted, so surrendered.

        For the purpose of any computation under the foregoing paragraph, the closing price per share of Common Stock on any date shall be deemed to be the average of the daily closing prices for the five consecutive trading days selected by the Board of Directors commencing no more than 20 trading days before and ending no later than the day before the day in question. The closing price for each day shall be the reported last sale price, regular way, or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices, regular way, in either case as reported on the New York Stock Exchange Composite Tape or, if the Common Stock is not listed or admitted to trading on the New York Stock Exchange at such time, on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or, if not listed or admitted to trading on any national securities exchange, on the National Market System of the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or, if the Common Stock is not quoted on the NASDAQ National Market System, the average of the closing bid and asked prices on such day in the over-the-counter market as reported by NASDAQ or, if bid and asked prices for the Common Stock on each such day shall not have been reported through NASDAQ, the average of the bid and asked prices for such date as furnished by any New York Stock Exchange member firm regularly making a market in the Common Stock selected from time to time by the Board of Directors of the Corporation for such purpose or, if no such quotations are available, the fair market value of the Common Stock as determined by a New York Stock Exchange member firm regularly making a market in the Common Stock selected from time to time by the Board of Directors of the Corporation for such purpose.

        (E)  The Conversion Price shall be adjusted from time to time as follows:

          (i)  In case the Corporation shall pay or make a dividend or other distribution on any class of capital stock of the Corporation in Common Stock, the Conversion Price in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such reduction to, become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this subparagraph (i), the number of shares of Common Stock at any time outstanding shall not include shares held in the

8

treasury of the Corporation. The Corporation will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Corporation.

         (ii)  In case outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and conversely, in case outstanding shares of Common Stock shall each be combined into a smaller number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective.

        (iii)  No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% of such price; provided, however, that any adjustments which by reason of this subparagraph (iii) are not required to be made shall be carried forward and taken into account in any subsequent adjustment, and provided further, that adjustment shall be required and made in accordance with the provisions hereof not later than such time as may be required in order to preserve the tax-free nature of a distribution to the holders of shares of Series A Preferred Stock or Common Stock. All calculations shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. The Corporation may make such reductions in the Conversion Price, in addition to those required by subparagraphs (i) and (ii) above, as it considers to be advisable in order to avoid or diminish any income tax to any holders of shares of Common Stock resulting from any dividend or distribution of stock or issuance of rights or warrants to purchase or subscribe for stock or from any event treated as such for income tax purposes or for any other reasons.

        (iv)  Whenever the Conversion Price is adjusted as herein provided, (x) the Corporation shall promptly file with any Conversion Agent a certificate of a firm of independent public accountants setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment, and the manner of computing the same, which certificate shall be conclusive evidence of the correctness of such adjustment, and (y) a notice stating that the Conversion Price has been adjusted and setting forth the adjusted Conversion Price shall forthwith be given by the Corporation to any Conversion Agent and mailed by the Corporation to each holder of shares of Series A Preferred Stock at their last address as the same appears on the books of the Corporation.

        (F)  In case of any consolidation of the Corporation with, or merger of the Corporation into, any other entity (other than a merger or consolidation in which the Corporation is the continuing corporation) or any sale or conveyance to another corporation of the property of the Corporation as an entirety or substantially as an entirety, or in the case of a statutory exchange of securities with another corporation, or any reclassification of shares, the Conversion Price shall not be adjusted but each holder of a share of Series A Preferred Stock then outstanding shall have the right thereafter to convert such share only into the kind and amount of securities, cash and other property which such holder would have owned or have been entitled to receive immediately after such consolidation, merger, sale, conveyance, exchange or reclassification had such share of Series A Preferred Stock been converted immediately prior to such consolidation, merger, sale, conveyance, exchange or reclassification. Provision shall be made in any such consolidation, merger, sale, conveyance, exchange or reclassification for adjustments in the Conversion Price which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section (E). The above provisions shall similarly apply to successive consolidations, mergers, sales, conveyances, exchange or reclassification.

9

        For purposes of this Section 5, "Common Stock" includes any stock of any class of the Corporation which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation and which is not subject to redemption by the Corporation. However, subject to the provisions of paragraph (F) above, shares issuable on conversion of shares of Series A Preferred Stock shall include only shares of the class designated as Common Stock of the Corporation on the date of the initial issuance of Series A Preferred Stock by the Corporation, or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation and which are not subject to redemption by the Corporation.

        In case:

          (i)  the Corporation shall declare a dividend (or any other distribution) on its Common Stock that would cause an adjustment to the Conversion Price of the Series A Preferred Stock pursuant to the terms of subparagraph (i) of Paragraph (E) above; or

         (ii)  the Corporation shall authorize the granting to the holders of its Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any other rights; or

        (iii)  of any reclassification of the Common Stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock), or of any consolidation, merger or share exchange to which the Corporation is a party and for which approval of any stockholders of the Corporation is required, or of the sale or conveyance, of the property of the Corporation as an entirety or substantially as an entirety; or

        (iv)  of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation;

then the Corporation shall cause to be filed with any Conversion Agent, and shall cause to be mailed to all holders of shares of Series A Preferred Stock at each such holder's last address as the same appears on the books of the Corporation, at least 20 days (or 10 days in any case specified in clause (i) or (ii) above) prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, share exchange, sale, conveyance, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, share exchange, sale, conveyance, dissolution, liquidation or winding up. Neither the failure to give such notice nor any defect therein shall affect the legality or validity of the proceedings described in clauses (i) through (iv) above.

        The Corporation will pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on conversions of shares of Series A Preferred Stock pursuant hereto; provided, however, that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of shares of Common Stock in a name other than that of the holder of the shares of Series A Preferred Stock to be converted and no such issue or delivery shall be made unless and until the person requesting such issue or delivery has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.

        The Corporation covenants that all shares of Common Stock which may be delivered upon conversions of shares of Series A Preferred Stock will upon delivery be duly and validly issued and fully

10

paid and non-assessable, free of all liens and charges and not subject to any pre-emptive rights. The Corporation further covenants that, if necessary, it shall reduce the par value of the Common Stock so that all shares of Common Stock delivered upon conversion of shares of Series A Preferred Stock are fully paid and non-assessable.

        The Corporation covenants that it will at all times reserve and keep available, free from pre-emptive rights, out of its authorized but unissued shares of Common Stock or its issued shares of Common Stock held in its treasury, or both, for the purpose of effecting conversions of shares of Series A Preferred Stock, the full number of shares of Common Stock deliverable upon the conversion of all outstanding shares of Series A Preferred Stock not theretofore converted. For purposes of this reservation of Common Stock, the number of shares of Common Stock which shall be deliverable upon the conversion of all outstanding shares of Series A Preferred Stock shall be computed as if at the time of computation all outstanding shares of Series A Preferred Stock were held by a single holder. The issuance of shares of Common Stock upon conversion of shares of Series A Preferred Stock is authorized in all respects.

Section 6.    Liquidation.

        In the event of any voluntary or involuntary dissolution, liquidation or winding up of the Corporation (for the purposes of this Section 6, a "Liquidation"), before any distribution of assets shall be made to the holders of the Common Stock or the holders of any other stock that ranks junior to the Series A Preferred Stock in respect of distributions upon the Liquidation of the Corporation, the holder of each share of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, an amount equal to $1,000.00 per share plus all dividends (whether or not declared or due) accrued and unpaid on such share of the date fixed for the distribution of assets of the Corporation to the holders of Series A Preferred Stock.

        If upon any Liquidation of the Corporation, the assets available for distribution to the holders of Series A Preferred Stock and any other stock of the Corporation ranking on a parity with the Series A Preferred Stock upon Liquidation issued by the Corporation which shall then be outstanding (hereinafter in this paragraph called the "Total Amount Available") shall be insufficient to pay the holders of all outstanding shares of Series A Preferred Stock and all other such parity stock the full amounts (including all dividends accrued and unpaid) to which they shall be entitled by reason of such Liquidation of the Corporation, then there shall be paid to the holders of the Series A Preferred Stock in connection with such Liquidation of the Corporation, an amount equal to the product derived by multiplying the Total Amount Available times a fraction, the numerator of which shall be the full amount to which the holders of the Series A Preferred Stock shall be entitled under the terms of the preceding paragraph by reason of such Liquidation of the Corporation and the denominator of which shall be the total amount which would have been distributed by reason of such Liquidation of the Corporation with respect to the Series A Preferred Stock and all other stock ranking on a parity with the Series A Preferred Stock upon Liquidation then outstanding had the Corporation possessed sufficient assets to pay the maximum amount which the holders of all such stock would be entitled to receive in connection with such Liquidation of the Corporation.

        The voluntary sale, conveyance, lease, exchange or transfer of the property of the Corporation as an entirety or substantially as an entirety, or the merger or consolidation of the Corporation into or with any other corporation, or the merger of any other corporation into the Corporation, or any purchase or redemption of some or all of the shares of any class or series of stock of the Corporation, shall not be deemed to be a Liquidation of the Corporation for the purposes of the Section 6 (unless in connection therewith the Liquidation of the Corporation is specifically approved).

11

        The holder of any shares of Series A Preferred Stock shall not be entitled to receive any payment owed for such shares under this Section 6 until such holder shall cause to be delivered to the Corporation (i) the certificate or certificates representing such shares of Series A Preferred Stock and (ii) transfer instrument or instruments satisfactory to the Corporation and sufficient to transfer such shares of Series A Preferred Stock to the Corporation free of any adverse interest. As in the case of the redemption price, no interest shall accrue on any payment upon Liquidation after the due date thereof.

        After payment of the full amount of the liquidating distribution to which they are entitled, the holders of shares of the Series A Preferred Stock will not be entitled to any further participation in any distribution of assets by the Corporation.

Section 7.    Payments.

        The Corporation may provide funds for any payment of the redemption price for any shares of Series A Preferred Stock or any amount distributable with respect to any Series A Preferred Stock under Section 6 hereof by depositing such funds with a bank or trust company selected by the Corporation having a net worth of at least $50,000,000 and organized under the laws of the United States or any state thereof, in trust for the benefit of the holder of such shares of Series A Preferred Stock under arrangements providing irrevocably for payment upon satisfaction of any conditions to such payment by the holder of such shares of Series A Preferred Stock which shall reasonably be required by the Corporation. The Corporation shall be entitled to make any deposit of funds contemplated by this Section 7 under arrangements designated to permit such funds to generate interest or other income for the Corporation, and the Corporation shall be entitled to receive all interest and other income earned by any funds while they shall be deposited as contemplated by this Section 7, provided that the Corporation shall maintain on deposit funds sufficient to satisfy all payments which the deposit arrangement shall have been established to satisfy if the conditions precedent to the disbursement of any funds deposited by the Corporation pursuant to this Section 7 shall not have been satisfied within two years after the establishment of the trust for such funds, then (i) such funds shall be returned to the Corporation upon its request; (ii) after such return, such funds shall be free of any trust which shall have been impressed upon them; (iii) the person entitled to the payment for which been originally intended shall have the right to look only to the Corporation for such payment, subject to applicable escheat laws; and (iv) the trustee which shall have held such funds shall be relieved of any responsibility for such of such funds to the Corporation.

        Any payment which may be owed for the payment of the redemption price for any shares of Series A Preferred Stock pursuant to Section 4 or the payment of any amount distributable with respect to the shares of Series A Preferred Stock under Section 6 shall be deemed to have been "paid or properly provided for" upon the earlier to occur of: (i) the date upon which funds sufficient to make such payment shall be deposited in a manner contemplated by the preceding paragraph or (ii) the date upon which a check payable to the person entitled to receive such payment shall be delivered to such person or mailed to such person at the address of such person then appearing on the books of the Corporation.

Section 8.    Status of Reacquired Shares.

        Shares of Series A Preferred Stock issued and reacquired by the Corporation (including, without limitation, shares of Series A Preferred Stock which have been redeemed pursuant to the terms of Section 4 hereof and shares of Series A Preferred Stock which have been converted into shares of Common Stock) shall have the status of authorized and unissued shares of Preferred Stock, undesignated as to series, subject to later issuance.

12

Section 9.    Preemptive Rights.

        Holders of shares of Series A Preferred Stock are not entitled to any preemptive or subscription rights in respect of any securities of the Corporation.

Section 10.    Legal Holidays.

        In any case where any Dividend Payment Date, redemption date or the last date on which a holder of Series A Preferred Stock has the right to convert such holder's shares of Series A Preferred Stock shall not be a Business Day (as defined below), then (notwithstanding any other provision of this Certificate of Designation of the Series A Preferred Stock) payment of a dividend due or a redemption price or conversion of the shares of Series A Preferred Stock need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Dividend Payment Date or redemption date or the last day for conversion, provided that, for purposes of computing such payment, no interest shall accrue for the period from and after such Dividend Payment Date or redemption date, as the case may be. As used in this Section 10, "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in the City of New York or the State of New Jersey are authorized or obligated by law or executive order to close.

ARTICLE XII

SERIES B 10% CONVERTIBLE PREFERRED STOCK,
NO PAR VALUE

Section 1.    Designation and Amount; Rank.

        There is hereby established a series of preferred stock which is designated "Series B 10% Convertible Preferred Stock" (referred to herein as "Series B Preferred Stock"). The number of shares which will constitute such series shall be Two Thousand One Hundred (2,100). The Series B Preferred Stock shall rank senior to the Corporation's Common Stock with respect to the payment of dividends and to the distribution of assets upon liquidation, dissolution or winding up.

Section 2.    Dividends.

        (A)  For purposes of this Section 2, each April 1 on which any shares of Series B Preferred Stock shall be outstanding shall be deemed to be a "Dividend Payment Date." On each Dividend Payment Date, the holder of any share of Series B Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors of the Corporation out of funds legally available therefor, cumulative dividends at the rate of 10% per year on the "Liquidation Value" of each share of Series B Preferred Stock and no more. The "Liquidation Value" is $1,000. Dividends payable on the Series B Preferred Stock for the initial dividend period and for any period less than a full annual period shall be computed on a basis of a 360-day year of twelve 30 day months.

        (B)  All dividends shall be payable in shares of the Company's Common Stock, valued at $2.50 per share, subject to Section 5(E) below.

        (C)  On each Dividend Payment Date all dividends which shall have accrued on each share of Series B Preferred Stock outstanding on such Dividend Payment Date shall accumulate and be deemed to become "due". Any dividend which shall not be paid on the Dividend Payment Date on which it shall become due shall be deemed to be "past due" until such dividend shall be paid or until the share of Series B Preferred Stock with respect of which such dividend became due shall no longer be outstanding, whichever is the earlier to occur. No interest or sum of money in lieu of interest shall be payable in respect of any dividend payment or payments which are past due. Dividends paid on shares of Series B Preferred Stock in an amount less than the total amount of such dividends at the time

13

accumulated and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding.

        (D)  So long as any shares of the Series B Preferred Stock are outstanding, no dividend (other than a dividend or distribution in Common Stock or in any other stock ranking junior to the Series B Preferred Stock as to dividends and upon liquidation, dissolution or winding up) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to, or on a parity with, the Series B Preferred Stock as to dividends or upon liquidation, dissolution or winding up, nor shall any Common Stock or any other stock of the Corporation ranking junior to, or on a parity with, the Series B Preferred Stock as to dividends or upon liquidation, dissolution or winding up, be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except for conversion of such junior or parity stock into, or exchange of such junior or parity stock for, stock of the Corporation ranking junior to the Series B Preferred Stock as to dividends and upon liquidation, dissolution, or winding up) unless, in each case, the full cumulative dividends on all outstanding shares of the Series B Preferred Stock shall have been paid or declared and set aside for payment for all past dividend payment periods.

Section 3.    General, Class and Series Voting Rights.

        Except as provided in this Section 3 and in Section 4 hereof or as otherwise from time to time required by applicable law, the Series B Preferred Stock shall have no voting rights.

        So long as any shares of Series B Preferred Stock remain outstanding, the consent of the holders of at least a majority of the shares of Series B Preferred Stock outstanding at the time (voting separately as a class together with all other series of Preferred Stock ranking on a parity with the Series B Preferred Stock either as to dividends or the distribution of assets upon liquidation, dissolution or winding up and upon which like voting rights have been conferred and are exercisable) given in person or by proxy, either in writing or at any special or annual meeting called for the purpose, shall be necessary to permit, effect or validate any one or more of the following:

          (i)  The creation, authorization or issuance of, or reclassification of any authorized stock of the Corporation into, or creation, authorization or issuance of any obligation or security convertible into or evidencing a right to purchase any shares of, or increase in the authorized or issued amount of, any class or series of stock (including any class or series of Preferred Stock) ranking prior (as that term is hereinafter defined in this Section 3) to the Series B Preferred Stock with respect to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up; or

         (ii)  The amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Restated Certificate of Incorporation (or any certificate amendatory thereof or supplemental thereto providing for the capital stock of the Corporation including, without limitation, this Restated Certificate) which would directly, materially and adversely affect the preferences, rights, powers or privileges of holders of shares of the Series B Preferred Stock or of such other series of Preferred Stock of the Corporation; provided, however, that in the event that any such amendment, alteration or repeal would materially and adversely affect the rights of only holders of shares of Series B Preferred Stock, then such amendment, alteration or repeal may be effected only with the affirmative vote or consent of the holders of a majority of the shares of Series B Preferred Stock then outstanding. Any increase in the amount of authorized Preferred Stock or the creation and issuance of other series of Preferred Stock ranking on a parity with or junior to the Series B Preferred Stock with respect to dividends and upon liquidation, dissolution or winding up shall not be deemed to affect adversely the rights of the holders of shares of Series B Preferred Stock.

14

        The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of Series B Preferred Stock shall have been redeemed or sufficient funds shall have been deposited in trust to effect such redemption.

        Any class or classes of stock of the Corporation shall be deemed to rank:

          (i)  prior to the Series B Preferred Stock as to dividends or as to distribution of assets upon liquidation, dissolution or winding up if the holders of such class shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Series B Preferred Stock; and

         (ii)  on a parity with the Series B Preferred Stock as to dividends or as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates, or redemption or liquidation prices per share thereof be different from those of the Series B Preferred Stock, if the holders of such class of stock and the Series B Preferred Stock shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority one over the other.

Section 4.    Optional Redemption.

        (A)  At any time and from time to time, the shares of Series B Preferred Stock are redeemable, in whole or in part, at the option of the Corporation at a redemption price equal to the Liquidation Value ($1,000) per share of Series B Preferred Stock, plus accrued and unpaid dividends thereon to the date fixed for redemption:

        (B)  In the event the Corporation shall elect to redeem the shares of Series B Preferred Stock, the Corporation shall give notice to the holders of record of shares of the Series B Preferred Stock being so redeemed, not less than 30 days prior to such redemption, by first class mail, postage prepaid, at their addresses as shown on the stock registry books of the Corporation, that said shares are being redeemed, provided that without limiting the obligation of the Corporation hereunder to give the notice provided in this Section 4(B), the failure of the Corporation to give such notice shall not invalidate any corporate action by the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of shares of Series B Preferred Stock to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date; and (vi) that such holder has the right to convert such shares into a number of shares of Common Stock prior to the close of business on the tenth (10th) day preceding such redemption date.

        (C)  In the event that fewer than all the outstanding shares of Series B Preferred Stock are to be redeemed, the number of shares to be redeemed shall be determined by the Board of Directors of the Corporation and the shares to be redeemed shall be determined pro rata or by lot as may be determined by the Board of Directors of the Corporation or by any other method as may be determined by the Board of Directors of the Corporation in its sole discretion to be equitable provided that such method satisfies any applicable requirements of any securities exchange on which the Series B Preferred Stock is listed.

        (D)  Notice having been mailed as aforesaid, from and after the applicable redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price), dividends on the shares of Series B Preferred Stock to be redeemed on such redemption date shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation

15

the redemption price) shall cease; provided that, notwithstanding the foregoing, if notice of redemption has been given pursuant to this Section 4 and any holder of shares of Series B Preferred Stock shall, prior to the close of business on the tenth (10th) day preceding the redemption date, surrender for conversion any or all of the shares to be redeemed held by such holder in accordance with Section 5, then the conversion of such shares to be redeemed shall become effective as provided in Section 5. Upon surrender of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof.

        (E)  Any shares of Series B Preferred Stock which shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series, until such shares are once more designated as part of a particular series by the Board of Directors of the Corporation.

Section 5.    Conversion.

        (A)  The holder of any share of Series B Preferred Stock shall have the right, at such holder's option (but if such share is called for redemption, then in respect of such share only to and including but not after the close of business on the tenth (10th) day preceding the date fixed for such redemption, provided that no default by the Corporation in the payment of the applicable redemption price (including any accrued and unpaid dividends) shall have occurred and be continuing on the date fixed for such redemption) to convert such share into that number of fully paid and non-assessable shares of Common Stock (calculated as to each conversion to the nearest whole share) obtained by dividing the Liquidation Value ($1,000.00) by the Conversion Price then in effect. The Conversion Price shall initially be $2.50 per share and shall be subject to adjustment as set forth below.

        (B)  In order to exercise the conversion privilege, the holder of shares of Series B Preferred Stock shall surrender the certificates representing such shares, accompanied by transfer instruments satisfactory to the Corporation and sufficient to transfer the Series B Preferred Stock being converted to the Corporation free of any adverse interest, at any of the offices or agencies maintained for such purpose by the Corporation ("Conversion Agent") and shall give written notice to the Corporation at such Conversion Agent that the holder elects to convert such shares. Such notice shall also state the names, together with addresses, in which the certificates for shares of Common Stock which shall be issuable on such conversion shall be issued. As promptly as practicable after the surrender of such shares of Series B Preferred Stock as aforesaid, the Corporation shall issue and shall deliver at such Conversion Agent to such holder, or on his written order, a certificate for the number of full shares of Common Stock issuable upon the conversion of such shares in accordance with the provisions hereof. Balance certificates will be issued for the remaining shares of Series B Preferred Stock in any case in which fewer than all of the shares of Series B Preferred Stock represented by a certificate are converted. Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which shares of Series B Preferred Stock shall have been so surrendered and such notice received by the Corporation as aforesaid, and the persons in whose names any certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holders of record of the Common Stock represented thereby at such time, unless the stock transfer books of the Corporation shall be closed on the date on which shares of Series B Preferred Stock are so surrendered for conversion, in which event such conversion shall be deemed to have been effected immediately prior to the close of business on the next succeeding day on which such stock transfer books are open, and such persons shall be deemed to have become such holders of record of the Common Stock at the close of business on such later day. In either circumstance, such conversion shall be at the Conversion Price in effect on the date upon which such share shall have been surrendered and such notice received by the Corporation.

16

        (C)  In the case of any share of Series B Preferred Stock which is converted after any record date with respect to the payment of a dividend on the Series B Preferred Stock and on or prior to the Dividend Payment Date related to such record date, the dividend due on such Dividend Payment Date shall be payable on such Dividend Payment Date to the holder of record of such share as of such preceding record date notwithstanding such conversion. Except as provided in this paragraph, no payment or adjustment shall be made upon any conversion on account of any dividends accrued on shares of Series B Preferred Stock surrendered for conversion or on account of any dividends on the Common Stock issued upon conversion.

        (D)  No fractional shares or scrip representing fractions of shares of Common Stock shall be issued upon conversion of any shares of Series B Preferred Stock. Instead of any fractional interest in a share of Common Stock which would otherwise be deliverable upon the conversion of a share of Series B Preferred Stock, the Corporation shall pay to the holder of such share of Series B Preferred Stock an amount in cash (computed to the nearest cent, with one-half cent being rounded upward) equal to such fraction multiplied by the reported closing price (as defined below) of the Common Stock at the close of business on the day on which such share or shares of Series B Preferred Stock are surrendered for conversion in the manner set forth above, or if such date is not a trading date, on the next succeeding trading date. If more than one certificate representing shares of Series B Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Series B Preferred Stock represented by such certificates, or the specified portions thereof to be converted, so surrendered.

        (E)  For the purpose of any computation under the foregoing paragraph, the closing price per share of Common Stock on any date shall be deemed to be the average of the daily closing prices for the five consecutive trading days selected by the Board of Directors commencing no more than 20 trading days before and ending no later than the day before the day in question. The closing price for each day shall be the reported last sale price, regular way, or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices, regular way, in either case as reported on the New York Stock Exchange Composite Tape or, if the Common Stock is not listed or admitted to trading on the New York Stock Exchange at such time, on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or, if not listed or admitted to trading on any national securities exchange, on the National Market System of the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or, if the Common Stock is not quoted on the NASDAQ National Market System, the average of the closing bid and asked prices on such day in the over-the-counter market as reported by NASDAQ or, if bid and asked prices for the Common Stock on each such day shall not have been reported through NASDAQ, the average of the bid and asked prices for such date as furnished by any New York Stock Exchange member firm regularly making a market in the Common Stock selected from time to time by the Board of Directors of the Corporation for such purpose or, if no such quotations are available, the fair market value of the Common Stock as determined by a New York Stock Exchange member firm regularly making a market in the Common Stock selected from time to time by the Board of Directors of the Corporation for such purpose.

        (F)  The Conversion Price shall be adjusted from time to time as follows:

          (i)  In case the Corporation shall pay or make a dividend or other distribution on any class of capital stock of the Corporation in Common Stock, the Conversion Price in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other

17

distribution, such reduction to, become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this subparagraph (i), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation. The Corporation will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Corporation.

         (ii)  In case outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and, conversely, in case outstanding shares of Common Stock shall each be combined into a smaller number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective.

        (iii)  No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% of such price; provided, however, that any adjustments which by reason of this subparagraph (iii) are not required to be made shall be carried forward and taken into account in any subsequent adjustment, and provided further, that adjustment shall be required and made in accordance with the provisions hereof not later than such time as may be required in order to preserve the tax-free nature of a distribution to the holders of shares of Series B Preferred Stock or Common Stock. All calculations shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. The Corporation may make such reductions in the Conversion Price, in addition to those required by subparagraphs (i) and (ii) above, as it considers to be advisable in order to avoid or diminish any income tax to any holders of shares of Common Stock resulting from any dividend or distribution of stock or issuance of rights or warrants to purchase or subscribe for stock or from any event treated as such for income tax purposes or for any other reasons.

        (iv)  Whenever the Conversion Price is adjusted as herein provided, (x) the Corporation shall promptly file with any Conversion Agent a certificate of a firm of independent public accountants setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment, and the manner of computing the same, which certificate shall be conclusive evidence of the correctness of such adjustment, and (y) a notice stating that the Conversion Price has been adjusted and setting forth the adjusted Conversion Price shall forthwith be given by the Corporation to any Conversion Agent and mailed by the Corporation to each holder of shares of Series B Preferred Stock at their last address as the same appears on the books of the Corporation.

        (G)  In case of any consolidation of the Corporation with, or merger of the Corporation into, any other entity (other than a merger or consolidation in which the Corporation is the continuing corporation) or any sale or conveyance to another corporation of the property of the Corporation as an entirety or substantially as an entirety, or in the case of a statutory exchange of securities with another corporation, or any reclassification of shares, the Conversion Price shall not be adjusted but each holder of a share of Series B Preferred Stock then outstanding shall have the right thereafter to convert such share only into the kind and amount of securities, cash and other property which such holder would have owned or have been entitled to receive immediately after such consolidation, merger, sale, conveyance, exchange or reclassification had such share of Series B Preferred Stock been converted immediately prior to such consolidation, merger, sale, conveyance, exchange or reclassification. Provision shall be made in any such consolidation, merger, sale, conveyance, exchange or reclassification for adjustments in the Conversion Price which shall be as nearly equivalent as may be

18

practicable to the adjustments provided for in Section (F). The above provisions shall similarly apply to successive consolidations, mergers, sales, conveyances, exchange or reclassification.

        For purposes of this Section 5, "Common Stock" includes any stock of any class of the Corporation which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation and which is not subject to redemption by the Corporation. However, subject to the provisions of paragraph (G) above, shares issuable on conversion of shares of Series B Preferred Stock shall include only shares of the class designated as Common Stock of the Corporation on the date of the initial issuance of Series B Preferred Stock by the Corporation, or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation and which are not subject to redemption by the Corporation.

        In case:

          (i)  the Corporation shall declare a dividend (or any other distribution) on its Common Stock that would cause an adjustment to the Conversion Price of the Series B Preferred Stock pursuant to the terms of subparagraph (i) of Paragraph (F) above; or

         (ii)  the Corporation shall authorize the granting to the holders of its Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any other rights; or

        (iii)  of any reclassification of the Common Stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock), or of any consolidation, merger or share exchange to which the Corporation is a party and for which approval of any stockholders of the Corporation is required, or of the sale or conveyance, of the property of the Corporation as an entirety or substantially as an entirety; or

        (iv)  of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation;

then the Corporation shall cause to be filed with any Conversion Agent, and shall cause to be mailed to all holders of shares of Series B Preferred Stock at each such holder's last address as the same appears on the books of the Corporation, at least 20 days (or 10 days in any case specified in clause (i) or (ii) above) prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, share exchange, sale, conveyance, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, share exchange, sale, conveyance, dissolution, liquidation or winding up. Neither the failure to give such notice nor any defect therein shall affect the legality or validity of the proceedings described in clauses (i) through (iv) above.

        The Corporation will pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on conversions of shares of Series B Preferred Stock pursuant hereto; provided, however, that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of shares of Common Stock in a name other than that of the holder of the shares of Series B Preferred Stock to be converted and no such issue or delivery shall be made unless and until the person requesting such issue or delivery has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.

19

        The Corporation covenants that all shares of Common Stock which may be delivered upon conversions of shares of Series B Preferred Stock will upon delivery be duly and validly issued and fully paid and non-assessable, free of all liens and charges and not subject to any pre-emptive rights. The Corporation further covenants that, if necessary, it shall reduce the par value of the Common Stock so that all shares of Common Stock delivered upon conversion of shares of Series B Preferred Stock are fully paid and non-assessable.

        The Corporation covenants that it will at all times reserve and keep available, free from pre-emptive rights, out of its authorized but unissued shares of Common Stock or its issued shares of Common Stock held in its treasury, or both, for the purpose of effecting conversions of shares of Series B Preferred Stock, the full number of shares of Common Stock deliverable upon the conversion of all outstanding shares of Series B Preferred Stock not theretofore converted. For purposes of this reservation of Common Stock, the number of shares of Common Stock which shall be deliverable upon the conversion of all outstanding shares of Series B Preferred Stock shall be computed as if at the time of computation all outstanding shares of Series B Preferred Stock were held by a single holder. The issuance of shares of Common Stock upon conversion of shares of Series B Preferred Stock is authorized in all respects.

Section 6.    Liquidation.

        In the event of any voluntary or involuntary dissolution, liquidation or winding up of the Corporation (for the purposes of this Section 6, a "Liquidation"), before any distribution of assets shall be made to the holders of the Common Stock or the holders of any other stock that ranks junior to the Series B Preferred Stock in respect of distributions upon the Liquidation of the Corporation, but in parity with the Series A Preferred Stock, the holder of each share of Series B Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, an amount equal to the Liquidation Value ($1,000.00 per share) plus all dividends (whether or not declared or due) accrued and unpaid on such share on the date fixed for the distribution of assets of the Corporation to the holders of Series B Preferred Stock.

        If upon any Liquidation of the Corporation, the assets available for distribution to the holders of Series B Preferred Stock, Series A Preferred Stock and any other stock of the Corporation ranking on a parity with the Series B Preferred Stock upon Liquidation issued by the Corporation which shall then be outstanding (hereinafter in this paragraph called the "Total Amount Available") shall be insufficient to pay the holders of all outstanding shares of Series B Preferred Stock, Series A Preferred Stock and all other such parity stock the full amounts (including all dividends accrued and unpaid) to which they shall be entitled by reason of such Liquidation of the Corporation, then there shall be paid to the holders of the Series B Preferred Stock in connection with such Liquidation of the Corporation, an amount equal to the product derived by multiplying the Total Amount Available times a fraction, the numerator of which shall be the full amount to which the holders of the Series B Preferred Stock shall be entitled under the terms of the preceding paragraph by reason of such Liquidation of the Corporation and the denominator of which shall be the total amount which would have been distributed by reason of such Liquidation of the Corporation with respect to the Series B Preferred Stock, Series A Preferred Stock and all other stock ranking on a parity with the Series B Preferred Stock upon Liquidation then outstanding had the Corporation possessed sufficient assets to pay the maximum amount which the holders of all such stock would be entitled to receive in connection with such Liquidation of the Corporation.

        The voluntary sale, conveyance, lease, exchange or transfer of the property of the Corporation as an entirety or substantially as an entirety, or the merger or consolidation of the Corporation into or with any other corporation, or the merger of any other corporation into the Corporation, or any purchase or redemption of some or all of the shares of any class or series of stock of the Corporation,

20

shall not be deemed to be a Liquidation of the Corporation for the purposes of the Section 6 (unless in connection therewith the Liquidation of the Corporation is specifically approved).

        The holder of any shares of Series B Preferred Stock shall not be entitled to receive any payment owed for such shares under this Section 6 until such holder shall cause to be delivered to the Corporation (i) the certificate or certificates representing such shares of Series B Preferred Stock and (ii) transfer instrument or instruments satisfactory to the Corporation and sufficient to transfer such shares of Series B Preferred Stock to the Corporation free of any adverse interest. As in the case of the redemption price, no interest shall accrue on any payment upon Liquidation after the due date thereof.

        After payment of the full amount of the liquidating distribution to which they are entitled, the holders of shares of the Series B Preferred Stock will not be entitled to any further participation in any distribution of assets by the Corporation.

Section 7.    Payments.

        The Corporation may provide funds for any payment of the redemption price for any shares of Series B Preferred Stock or any amount distributable with respect to any Series B Preferred Stock under Section 6 hereof by depositing such funds with a bank or trust company selected by the Corporation having a net worth of at least $50,000,000 and organized under the laws of the United States or any state thereof, in trust for the benefit of the holder of such shares of Series B Preferred Stock under arrangements providing irrevocably for payment upon satisfaction of any conditions to such payment by the holder of such shares of Series B Preferred Stock which shall reasonably be required by the Corporation. The Corporation shall be entitled to make any deposit of funds contemplated by this section 7 under arrangements designated to permit such funds to generate interest or other income for the Corporation, and the Corporation shall be entitled to receive all interest and other income earned by any funds while they shall be deposited as contemplated by this section 7, provided that the Corporation shall maintain on deposit funds sufficient to satisfy all payments which the deposit arrangement shall have been established to satisfy if the conditions precedent to the disbursement of any funds deposited by the Corporation pursuant to this Section 7 shall not have been satisfied within two years after the establishment of the trust for such funds, then (i) such funds shall be returned to the Corporation upon its request; (ii) after such return, such funds shall be free of any trust which shall have been impressed upon them; (iii) the person entitled to the payment for which been originally intended shall have the right to look only to the Corporation for such payment, subject to applicable escheat laws; and (iv) the trustee which shall have held such funds shall be relieved of any responsibility for such of such funds to the Corporation.

        Any payment which may be owed for the payment of the redemption price for any shares of Series B Preferred Stock pursuant to Section 4 or the payment of any amount distributable with respect to the shares of Series B Preferred Stock under Section 6 shall be deemed to have been "paid or properly provided for" upon the earlier to occur of: (i) the date upon which funds sufficient to make such payment shall be deposited in a manner contemplated by the preceding paragraph or (ii) the date upon which a check payable to the person entitled to receive such payment shall be delivered to such person or mailed to such person at the address of such person then appearing on the books of the Corporation.

Section 8.    Status of Reacquired Shares.

        Shares of Series B Preferred Stock issued and reacquired by the Corporation (including, without limitation, shares of Series B Preferred Stock which have been redeemed pursuant to the terms of Section 4 hereof and shares of Series B Preferred Stock which have been converted into shares of Common Stock) shall have the status of authorized and unissued shares of Preferred Stock, undesignated as to series, subject to later issuance.

21

Section 9.    Preemptive Rights.

        Holders of shares of Series B Preferred Stock are not entitled to any preemptive or subscription rights in respect of any securities of the Corporation.

Section 10.    Legal Holidays.

        In any case where any Dividend Payment Date, redemption date or the last date on which a holder of Series B Preferred Stock has the right to convert such holder's shares of Series B Preferred Stock shall not be a Business Day (as defined below), then (notwithstanding any other provision of this Certificate of Designation of the Series B Preferred Stock) payment of a dividend due or a redemption price or conversion of the shares of Series B Preferred Stock need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Dividend Payment Date or redemption date or the last day for conversion, provided that, for purposes of computing such payment, no interest shall accrue for the period from and after such Dividend Payment Date or redemption date, as the case may be. As used in this Section 10, "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in the City of New York or the State of New Jersey are authorized or obligated by law or executive order to close.

        IN WITNESS WHEREOF, the undersigned corporation has caused this Restated Certificate to be executed on its behalf by its duly authorized officer as of the date first written above.

PHOTONIC PRODUCTS GROUP, INC.
By:	/s/ DANIEL LEHRFELD Daniel Lehrfeld, President

22

QuickLinks

RESTATED CERTIFICATE OF INCORPORATION OF PHOTONIC PRODUCTS GROUP, INC.

EX-3.2

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 3.2

BY-LAWS

OF

PHOTONIC PRODUCTS GROUP, INC.

(adopted                        ,            )

ARTICLE I

OFFICES

        1.1.  Registered Office and Agent.—The registered office of the Corporation in the State of New Jersey is at 181 Legrand Avenue, Northvale, New Jersey 07647. The registered agent of the Corporation at that office is William Miraglia.

        1.2.  Principal Place of Business.—The principal place of business of the Corporation is located at 181 Legrand Avenue, Northvale, New Jersey 07647.

        1.3.  Other Places of Business.—Branch or subordinate places of business or offices may be established at any time by the board of directors (the board) at any place or places where the Corporation is qualified to do business or where qualification is not required.

ARTICLE II

MEETINGS OF SHAREHOLDERS

        2.1.  Place of Meetings.—All meetings of shareholders shall be held at the principal business office of the Corporation or at whatever other place is designated by the board and stated in the notice of the meeting.

        2.2.  Annual Meeting.—The annual meeting of shareholders shall be held at 10:00 a.m. on the third Tuesday of April of each year or at whatever other time may be determined by the board, but not more than thirteen months after the last annual meeting. If the scheduled date for the meeting is a legal holiday, the meeting shall be held at the same hour on the next succeeding business day.

        2.3.  Special Meetings.—Special meetings of the shareholders may be called for any purpose and at any time by the chairman of the board, the president or the board. A special meeting of the shareholders, or of the holders of any class or series entitled to vote exclusively on a particular matter, shall be called by the Corporation upon the written application by the holder or holders of twenty percent or more of all stock entitled to vote on the matter or matters to be considered at the meeting. The application or applications shall state the purpose or purposes for which the meeting is to be held. The meeting shall be held within sixty days after receipt by the Corporation of the application or applications which, in the aggregate, equal twenty percent of the stock which will be entitled to vote at the meeting.

        2.4.  Record Date.—The board shall fix in advance a record date for determination of shareholders entitled to notice of and to vote at any meeting of shareholders. The record date shall not be more than sixty days nor less than ten days before the date of the meeting.

        2.5.  Voting List.—The secretary or stock transfer agent or registrar of the Corporation shall prepare a complete list of the shareholders entitled to vote at each shareholders' meeting or any adjournment thereof. The list may consist of cards arranged alphabetically or any equipment which permits the visual display of the information required by this section. The list shall be

        (a)   arranged alphabetically within each class, series, or group of shareholders maintained by the Corporation for convenience of reference, with the address of, and the number of shares held by, each shareholder;

        (b)   produced (or available by means of a visual display) at the time and place of the meeting;

        (c)   subject to the inspection of any shareholder for reasonable periods during the meeting; and

        (d)   prima facie evidence as to who are the shareholders entitled to examine such list or to vote at any meeting.

        2.6.  Inspectors.—The board may, in advance of any shareholders' meeting, appoint one or more inspectors to act at the meeting or any adjournment thereof. If the board does not appoint an inspector or inspectors, the presiding officer at the shareholders' meeting may, and on the request of any shareholder entitled to vote at the meeting shall, appoint one or more persons to act in that capacity. Each inspector shall take and sign an oath to execute faithfully the duties of inspector at the meeting with strict impartiality and to the best of his or her ability. No person shall be elected a director at a meeting at which that person has served as an inspector.

        2.7.  Notice of Meetings.—Written notice of the time, place and purposes of each shareholders' meetings shall be given to each shareholder entitled to vote at the meeting at least ten and not more than sixty days before the date of the meeting. The notice may be given personally, by first class United States mail or by courier service, charges prepaid, by facsimile transmission, or any other reasonable means of delivery. The notice may be sent to the shareholder at his or her address appearing on the books of the Corporation or to any other business or residence address of the shareholder known to the Corporation. The notice shall be deemed given at the time it is delivered personally, delivered to the courier service, deposited in the United States mail, transmitted by facsimile (and there is no reason to believe it was not received), or delivered by any other method (provided that method is reasonably believed to be at least as quick and reliable as first class United States mail).

        2.8.  Voting Rights.—Shareholders shall be entitled to vote their stock in the manner provided by law or as modified by the certificate of incorporation as amended or restated from time to time.

        2.9.  Proxies.

        2.9.1. Every shareholder entitled to vote at a shareholder meeting may authorize another person or persons to act for him or her by proxy. Every proxy shall be executed by the shareholder or his or her agent, but a proxy may be given by telegram, cable, or any other means of electronic communication that results in a writing.

        2.9.2. No proxy shall be valid after eleven months from the date of its execution unless a longer time is expressly provided therein. A proxy shall be revocable at will unless it states that it is irrevocable and is coupled with an interest either in the stock itself or in the Corporation. A proxy shall not be revoked by the death or incapacity of the shareholder, but the proxy shall continue in force until revoked by the personal representative or guardian of the shareholder.

        2.9.3. The presence at a meeting of any shareholder who has given a proxy shall not revoke the proxy unless the shareholder (i) files written notice of the revocation with the secretary of the meeting prior to the voting of the proxy or (ii) votes the shares subject to the proxy by written ballot. A person named as proxy of a shareholder may, if the proxy so provides, substitute another person to act in his or her place, including any other person named as proxy in the same proxy. The substitution shall not be effective until an instrument effecting it is filed with the secretary of the meeting.

        2.9.4. Each person holding a proxy shall either file the proxy with the secretary of the meeting or the inspectors at the start of the meeting or shall submit the proxy to the inspectors together with his or her ballot, as determined by the presiding officer. No proxy shall be counted or acted upon that is submitted to the secretary of the meeting or the inspectors any later than the first time during the meeting a vote is taken by ballot.

2

        2.10. Closing the Polls.

        2.10.1. After the polls are closed as provided herein, no additional votes nor any changes of votes shall be received or recognized, regardless of whether the votes have been tabulated and the results reported to the meeting.

        2.10.2. If a vote is taken by any method other than by ballot, the voting shall be completed and the polls closed upon the announcement of the result of the vote by the presiding officer.

        2.10.3. If a vote is taken by ballot, ballots shall be distributed to each shareholder or proxyholder requesting one, and they shall complete the ballots and return them to the inspectors. The polls shall be closed by a ruling by the presiding officer within a reasonable period of time after the ballots are distributed and, in any event, no sooner than ten minutes after the distribution of ballots.

        2.11. Quorum.—The presence in person or by proxy of the holders of shares entitled to cast a majority of the votes of each class or series entitled to vote as a class at the meeting and a majority of any two or more classes voting together as a class at such meeting shall constitute a quorum for the transaction of business. The shareholders present at a duly organized meeting may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum.

        2.12. Officers of Meetings.—The president shall preside at all meetings of shareholders. In the absence of the president, the chairman shall preside. In the absence of both, the most senior vice president shall preside unless the board has provided for someone else to preside. The secretary shall act as secretary of all meetings of shareholders. In the absence of the secretary, any assistant secretary who is present shall act as secretary of the meeting. If no assistant secretary is present, the presiding officer shall designate a secretary of the meeting.

        2.13. Order of Business.—The order of business at all shareholder meetings shall be as follows:

        (a)   call to order;

        (b)   proof of mailing of notice of meeting, proxy and proxy statement;

        (c)   appointment of inspectors, if not previously appointed by board and if demanded by any shareholder;

        (d)   report on presence of a quorum;

        (e)   reading or waiver of reading of minutes of preceding meeting;

        (f)    election of directors, if an annual meeting;

        (g)   consideration of other matters contained in the notice of meeting or properly brought before the meeting;

        (h)   balloting;

        (i)    reports of officers;

        (j)    question and answer period;

        (k)   report of inspectors;

        (l)    adjournment.

        2.14. Adjourned Meetings.

        2.14.1. Any shareholder meeting may be adjourned to another time or place, whether or not a quorum is present. In the absence of a quorum no other business may be transacted at a meeting.

3

        2.14.2. If a shareholder meeting is adjourned for more than thirty days or if the board establishes a new record date for the adjourned meeting, notice of the adjourned meeting shall be given as in the case of an original meeting. No notice of an adjourned meeting need be given if (i) the meeting is adjourned for thirty days or less; (ii) the record date is unchanged; (iii) the time and place of the adjourned meeting is announced at the meeting at which the adjournment is taken; and (iv) the only business transacted at the adjourned meeting is business which might have been transacted at the original meeting.

        2.15. Action by Shareholders Without Meeting.—Any action required or permitted to be taken at a meeting of shareholders by the New Jersey Business Corporation Act or the certificate of incorporation as amended or restated from time to time may be taken without a meeting by a written consent or consents pursuant to N.J.S. 14A:5-6.

ARTICLE III

BOARD OF DIRECTORS

        3.1.  Management Authority.—The business and affairs of the Corporation shall be managed under the direction of its board of directors (the board), subject only to the limitations imposed by law and by the Corporation's certificate of incorporation as amended or restated from time to time.

        3.2.  Number of Directors.—The board shall consist of five members.

        3.3.  Qualification of Directors.—Each director must be a United States citizen. No person shall be eligible to be elected a director who is under the age of 21 or over the age of 75 on the date of the election.

        3.4.  Election.—At each election of directors, each shareholder entitled to vote at the election shall have the right to vote the number of shares owned by that shareholder for as many persons as there are directors to be elected and for whose election the shareholder has a right to vote.

        3.5.  Term of Office; Classification of Directors.—The board shall be divided into three classes, the members of each class to serve for three years. Two directors (or such number as shall be as nearly equal as possible) shall serve in each class. At the annual meeting of shareholders at which the shareholders approve an amendment to the certificate of incorporation to divide the board into classes, the directors of one class (Class 1) shall be elected for a term to end at the third annual meeting of shareholders following such annual meeting; the directors of the second class (Class 2) shall be elected for a term to end at the second annual meeting of shareholders following such annual meeting; and the directors of the third class (Class 3) shall be elected for a term to end at the next annual meeting of shareholders following such annual meeting. At each annual meeting thereafter, directors shall be elected to fill the directorships of the class of directors whose terms have expired. Those directors shall hold office until the third successive annual meeting after their election and until their successors shall have been elected and qualified, so that the term of office of one class of directors shall expire at each annual meeting.

        3.6.  Resignation, Removal, and Suspension.—

        3.6.1. Resignation.—Any director may resign at any time by giving a written notice of resignation to the corporation.

        3.6.2. Removal by Shareholders.—Any director may be removed, without cause, by the affirmative vote of the majority of votes cast by the holders of shares entitled to vote for the election of directors.

        3.6.3. Removal or Suspension by Board.—The board shall have the power (i) to remove any director for cause or (ii) to suspend any director, pending a final determination that cause exists

4

for removal, if the board determines in its sole discretion there is a reasonable possibility that cause for removal may exist. The determination of whether cause exists shall be made by the board in its sole discretion and shall not be set aside unless it is unreasonable, arbitrary, or capricious. Conduct constituting cause for removal includes, but is not limited to,

        (a)   Repeated failure to attend meetings or to maintain a reasonable degree of familiarity with the business conducted by the board;

        (b)   Any conduct as a board member or individually which is disloyal or contrary to the interests of the Corporation, such as seeking or obtaining an improper personal benefit on account of the director's position, exploiting for personal benefit information obtained as a director, or engaging in activities in competition with the Corporation; or

        (c)   Engaging in any action that reasonably would be viewed as likely to cause the director's continued membership on the board to cause embarrassment or ignominy to the board or the Corporation.

        3.7.  Vacancies.—Any vacancy in the board, however caused, including an increase in the number of directors, may be filled by the affirmative vote of a majority of the votes of the remaining directors, even if less than a quorum. Each director so elected shall hold office until the next succeeding annual meeting of the shareholders. A vacancy in the board shall be deemed to exist in the case of death, resignation or removal of any director, or if the number of directors is increased. No reduction of the number of directors shall have the effect of removing any director prior to the expiration of his or her term of office.

        3.8.  Place of Meeting.—All meetings of the board shall be held at the principal business office of the Corporation or at such place or places as the board may from time to time determine.

        3.9.  Use of Communications Equipment.—If the board determines it to be appropriate, any director may participate in a meeting of the board by means of conference telephone or any other means of communication by which all persons participating in the meeting are able to hear each other. Upon the request of any director who is not able to attend in person, the secretary shall use his or her best efforts to arrange for appropriate equipment to be used to enable any director so requesting to participate in part or all of the meeting through the use of communication equipment.

        3.10. Regular Meetings.—A regular meeting of the board shall be held without notice immediately following and at the same place as the annual shareholders' meeting for the purpose of electing officers and conducting any other business as may come before the meeting. The board may decide to have additional regular meetings which may be held without notice.

        3.11. Special Meetings.—A special meeting of the board may be called for any purpose at any time by the president or by two directors. The meeting shall be held upon not less than two days notice if given by telegram, orally (either by telephone or in person), or by facsimile transmission, upon not less than three days notice if given by overnight courier delivery service, or upon not less than five days notice if given by depositing the notice in the United States mails, first class postage prepaid. The notice shall be deemed given at the time it is given orally, the facsimile transmission is originated (and there is no reason to believe it was not received), it is delivered to the overnight courier service, or it is deposited in the United States mails. The notice shall specify the time and place, and may, but need not, specify the purposes, of the meeting.

        3.12. Waivers of Notice.—Any action taken at any meeting of the board, however called and noticed or wherever held, shall be as valid as though the meeting had been duly held after a regular call and notice if a quorum was present and if, before or after the meeting, each of the directors not present signs a written waiver of notice. All written waivers shall be filed with the corporate records or made a part of the minutes of the meeting. The attendance of any director at a meeting without protesting prior to the conclusion of the meeting the lack of notice shall constitute a waiver of notice by the director. The fact of attendance without protest shall be recorded in the minutes of the meeting.

5

        3.13. Action Without Meeting.—Any action required or permitted to be taken by the board by law, the certificate of incorporation as amended or restated from time to time, or these by-laws may be taken without a meeting, if, prior or subsequent to the action, each member of the board consents in writing to the action. A consent may be given by cable or telegram or by facsimile. Each written consent shall be filed with the minutes of the proceedings of the board. Action by the board by written consent shall have the same force and effect as a unanimous vote of the directors for all purposes. Any certificate or other document which relates to action taken by consent may state that the action was taken by unanimous written consent of the board of directors without a meeting.

        3.14. Quorum.—The presence at a meeting of persons entitled to cast a majority of the votes of the entire board shall constitute a quorum for the transaction of business.

        3.15. Votes Required.—Any action approved by a majority of the votes of directors present at a meeting at which a quorum is present shall be the act of the board.

        3.16. Presiding Officer.—The chairman shall preside at all meetings of the board at which he or she is present. In the absence of the chairman, the president shall preside. The secretary or, in the absence of the secretary, an assistant secretary, shall record the minutes of the meeting. If neither of them is present, the presiding officer shall designate a secretary to record the minutes of the meeting.

        3.17. Adjournment.—Any meeting of the board at which a quorum is present may be adjourned to meet again at a time and place specified by the board when it adjourns the meeting. No notice of the time and place of the adjourned meeting need be given if it is to be held within three days of the date fixed for the adjourned meeting.

        3.18. Presumption of Assent.—A director who is present at a meeting of the board or any committee thereof of which the director is a member at which action on any corporate matter is taken shall be presumed to have concurred in the action taken unless the director's dissent is entered in the minutes of the meeting or unless the director files a written dissent to the action with the person acting as the secretary of the meeting before or promptly after the adjournment thereof. The right to dissent shall not apply to a director who voted in favor of the action. A director who is absent from a meeting of the board, or any committee thereof of which he or she is a member, at which any action is taken shall be presumed to have concurred in the action unless the director files a dissent with the secretary of the corporation within a reasonable time after learning of the action.

        3.19. Expenses and Compensation of Directors.—Members of the board shall be reimbursed for all reasonable expenses incurred by them in connection with attending board or committee meetings. The board may determine from time to time fees to be paid to each member for service on the board and any committee of the board. The fees may be based upon a specified amount per annum or a specified amount per meeting attended, a combination of both, or any other reasonable method. Directors who are compensated officers of the Corporation shall not be paid directors' fees.

ARTICLE IV

COMMITTEES

        4.1.  Establishment of Committees; Executive Committee.—The board may, by action taken by a majority of the entire board, designate from among its members an executive committee, consisting of one or more directors, and may at any time designate additional committees, each of which shall consist of one or more persons. Subject to the limitations contained in Section 4.8, the executive committee shall have and may exercise all of the authority of the board. Each other committee shall have whatever authority, not exceeding the authority of the executive committee, as is specifically provided by the board. Each committee that is delegated the power to act on behalf of the Corporation (a board committee) shall consist exclusively of directors. A majority of the members of each other committee (advisory committees) shall be directors. The other members may be officers or other

6

employees of the Corporation or other persons who have experience, expertise, or a special background of value to the areas of responsibility of the committee.

        4.2.  Presiding Officer and Secretary.—The board shall designate the chairman of each committee. Each committee shall from time to time designate a secretary of the committee who shall keep a record of its proceedings.

        4.3.  Vacancies.—Vacancies occurring from time to time in the membership of any committee may be filled by the board for the unexpired term of the member whose death, resignation, removal or disability causes the vacancy, and shall be so filled if, as the result of the vacancy, there shall be less than three directors on the committee, or, in the case of the executive committee, if the president shall be the person whose death, resignation, removal, or disability causes the vacancy.

        4.4.  Meetings.—Each committee shall adopt its own rules of procedure and shall meet at whatever times it may determine and shall also meet whenever a meeting is called by the chairman or the chairman of the committee. Members of committees may attend meetings through the medium of communications equipment (in the same manner as may members of the board), and any committee may act by unanimous written consent in lieu of a meeting (in the same manner as may the board).

        4.5.  Notice of Meetings.—If the committee establishes regular meeting dates, it shall not be necessary to give notice of a regular meeting. Notice of every special meeting shall be given in the manner and within the time periods specified in these by-laws with respect to notices of special meetings of the board. Notice of any special meeting may be waived in writing by all the absent members of the committee either before or after the meeting.

        4.6.  Quorum.—A quorum at any meeting of a committee shall be the presence of one-half of the members of the entire committee. Every act or decision done or made by a majority of the directors present at a committee meeting duly held at which a quorum is present shall be regarded as the act of the committee.

        4.7.  Reports.—Actions taken at a meeting of any committee shall be reported to the board at its next meeting following the committee meeting, except that when the meeting of the board is held within two days after the committee meeting, the report shall, if not made at the first meeting, be made to the board at the second meeting following the committee meeting.

        4.8.  Limitations of Powers.—No committee of the board shall have authority to do any of the following:

        (a)   make, alter or repeal any by-law of the corporation;

        (b)   elect or remove any director, or remove any officer who may be elected or appointed only by the board;

        (c)   submit to shareholders any action that requires shareholders' approval;

        (d)   amend or repeal any resolution theretofore adopted by the board which, by its terms, is amendable or repealable only by the board;

        (e)   fix the compensation of any officer who is a member of the committee for serving as an officer of the Corporation.

        4.9.  Powers of the Board.—The board shall have the power to

        (a)   fill any vacancy in any committee;

        (b)   appoint one or more directors to serve as alternate members of any committee to act in the absence or disability of any member of that committee with all the powers of the absent or disabled members;

7

        (c)   abolish any committee at its pleasure; and

        (d)   remove any director from membership on any committee at any time, with or without cause.

ARTICLE V

OFFICERS

        5.1.  Officers Enumerated.—The board shall elect a chairman of the board, a president, one or more vice presidents, including executive vice presidents and senior vice presidents, a treasurer, and a secretary. Any two or more offices may be held by the same person.

        5.2.  Additional Officers.—The board may from time to time elect any other officers it deems necessary, who shall hold their offices for the terms and have the powers and perform the duties that shall be prescribed from time to time by the board.

        5.3.  Election and Term of Office.—Each officer shall hold office until the next annual election of officers, and until his or her successor has been elected and has qualified, unless he or she is earlier removed. All officers of the Corporation shall hold office at the pleasure of the board.

        5.4.  Vacancies.—Any vacancy in any office may be filled by the board.

        5.5.  Removal and Resignation.—Any officer may be removed, either with or without cause, by the board or by any officer upon whom the power of removal has been conferred by the board. Removal of an officer shall be without prejudice to the officer's contract rights, if any. Election or appointment of an officer shall not of itself create contract rights. Any officer may resign at any time by giving written notice to the board or to the president. A resignation shall take effect on the date of the receipt of the notice or at any later time specified therein and, unless otherwise specified therein, the acceptance of the resignation shall not be necessary to make it effective.

        5.6.  Powers and Duties.—The officers shall each have such authority and perform such duties in the management of the Corporation as from time to time may be prescribed by the board and as may be delegated by the chairman or president. Without limiting the foregoing, the following officers shall have the following authority:

        (a)   Chief Executive Officer.    The chief executive officer shall, subject only to the direction and control of the board, have general charge and supervision over and responsibility for the business and affairs of the Corporation and the authority to instruct, direct, and control its other officers, employees, and agents. The chief executive officer may enter into and execute in the name of the corporation, contracts or other instruments in the regular course of business or contracts or other instruments not in the regular course of business that are authorized, either generally or specifically, by the board. The chief executive officer shall have the power to appoint, fix the compensation of, and suspend or remove all employees of the corporation, including officers, except for the chairman, the president, the executive vice presidents, the treasurer, and the secretary. The appointment, suspension, removal and fixing the compensation of officers by the chief executive officer shall be subject to whatever guidelines are adopted from time to time by the board and to the approval of the board. The chief executive officer shall have the general powers and duties of management usually vested in the office of chief executive officer of a corporation and shall have such other powers and duties as may be prescribed by the board.

        (b)   Chairman of the Board.    If a chairman is elected, he shall be chosen from among the members of the board. Unless the board determines otherwise, the chairman shall be chief executive officer of the corporation.

8

        (c)   President.—If there is no chairman, or in the event of the chairman's absence or inability to act, or if the board has so designated, the president shall be chief executive officer. If there is a chairman who is chief executive officer, the president shall be chief operating officer and shall be responsible only to the chairman and to the board for those areas of operation of the business and affairs of the corporation as shall be delegated to the president by the board or by the chairman. Unless otherwise specified by the board or the chairman, all other officers of the corporation (except the chairman) shall be subject to the authority and supervision of the president. The president may enter into and execute in the name of the corporation contracts or other instruments in the regular course of business or contracts or other instruments not in the regular course of business that are authorized, either generally or specifically, by the board.

        (d)   Vice Presidents.    Each vice president shall perform the duties that may, from time to time, be assigned to him or her by the chief executive officer, the president, or the board. Vice presidents shall report and be subject to the supervision of the chief executive officer or the president in the performance of their duties unless otherwise specified by the board. In the absence of the chief executive officer and the president or in the event of the death, inability, or refusal to act of both of them, the vice presidents in the order designated at the time of their election by the board (or in the absence of any designation, then in the order of seniority) shall perform the duties of the chief executive officer. For these purposes, an executive vice president shall be deemed senior to a senior vice president.

        (e)   Secretary.    The secretary, or any assistant secretary, shall cause notices of all meetings to be served as prescribed in these by-laws and shall keep the minutes of all meetings and written consents of the shareholders and board. The secretary shall have charge of the seal of the Corporation and shall perform whatever other duties and possess whatever other powers as are incident to the office or as are assigned by the chief executive officer, president, or the board.

        (f)    Treasurer.    The treasurer shall have custody of the funds and securities of the Corporation and shall keep or cause to be kept regular books of account for the Corporation. The treasurer shall account to the chief executive officer, the president, or the board, whenever they may require, concerning all the treasurer's transactions and concerning the financial condition of the Corporation. The treasurer shall perform the duties and possess whatever other powers are incident to the office or are assigned by the chief executive officer, the president, or the board.

ARTICLE VI

CAPITAL STOCK AND OTHER SECURITIES

        6.1.  Issuance of Stock and Other Securities.—Certificates of any class of capital stock of the Corporation and certificates representing any other securities of the Corporation shall be signed by the chairman, the president, or any vice president and countersigned by the secretary, any assistant secretary, the treasurer or any assistant treasurer. The signature of each officer may be an engraved or printed facsimile. If an officer or transfer agent or registrar whose facsimile signature has been placed upon certificates ceases to hold the official capacity in which he or she signed, the certificates may continue to be used. The certificates may, but need not, be sealed with the seal of the Corporation, or a facsimile of the seal. The certificates shall be countersigned and registered in whatever manner the board may prescribe.

        6.2.  Lost, Stolen and Destroyed Certificates.—In case of lost, stolen or destroyed certificates, new certificates may be issued to take their place upon receipt by the Corporation of a bond of indemnity and under whatever regulations may be prescribed by the board. The giving of a bond of indemnity may be waived.

9

        6.3.  Transfer of Securities.—The shares of the capital stock or any other registered securities of the Corporation shall be transferable on the books of the Corporation by the holder thereof in person or by that person's authorized agent, or by the transferee, upon surrender for cancellation to the transfer agent of an outstanding certificate or certificates for the same number of shares or other security with an assignment and authorization to transfer endorsed thereon or attached thereto, duly executed, together with such proof of the authenticity of the signature and of the power of the assignor to transfer the securities as the Corporation or its agents may require.

        6.4.  Record Date for Dividends or Rights.—The board may fix a record date in advance as of which shares of stock shall be held of record to entitle a shareholder to the payment of any dividend, to the allotment of rights, or to exercise rights in respect to any change, conversion or exchange of capital stock of the Corporation. The record date shall not precede by more than sixty (60) days the date of the dividend payment, or the allotment of rights, or the date when the change, conversion or exchange of capital stock shall take effect. Only shareholders of record on the record date shall be entitled to receive or exercise the rights or benefits when they shall accrue, notwithstanding any transfer of any stock on the books of the Corporation subsequent to the record date.

        6.5.  Issuance of Shares.—Shares of the capital stock of the Corporation which have been authorized but not issued may be sold or issued from time to time for such consideration as may be determined by the board.

ARTICLE VII

CORPORATE SEAL

        The corporate seal shall have inscribed thereon the name of the Corporation, the year of its incorporation, and the words "Corporate Seal, New Jersey". The seal may be used by causing it or a facsimile thereof to be impressed or reproduced on a document or instrument, or affixed thereto.

ARTICLE VIII

FISCAL YEAR

        The fiscal year of the Corporation shall end on December 31 of each calendar year.

ARTICLE IX

AMENDMENTS

        These by-laws may be altered, amended or repealed by the shareholders or the board. Any by-law adopted, amended, or repealed by the shareholders may be amended or repealed by the board unless the resolution of the shareholders adopting the by-law expressly reserves the right to amend or repeal it to the shareholders.

ARTICLE X

MISCELLANEOUS

        10.1. Inspection of Corporate Records.—The share register, or duplicate share register, and minutes of proceedings of the shareholders shall be open to inspection for any proper purpose upon the written demand of any person who has been a shareholder of record or holder of a voting trust certificate for at least six months immediately preceding that person's demand, or any person holding, or so authorized in writing by the holders of, at least five percent of the outstanding shares of any class. The inspection may be made at any reasonable time not less than five days after the person has given written notice of the demand to the Corporation. The inspection may be made in person or by an

10

agent or attorney and shall include the right to make extracts. Demand for inspection shall be made in writing upon the president or secretary of the Corporation.

        10.2. Checks, Drafts, Etc.—All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the Corporation, shall be signed or endorsed by the person or persons and in such manner, manually or by facsimile signature, as shall be determined from time to time by the board.

        10.3. Execution of Contracts.—The board may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation. The authority may be general or confined to specific instances. No officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount unless so authorized by the board or these by-laws.

        10.4. Voting Shares of Other Corporations.—The chairman, the president, or any vice president are each authorized to vote, represent and exercise on behalf of this Corporation all rights incident to any and all shares of stock of any other corporation or corporations standing in the name of this Corporation. The authority herein granted may be exercised by those officers either in person or by proxy or by power of attorney duly executed by the officer.

        10.5. Force and Effect of By-Laws.—These by-laws are subject to the provisions of the New Jersey Business Corporation Act and the Corporation's certificate of incorporation as amended or restated from time to time. If any provision in these by-laws is inconsistent with a provision in that Act or the certificate of incorporation as amended or restated from time to time, the provision of the Act or the certificate of incorporation as amended or restated from time to time shall govern to the extent of such inconsistency.

11

QuickLinks

BY-LAWS OF PHOTONIC PRODUCTS GROUP, INC. (adopted , )

EX-4.1

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 4.1

NUMBER				SHARES
PP00153				COMMON STOCK
	PHOTONIC PRODUCTS GROUP, INC.
	INCORPORATED UNDER THE LAWS OF THE STATE OF NEW JERSEY
			SEE REVERSE FOR CERTAIN DEFINITIONS
			CUSIP 71937M 10 0
	THIS CERTIFIES THAT:
	SPECIMEN
	IS THE OWNER OF
	FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE, OF
	PHOTONIC PRODUCTS GROUP, INC. transferable on the books of the Corporation in person or by attorney upon surrender of this certificate duly endorsed or assigned. This certificate and the shares represented hereby are subject to the laws of the State of New Jersey, and to the Articles of Incorporation and Bylaws of the Corporation, as now or hereafter amended. This certificate is not valid until countersigned by the Transfer Agent.
	WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.
	[SEAL]
	DATED:
		COUNTERSIGNED AND REGISTERED
		AMERICAN STOCK TRANSFER & TRUST COMPANY NEW YORK, NY
			TRANSFER AGENT
			AND REGISTRAR
			BY:
	/s/  W.L. MIRAGLIA	/s/  DANIEL LEHRFELD
	SECRETARY & CFO	PRESIDENT & CEO	AUTHORIZED SIGNATURE

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM	—	as tenants in common	UNIF GIFT MIN ACT	—		Custodian
TEN ENT	—	as tenants by the entireties			(Cust)		(Minor)
JT TEN	—	as joint tenants with right of survivorship and not as tenants in common			under Uniform Gifts to Minors Act      (State)

Additional abbreviations may also be used though not in the above list.

For Value Received,                        hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
		Shares
of the stock represented by the within Certificate, and do hereby irrevocably constitute and appoint
	Attorney
to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.

Dated
	NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.

THE SIGNATURE TO THE ASSIGNMENT MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF A NATIONAL OR REGIONAL OR OTHER RECOGNIZED STOCK EXCHANGE IN CONFORMANCE WITH A SIGNATURE GUARANTEE MEDALLION PROGRAM.

QuickLinks

Exhibit 4.1

EX-4.2

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 4.2

Warrant to Purchase
Shares of Common Stock

W-        

Issue Date:                        , 2004

NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

Void after 5:00 P.M. New York City time on the last day of the Exercise Period, as defined in the Warrant.

COMMON STOCK PURCHASE WARRANT
OF
PHOTONIC PRODUCTS GROUP, INC.

        This is to certify that, FOR VALUE RECEIVED,                         with an address at                        (and or its assign(s) and/or transferee(s)) (hereinafter, each a "Holder" and collectively the "Holders"), is entitled to purchase, subject to the provisions of this Warrant, from Photonic Products Group, Inc., a New Jersey corporation (the "Company"), at an exercise price per share of One Dollar and Thirty-Five Cents ($1.35),            (            ) fully paid and non-assessable shares of Common Stock. The shares of Common Stock deliverable upon such exercise, and as adjusted from time-to-time as provided in this Warrant, are hereinafter sometimes referred to as "Warrant Stock," and the exercise price for the purchase of a share of Common Stock pursuant to this Warrant in effect at any time and as adjusted from time-to-time is hereinafter sometimes referred to as the "Exercise Price." The aggregate purchase price payable for the Warrant Stock purchasable hereunder is referred to as the "Aggregate Purchase Price." The Aggregate Purchase Price is not subject to adjustment. In the event of an adjustment to the Exercise Price, as provided in Section 6 herein, the number of shares of Warrant Stock deliverable upon exercise of this Warrant shall be adjusted by dividing the Aggregate Purchase Price by the Exercise Price in effect immediately after such adjustment.

        This warrant and additional warrants of like tenor, including warrants issued in exchange and/or substitution thereof (collectively, the "Warrants") were originally issued in connection with a private offering of securities by the Company (the "Offering"), pursuant to the terms of a Confidential Private Placement Memorandum dated June 1, 2004, as may be supplemented from time to time (the "Memorandum") and as set forth in the Subscription Agreements between the subscribers and the Company ("Subscription Agreement(s)"). The term "Holders" as used herein shall refer to holders of all the Warrants.

        1.    DEFINITIONS.    The following terms have the meanings set forth below:

        "Current Market Value" of a share of Warrant Stock as of a particular date (the "Determination Date") shall mean:

        a.     If the Common Stock is listed on a national securities exchange or admitted to unlisted trading privileges on such exchange or listed for trading on the Nasdaq National Market, the current market value shall be the last reported sale price of the Common Stock on such exchange or market on the last business day prior to the date of exercise of this

Warrant or if no such sale is made on such day, the average closing bid and asked prices for such day on such exchange or market; or

        b.     If the Common Stock is not so listed or admitted to unlisted trading privileges, but is traded on the Nasdaq SmallCap Market or elsewhere quoted, the current market value shall be the average of the closing price of the Common Stock for the five (5) trading days prior to such day on such market and if the Common Stock is not so traded, the current market value shall be the mean of the last reported bid-and asked prices reported by the National Quotation Bureau, Inc. on the last business day prior to the date of the exercise of this Warrant; or

        c.     If the Common Stock is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the current market value shall be an amount, not less than book value thereof as at the end of the most recent fiscal year of the Company ending prior to the date of the exercise of the Warrant, determined in such reasonable manner as may be prescribed by the Board of Directors of the Company.

        "Convertible Securities" shall mean evidences of indebtedness, shares of stock or other securities, including but not limited to options, warrants or purchase, subscription or other rights, which are convertible into, exchangeable or exercisable for, or represent the right to receive, with or without payment of additional consideration in cash or property, shares of Common Stock (or other Convertible Securities), either immediately or upon the occurrence of a specified date or a specified event.

        "Permitted Issuances" shall mean (i) Common Stock issuable or issued to employees, consultants or directors of the Company pursuant to the Company's 2000 Equity Compensation Plan (the "2000 Plan") and 1991 Inrad, Inc. Key Employee Compensation Program (the "1999 Plan," and together with the 2000 Plan, the "Existing Plans"), which in no event shall exceed 4,314,500 shares in the aggregate, provided, however, that, the Company may choose to either (A) increase the Existing Plans by up to 1,000,000 shares in the aggregate or (B) adopt one or more plans providing for the issuance of Common Stock to employees, consultants or directors of the Company covering up to 1,000,000 shares in the aggregate, but shall not in any event issue any securities thereunder until (1) the authorized capital stock of the Company is increased by a minimum of 10,000,000 shares of Common Stock and (2) the Registration Statement required by Section 5.1 of the Subscription Agreement has been declared effective by the Securities and Exchange Commission, (ii) Common Stock issued or issuable upon conversion of the Warrants or any other securities exercisable or exchangeable for, or convertible into shares of Common Stock outstanding as of the commencement of the Offering (the "Commencement Date"), and (iii) Common Stock or Convertible Securities issued or issuable as consideration by the Company solely for the acquisition of lines of business, business assets and capital assets. Notwithstanding the foregoing, during the six-month period commencing on the date of the final closing of the Offering, any issuances of Common Stock or Convertible Securities pursuant to clause (iii) above in excess of 500,000 shares of Common Stock in the aggregate (including shares underlying Convertible Securities) shall not fall within the definition of Permitted Issuances and shall be subject to the provisions of Section 6 herein.

        2.    EXERCISE OF WARRANT.    This Warrant may be exercised in whole or in part at any time, or from time to time, commencing on the date hereof and ending at 5 P.M. New York City time on the day preceding the fifth (5^th) anniversary of the date of issuance of this Warrant (the "Exercise Period"); provided, however, that if either such day is a day on which banking institutions in the State of New York are authorized by law to close, then on the next succeeding day which shall not be such a day. This Warrant may be exercised by presentation and surrender hereof to the Company at its principal office, or at the office of its stock transfer agent, if any, with the Subscription form annexed hereto

2

duly executed and accompanied by payment of the Exercise Price for the number of shares of Warrant Stock specified in such form. As soon as practicable after each such exercise of this Warrant, but not later than seven (7) days from the date of such exercise, the Company shall issue and deliver to the Holder a certificate or certificates for the shares of Warrant Stock issuable upon such exercise, registered in the name of the Holder or its designee. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Holder thereof to purchase the balance of the shares of Warrant Stock purchasable thereunder. Upon receipt by the Company of this Warrant at its office, or by the stock transfer agent of the Company at its office, in proper form for exercise, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be physically delivered to the Holder.

        3.    RESERVATION OF SHARES/FRACTIONAL SHARES.    The Company hereby agrees that at all times there shall be reserved for issuance and/or delivery upon exercise of this Warrant such number of shares of Common Stock as shall be required for issuance and delivery upon exercise of this Warrant. If the Company hereafter lists its Common Stock on any national securities exchange, the Nasdaq National Market or the Nasdaq SmallCap Market, it shall use its best efforts to keep the Warrant Stock authorized for listing on such exchange upon notice of issuance. No fractional shares or script representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon exercise hereof, the Company shall pay to the Holder an amount in cash equal to such fraction multiplied by the Current Market Value of a share of Warrant Stock.

        4.    EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT.    This Warrant (and all rights hereunder) is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company or at the office of its stock transfer agent, if any, for other Warrants of different denominations entitling the holder or any assignee and/or transferee thereof to purchase in the aggregate the same number of shares of Common Stock purchasable hereunder; provided, however, that any assignment or transfer of the Warrant must comply with Section 11 below. Upon surrender of this Warrant to the Company or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new Warrant in the name of the assignee and/or transferee named in such instrument of assignment and this Warrant shall promptly be canceled; provided, however, that any assignment or transfer of the Warrant must comply with Section 11 below. This Warrant may be divided or combined with other Warrants which carry the same rights upon presentation hereof at the office of the Company or at the office of its stock transfer agent, if any, together with a written notice specifying the names and denominations in which new Warrants are to be issued and signed by the Holder hereof. The term "Warrant" as used herein includes any Warrants into which this Warrant may be divided or exchanged. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor. Any such new Warrant executed and delivered shall constitute a substitute contractual obligation on the part of the Company.

        5.    RIGHTS OF THE HOLDER.    The Holder shall not, by virtue of this Warrant, be entitled to any rights of a stockholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in the Warrant and are not enforceable against the Company except to the extent set forth herein. In addition, no provision hereof, in the absence of affirmative action by Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of Holder hereof, shall give rise to any liability of such Holder for the purchase price of any Common Stock or as a stockholder of Company, whether such liability is asserted by Company or by creditors of Company.

3

        6.    ANTI-DILUTION PROVISIONS.    The Exercise Price in effect at any time and the number and kind of securities purchasable upon exercise of each Warrant shall be subject to adjustment as follows:

        (a)    Stock Dividends, Subdivisions and Combinations.    If, at any time or from time to time after the date of this Warrant, the Company shall (i) pay a dividend or make a distribution to any holder of its capital stock in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares, or (iv) issue by reclassification of its Common Stock any shares of capital stock of the Company, the Exercise Price shall be adjusted to be equal to a fraction, the numerator of which shall be the Aggregate Purchase Price and the denominator of which shall be the number of shares of Common Stock or other capital stock of the Company that the Holder would have owned immediately following such action had such Warrant been exercised immediately prior thereto. An adjustment made pursuant to this Subsection (a) shall become effective immediately after the record date in the case of a dividend or distribution, and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification, and shall result in a corresponding adjustment to the number of shares of Warrant Stock issuable upon exercise of this Warrant.

        (b)    Certain Other Distributions and Adjustments.    If, at any time or from time to time after the date of this Warrant, the Company shall issue or distribute to any holder of shares of Common Stock evidence of its indebtedness, any other securities of the Company or any cash, property or other assets (excluding a subdivision, combination or reclassification, or dividend or distribution payable in shares of Common Stock referred to in Subsection (a), and also excluding cash dividends or cash distributions paid out of net profits legally available therefor in the full amount thereof (any such non-excluded event being herein called a "Special Dividend")), the Exercise Price shall be adjusted by multiplying the Exercise Price then in effect by a fraction, the numerator of which shall be the then Current Market Value in effect on the record date of such issuance or distribution less the fair market value (as determined pursuant to Paragraph (g)(B) of this Section 6) of the evidence of indebtedness, cash, securities or property, or other assets issued or distributed in such Special Dividend applicable to one share of Common Stock and the denominator of which shall be the then Current Market Value in effect on the record date of such issuance or distribution. An adjustment made pursuant to this Subsection (b) shall become effective immediately after the record date of any such Special Dividend and shall result in a corresponding adjustment to the number of shares of Warrant Stock issuable upon exercise of this Warrant.

        (c)    Issuance of Additional Shares of Common Stock and Convertible Securities.

          (i)  If at any time the Company shall in any manner issue or sell any shares of Common Stock or Convertible Securities (whether directly or by assumption in a merger in which the Company is the surviving corporation), in exchange for consideration in an amount per share of Common Stock (determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration at the time of issuance or sale of such securities plus the total consideration, if any, payable to the Company upon exercise, conversion or exchange thereof, by (ii) the number of additional shares of Common Stock issued, sold or issuable upon the exercise, conversion or exchange of such securities) that is less than the Exercise Price (excluding Permitted Issuances), then the Exercise Price shall be adjusted so that it shall equal the price determined by multiplying such Exercise Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on the date of issuance or sale (calculated on a fully-diluted basis as if all securities exercisable, convertible or exchangeable for Common Stock have been so exercised, converted or exchanged) plus the number of shares of Common Stock which the aggregate offering price would purchase based upon the Exercise Price, and the denominator of which shall be the number of shares of

4

Common Stock outstanding on the date of issuance or sale (calculated on a fully-diluted basis as if all securities exercisable, convertible or exchangeable for Common Stock have been so exercised, converted or exchanged) plus the maximum number of additional shares of Common Stock issued, sold or issuable in connection with such offering or transaction.

         (ii)  The provisions of paragraph (i) of this Section 6(c) shall not apply to any issuance of shares of Common Stock for which an adjustment is provided under Section 6(a) or 6(b). No adjustment of the number of shares of Common Stock for which this Warrant shall be exercisable shall be made under paragraph (i) of this Section 6(c) upon the issuance of any shares of Common Stock which are issued pursuant to the exercise of any warrants or other subscription or purchase rights or pursuant to the exercise of any conversion or exchange rights in any Convertible Securities, if any such adjustment shall previously have been made upon the issuance of such warrants or other rights or upon the issuance of such Convertible Securities.

        (d)    No Adjustment.    No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least one cent ($0.01) in such price; provided, however, that any adjustments which by reason of this Section 6(d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment; provided, further, however that adjustments shall be required and made in accordance with the provisions of this Section 6 not later than such time as may be required in order to preserve the tax-free nature of a distribution to the Holder of this Warrant or the Common Stock issuable upon the exercise hereof. All calculations under this Section 6(d) shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be.

        (e)    Accountants.    The Company may retain a firm of independent public accountants of recognized standing selected by the Board (who may be the regular accountants employed by the Company) to make any computation required by this Section 6.

        (f)    Additional Adjustments.    In the event that at any time, as a result of an adjustment made pursuant to Section 6(a), (b) or (c) of this Warrant, the Holder of any Warrant thereafter shall become entitled to receive any shares of the Company other than Common Stock, thereafter the number of such other shares so receivable upon exercise of any Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Sections 6(a) through (j), inclusive, of this Warrant.

        (g)    Consideration.    For purposes of any computation respecting consideration received pursuant to this Section 6, the following shall apply:

        A.    in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith;

        B.    in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors of the Company (irrespective of the accounting treatment thereof), whose determination shall be conclusive; and

        C.    in the case of the issuance of securities convertible, exchangeable or exercisable for shares of Common Stock, the aggregate consideration received therefor shall be deemed to be the consideration received by the Company for the issuance of such securities plus the additional minimum consideration, if any, to be received by the Company upon the conversion

5

or exchange thereof (the consideration in each case to be determined in the same manner as provided in clauses (A) and (B) of this Subsection (g)).

        (h)    Voluntary Adjustment by the Company.    The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

        (i)    No Adjustment.    Notwithstanding the foregoing, no adjustment shall be effected due to, or as a result of, any Permitted Issuances.

        (j)    Enforcement of Intent and Principles.    If any event or condition occurs as to which other provisions of this Section 6 are not strictly applicable or if strictly applicable would not fairly protect the exercise or purchase rights of this Warrant in accordance with the essential intent and principles of such provisions, or which might materially and adversely affect the exercise or purchase rights of the Holder under any provisions of the Warrant, then the Company shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles, so as to protect such exercise and purchase rights as aforesaid, and any adjustment necessary with respect to the Exercise Price and the number of shares of Common Stock purchasable hereunder so as to preserve without dilution the rights of the Holders.

        7.    REGISTRATION RIGHTS.    The Warrant Stock shall be entitled to the registration rights set forth in Article V of the Subscription Agreement.

        8.    OFFICER'S CERTIFICATE.    Whenever the Exercise Price(s) shall be adjusted as required by the provisions of Section 6 of this Warrant, the Company shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office and with its stock transfer agent, if any, an officer's certificate showing the adjusted Exercise Price(s) and the adjusted number of shares of Common Stock issuable upon exercise of each Warrant, determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment, including a statement of the number of additional shares of Common Stock, if any, and such other facts as shall be necessary to show the reason for and the manner of computing such adjustment. Each such officer's certificate shall immediately be forwarded by certified mail to Holder as provided in Section 13.

        9.    NOTICES TO WARRANT HOLDERS.    So long as this Warrant shall be outstanding, (a) if the Company shall pay any dividend or make any distribution upon Common Stock, or (b) if the Company shall offer to the holders of Common Stock for subscription or purchase by them any share of any class or any other rights, or (c) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another entity, tender offer transaction for the Company's Common Stock, sale, lease or transfer of all or substantially all of the property and assets of the Company, or voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected, or (d) if the Company shall file a registration statement under the Securities Act of 1933, as amended (the "Act"), on any form other than on Form S-4 or S-8 or any successor form, then in any such case, the Company shall cause to be mailed by certified mail to the Holder, at least ten (10) days prior to the date specified in clauses (a), (b), (c) or (d) above, as the case may be, of this Section 9 a notice containing a brief description of the proposed action and stating the date on which (i) a record is to be taken for the purpose of such dividend, distribution or rights, or (ii) such reclassification, reorganization, consolidation, merger, tender offer transaction, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Common Stock or other securities shall receive cash or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up, or (iii) such registration statement is to be filed with the Securities and Exchange Commission.

6

        10.    RECLASSIFICATION, REORGANIZATION OR MERGER.    In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Company, or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary in which merger the Company is the continuing or surviving corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) or in case of any sale, lease or conveyance of all or substantially all of the assets of the Company, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Company), the Company shall, as a condition precedent to such transaction, cause effective provisions to be made so that (i) the Holder shall have the right thereafter by exercising this Warrant, to purchase the kind and amount of shares of stock and other securities and property receivable upon such reclassification, capital reorganization and other change, consolidation, merger, sale, conveyance or statutory exchange by a holder of the number of shares of Common Stock which could have been purchased upon exercise of this Warrant immediately prior to such reclassification, change, consolidation, merger, sale, conveyance, or statutory exchange and (ii) the successor or acquiring entity shall expressly assume the due and punctual observance and performance of each covenant, agreement, obligation and condition of this Warrant to be performed and observed by Company and all obligations and liabilities hereunder (including but not limited to the provisions of Section 6 regarding the increase in the number of shares of Warrant Stock potentially issuable hereunder). Any such provision shall include provision for adjustments which shall be as nearly equivalent as possible to the adjustments provided for in this Warrant. The foregoing provisions of this Section 10 shall similarly apply to successive reclassifications, capital reorganizations and changes of shares of Common Stock and to successive consolidations, mergers, sales or conveyances. In the event that in connection with any such capital reorganization or reclassification, consolidation, merger, sale, conveyance or statutory exchange, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole in part, for a security of the Company other than Common Stock, any such issue shall be treated as an issuance of Common Stock covered by the provisions of Section 6 of this Warrant. Notice of any such event shall be mailed by certified mail to the Holders of the Warrants no less than thirty (30) days prior to such event. A sale of all or substantially all of the Company's assets for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes.

        11.    TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933.    This Warrant or the Warrant Stock or any other security issued or issuable upon exercise of this Warrant may not be sold or otherwise disposed of except as follows:

        (i)    to a person who, in the opinion of counsel for the Company, or counsel for the Holder who is reasonably acceptable to the Company, is a person to whom this Warrant or Warrant Stock may legally be transferred without registration and without the delivery of a current prospectus under the Act with respect thereto and then only against receipt of an agreement of such person to comply with the provisions of this Section 11 with respect to any resale or other disposition of such securities which agreement shall be satisfactory in form and substance to the Company and its counsel; or

7

        (ii)   to any person upon delivery of a prospectus then meeting the requirements of the Act relating to such securities and the offering thereof for such sale or disposition.

        12.    GOVERNING LAW; JURISDICTION.    The corporate laws of the State of New York shall govern all issues concerning the relative rights of the Company and its stockholders. All issues concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to the principles of conflicts of law thereof. The parties hereto agree that venue in any and all actions and proceedings related to the subject matter of this Warrant shall be in the state and federal courts in and for New York, New York, which courts shall have exclusive jurisdiction for such purpose, and the parties hereto irrevocably submit to the exclusive jurisdiction of such courts and irrevocably waive the defense of an inconvenient forum to the maintenance of any such action or proceeding. Service of process may be made in any manner recognized by such courts. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought.

        13.    NOTICES.    Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Subscription Agreement.

        14.    MODIFICATION OF WARRANT.    Other than as provided in Section 6(h), this Warrant shall not be modified, supplemented or altered in any respect, nor any provision waived, except with the consent in writing of the Holders representing not less than fifty percent (50%) of the Warrants then outstanding.

        15.    SOLICITATION FEE.    The Company has agreed to pay a fee of three percent (3%) of the Exercise Price to Casimir Capital L.P., as Placement Agent, upon the exercise of this Warrant on or before the twelve (12) months from the final closing of the Offering.

        16.    PAYMENT OF TAXES.    The Company will pay all documentary stamp taxes attributable to the issuance of shares of Common Stock underlying this Warrant upon exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificate for shares of Common Stock underlying this Warrant in a name other than that of the Holder. The Holder is responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving shares of Common Stock underlying this Warrant upon exercise hereof.

        17.    REMEDIES.    Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

        18.    SUCCESSORS AND ASSIGNS.    Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.

        19.    SEVERABILITY.    Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

8

        20.    HEADINGS.    The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose be deemed a part of this Warrant.

        IN WITNESS WHEREOF, this Warrant has been duly executed as of                        , 2004.

PHOTONIC PRODUCTS GROUP, INC.
By:
	Daniel Lehrfeld
	President and CEO

ATTEST:

Secretary

[CORPORATE SEAL]

9

PHOTONIC PRODUCTS GROUP, INC.

WARRANT EXERCISE FORM

To Photonic Products Group, Inc.:

The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within warrant ("Warrant") for, and to purchase thereunder by the payment of the Exercise Price and surrender of the Warrant,                        shares of Common Stock ("Warrant Stock") provided for therein, and requests that certificates for the Warrant Stock be issued as follows:

Name

Address

Federal Tax ID or Social Security Number

        and delivered by certified mail to the above address, or electronically (provide DWAC instructions:                        ), or (please specify:                        ).

and, if the number of shares of Warrant Stock shall not be all the Warrant Stock purchasable upon exercise of the Warrant, that a new Warrant for the balance of the Warrant Stock purchasable upon the exercise of this Warrant be registered in the name of the undersigned Holder or the undersigned's Assignee as below indicated and delivered to the address stated below.

Dated:

NOTE: The signature must correspond with the name of the Holder as written on the first page of the Warrant in every particular, without alteration or enlargement or any change whatsoever, unless the Warrant has been assigned.

Name (please print)

Address

Federal Tax ID or Social Security Number

Assignee:

10

ASSIGNMENT

        FOR VALUE RECEIVED                        hereby sells, assigns and transfers unto                        the foregoing Warrant and all rights evidenced thereby, and does irrevocably constitute and appoint                        , attorney, to transfer said Warrant on the books of                        .

Dated:	Signature:
	Address:

PARTIAL ASSIGNMENT

        FOR VALUE RECEIVED                        hereby sells, assigns and transfers unto                        the right to purchase                        shares of Common Stock, par value $.01 per share, of Photonic Products Group, Inc. covered by the foregoing Warrant, and a proportionate part of said Warrant and the rights evidenced thereby, and does irrevocably constitute and appoint                         , attorney, to transfer such part of said Warrant on the books of                        .

Dated:	Signature:
	Address:

11

QuickLinks

Exhibit 4.2

EX-4.3

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 4.3

Warrant to Purchase
Shares of Common Stock

PAW        

Issue Date:                        , 2004

NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

Void after 5:00 P.M. New York City time on the last day of the Exercise Period, as defined in the Warrant.

COMMON STOCK PURCHASE WARRANT
OF
PHOTONIC PRODUCTS GROUP, INC.

        This is to certify that, FOR VALUE RECEIVED,                         with an address at                        (and or its assign(s) and/or transferee(s)) (hereinafter, each a "Holder" and collectively the "Holders"), is entitled to purchase, subject to the provisions of this Warrant, from Photonic Products Group, Inc., a New Jersey corporation (the "Company"), at an exercise price per share of One Dollar and Thirty-Five Cents ($1.35),            (            ) fully paid and non-assessable shares of Common Stock. The shares of Common Stock deliverable upon such exercise, and as adjusted from time-to-time as provided in this Warrant, are hereinafter sometimes referred to as "Warrant Stock," and the exercise price for the purchase of a share of Common Stock pursuant to this Warrant in effect at any time and as adjusted from time-to-time is hereinafter sometimes referred to as the "Exercise Price." The aggregate purchase price payable for the Warrant Stock purchasable hereunder is referred to as the "Aggregate Purchase Price." The Aggregate Purchase Price is not subject to adjustment. In the event of an adjustment to the Exercise Price, as provided in Section 6 herein, the number of shares of Warrant Stock deliverable upon exercise of this Warrant shall be adjusted by dividing the Aggregate Purchase Price by the Exercise Price in effect immediately after such adjustment.

        This warrant and additional warrants of like tenor, including warrants issued in exchange and/or substitution thereof (collectively, the "Warrants") were originally issued to Casimir Capital L.P. (the "Placement Agent" or "Casimir") and its designees in connection with Casimir acting as placement agent with respect to a private offering of securities by the Company (the "Offering"), pursuant to the terms of a Confidential Private Placement Memorandum dated June 1, 2004, as may be supplemented from time to time (the "Memorandum") and as further provided in a Placement Agent Agreement between the Company and Casimir dated May 28, 2004.

        1.    DEFINITIONS.    The following terms have the meanings set forth below:

        "Current Market Value" of a share of Warrant Stock as of a particular date (the "Determination Date") shall mean:

        a.     If the Common Stock is listed on a national securities exchange or admitted to unlisted trading privileges on such exchange or listed for trading on the Nasdaq National Market, the current market value shall be the last reported sale price of the Common Stock on such exchange or market on the last business day prior to the date of exercise of this

Warrant or, if no such sale is made on such day, the average closing bid and asked prices for such day on such exchange or market; or

        b.     If the Common Stock is not so listed or admitted to unlisted trading privileges, but is traded on the Nasdaq SmallCap Market or elsewhere quoted, the current market value shall be the average of the closing price of the Common Stock for the five (5) trading days prior to such day on such market and if the Common Stock is not so traded, the current market value shall be the mean of the last reported bid and asked prices reported by the National Quotation Bureau, Inc. on the last business day prior to the date of the exercise of this Warrant; or

        c.     If the Common Stock is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the current market value shall be an amount, not less than book value thereof as at the end of the most recent fiscal year of the Company ending prior to the date of the exercise of the Warrant, determined in such reasonable manner as may be prescribed by the Board of Directors of the Company.

        "Convertible Securities" shall mean evidences of indebtedness, shares of stock or other securities, including but not limited to options, warrants or purchase, subscription or other rights, which are convertible into, exchangeable or exercisable for, or represent the right to receive, with or without payment of additional consideration in cash or property, shares of Common Stock (or other Convertible Securities), either immediately or upon the occurrence of a specified date or a specified event.

        "Permitted Issuances" shall mean (i) Common Stock issuable or issued to employees, consultants or directors of the Company pursuant to the Company's 2000 Equity Compensation Plan (the "2000 Plan") and 1991 Inrad, Inc. Key Employee Compensation Program (the "1999 Plan," and together with the 2000 Plan, the "Existing Plans"), which in no event shall exceed 4,314,500 shares in the aggregate, provided, however, that, the Company may choose to either (A) increase the Existing Plans by up to 1,000,000 shares in the aggregate or (B) adopt one or more plans providing for the issuance of Common Stock to employees, consultants or directors of the Company covering up to 1,000,000 shares in the aggregate, but shall not in any event issue any securities thereunder until (1) the authorized capital stock of the Company is increased by a minimum of 10,000,000 shares of Common Stock and (2) the Registration Statement required by Section 5.1 of the Subscription Agreement(s) has been declared effective by the Securities and Exchange Commission, (ii) Common Stock issued or issuable upon conversion of the Warrants or any other securities exercisable or exchangeable for, or convertible into, shares of Common Stock outstanding as of the commencement of the Offering (the "Commencement Date"), and (iii) Common Stock or Convertible Securities issued or issuable as consideration by the Company solely for the acquisition of lines of business, business assets and capital assets. Notwithstanding the foregoing, during the six-month period commencing on the date of the final closing of the Offering, any issuances of Common Stock or Convertible Securities pursuant to clause (iii) above in excess of 500,000 shares of Common Stock in the aggregate (including shares underlying Convertible Securities) shall not fall within the definition of Permitted Issuances and shall be subject to the provisions of Section 6 herein.

        2.    EXERCISE OF WARRANT.    (a) This Warrant may be exercised in whole or in part at any time, or from time to time, commencing on the date hereof and ending at 5 P.M. New York City time on the day preceding the fifth (5^th) anniversary of the date of issuance of this Warrant (the "Exercise Period"); provided, however, that if either such day is a day on which banking institutions in the State of New York are authorized by law to close, then on the next succeeding day which shall not be such a day. This Warrant may be exercised by presentation and surrender hereof to the Company at its principal office, or at the office of its stock transfer agent, if any, with the Warrant Exercise Form

2

annexed hereto duly executed and accompanied by payment of the Exercise Price for the number of shares of Warrant Stock specified in such form. As soon as practicable after each such exercise of this Warrant, but not later than seven (7) days from the date of such exercise, the Company shall issue and deliver to the Holder a certificate or certificates for the shares of Warrant Stock issuable upon such exercise, registered in the name of the Holder or its designee. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Holder thereof to purchase the balance of the shares of Warrant Stock purchasable thereunder. Upon receipt by the Company of this Warrant at its office, or by the stock transfer agent of the Company at its office, in proper form for exercise, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be physically delivered to the Holder.

        (b)   In lieu of the payment method set forth in Section 2(a) above, at any time during the Exercise Period, the Holder may, at its option, exchange this Warrant, in whole or in part (a "Warrant Exchange"), without payment by the Holder of any additional consideration, into the number of shares of Warrant Stock determined in accordance with this Section 2(b), by surrendering this Warrant at the principal office of the Company or at the office of its stock transfer agent, if any, accompanied by a notice stating such Holder's intent to effect such exchange, the number of shares of Warrant Stock so be exchanged and the date on which the Holder requests that such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange shall take place on the date specified in the Notice of Exchange or, if later, the date the Notice of Exchange is received by the Company (the "Exchange Date"). Certificates for the shares issuable upon such Warrant Exchange and, if applicable, a new warrant of like tenor evidencing the balance of the shares remaining subject to this Warrant, shall be issued as of the Exchange Date and delivered to the Holder within seven (7) days following the Exchange Date. In connection with any Warrant Exchange, this Warrant shall represent the right to subscribe for and acquire the number of shares of Warrant Stock (rounded to the next highest integer) equal to (i) the number of shares of Warrant Stock specified by the Holders in its Notice of Exchange (the "Total Number"), less (ii) the number of shares of Warrant Stock equal to the quotient obtained by dividing (A) the product of the Total Number and the existing Exercise Price by (B) the Current Market Value of a share of Common Stock. Current Market Value shall have the meaning set forth in Section 1 above, except that for the purposes hereof, the date of exercise, as used in such Section 1, shall mean the Exchange Date.

        3.    RESERVATION OF SHARES/FRACTIONAL SHARES.    The Company hereby agrees that at all times there shall be reserved for issuance and/or delivery upon exercise of this Warrant such number of shares of Common Stock as shall be required for issuance and delivery upon exercise of this Warrant. If the Company hereafter lists its Common Stock on any national securities exchange, the Nasdaq National Market or the Nasdaq SmallCap Market, it shall use its best efforts to keep the Warrant Stock authorized for listing on such exchange upon notice of issuance. No fractional shares or script representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon exercise hereof, the Company shall pay to the Holder an amount in cash equal to such fraction multiplied by the Current Market Value of a share of Warrant Stock.

        4.    EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT.    This Warrant (and all rights hereunder) is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company or at the office of its stock transfer agent, if any, for other Warrants of different denominations entitling the holder or any assignee and/or transferee thereof to purchase in the aggregate the same number of shares of Common Stock purchasable hereunder; provided, however, that any assignment or transfer of the Warrant must comply with Section 11 below. Upon surrender of this Warrant to the Company or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall,

3

without charge, execute and deliver a new Warrant in the name of the assignee and/or transferee named in such instrument of assignment and this Warrant shall promptly be canceled; provided, however, that any assignment or transfer of the Warrant must comply with Section 11 below. This Warrant may be divided or combined with other Warrants which carry the same rights upon presentation hereof at the office of the Company or at the office of its stock transfer agent, if any, together with a written notice specifying the names and denominations in which new Warrants are to be issued and signed by the Holder hereof. The term "Warrant" as used herein includes any Warrants into which this Warrant may be divided or exchanged. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor. Any such new Warrant executed and delivered shall constitute a substitute contractual obligation on the part of the Company.

        5.    RIGHTS OF THE HOLDER.    The Holder shall not, by virtue of this Warrant, be entitled to any rights of a stockholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in the Warrant and are not enforceable against the Company except to the extent set forth herein. In addition, no provision hereof, in the absence of affirmative action by Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of Holder hereof, shall give rise to any liability of such Holder for the purchase price of any Common Stock or as a stockholder of Company, whether such liability is asserted by Company or by creditors of Company.

        6.    ANTI-DILUTION PROVISIONS.    The Exercise Price in effect at any time and the number and kind of securities purchasable upon exercise of each Warrant shall be subject to adjustment as follows:

        (a)    Stock Dividends, Subdivisions and Combinations.    If, at any time or from time to time after the date of this Warrant, the Company shall (i) pay a dividend or make a distribution to any holder of its capital stock in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares, or (iv) issue by reclassification of its Common Stock any shares of capital stock of the Company, the Exercise Price shall be adjusted to be equal to a fraction, the numerator of which shall be the Aggregate Purchase Price and the denominator of which shall be the number of shares of Common Stock or other capital stock of the Company that the Holder would have owned immediately following such action had such Warrant been exercised immediately prior thereto. An adjustment made pursuant to this Subsection (a) shall become effective immediately after the record date in the case of a dividend or distribution, and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification, and shall result in a corresponding adjustment to the number of shares of Warrant Stock issuable upon exercise of this Warrant.

        (b)    Certain Other Distributions and Adjustments.    If, at any time or from time to time after the date of this Warrant, the Company shall issue or distribute to any holder of shares of Common Stock evidence of its indebtedness, any other securities of the Company or any cash, property or other assets (excluding a subdivision, combination or reclassification, or dividend or distribution payable in shares of Common Stock referred to in Subsection (a), and also excluding cash dividends or cash distributions paid out of net profits legally available therefor in the full amount thereof (any such non-excluded event being herein called a "Special Dividend")), the Exercise Price shall be adjusted by multiplying the Exercise Price then in effect by a fraction, the numerator of which shall be the then Current Market Value in effect on the record date of such issuance or distribution less the fair market value (as determined pursuant to paragraph (g)(B) of this Section 6) of the evidence of indebtedness, cash, securities or property, or other assets issued or distributed in such Special Dividend applicable to one share of Common Stock and the denominator of which shall be the then Current Market Value in effect on the record date of such

4

issuance or distribution. An adjustment made pursuant to this Subsection (b) shall become effective immediately after the record date of any such Special Dividend and shall result in a corresponding adjustment to the number of shares of Warrant Stock issuable upon exercise of this Warrant.

        (c)    Issuance of Additional Shares of Common Stock and Convertible Securities.

          (i)  If at any time the Company shall in any manner issue or sell any shares of Common Stock or Convertible Securities (whether directly or by assumption in a merger in which the Company is the surviving corporation), in exchange for consideration in an amount per share of Common Stock (determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration at the time of issuance or sale of such securities plus the total consideration, if any, payable to the Company upon exercise, conversion or exchange thereof, by (ii) the number of additional shares of Common Stock issued, sold or issuable upon the exercise, conversion or exchange of such securities) that is less than the Exercise Price (excluding Permitted Issuances), then the Exercise Price shall be adjusted so that it shall equal the price determined by multiplying such Exercise Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on the date of issuance or sale (calculated on a fully-diluted basis as if all securities exercisable, convertible or exchangeable for Common Stock have been so exercised, converted or exchanged) plus the number of shares of Common Stock which the aggregate offering price would purchase based upon the Exercise Price, and the denominator of which shall be the number of shares of Common Stock outstanding on the date of issuance or sale (calculated on a fully-diluted basis as if all securities exercisable, convertible or exchangeable for Common Stock have been so exercised, converted or exchanged) plus the maximum number of additional shares of Common Stock issued, sold or issuable in connection with such offering or transaction.

         (ii)  The provisions of paragraph (i) of this Section 6(c) shall not apply to any issuance of shares of Common Stock for which an adjustment is provided under Section 6(a) or 6(b). No adjustment of the number of shares of Common Stock for which this Warrant shall be exercisable shall be made under paragraph (i) of this Section 6(c) upon the issuance of any shares of Common Stock which are issued pursuant to the exercise of any warrants or other subscription or purchase rights or pursuant to the exercise of any conversion or exchange rights in any Convertible Securities, if any such adjustment shall previously have been made upon the issuance of such warrants or other rights or upon the issuance of such Convertible Securities.

        (d)    No Adjustment.    No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least one cent ($0.01) in such price; provided, however, that any adjustments which by reason of this Section 6(d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment; provided, further, however that adjustments shall be required and made in accordance with the provisions of this Section 6 not later than such time as may be required in order to preserve the tax-free nature of a distribution to the Holder of this Warrant or the Common Stock issuable upon the exercise hereof. All calculations under this Section 6(d) shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be.

        (e)    Accountants.    The Company may retain a firm of independent public accountants of recognized standing selected by the Board (who may be the regular accountants employed by the Company) to make any computation required by this Section 6.

        (f)    Additional Adjustments.    In the event that at any time, as a result of an adjustment made pursuant to Section 6(a), (b) or (c) of this Warrant, the Holder of any Warrant thereafter shall become entitled to receive any shares of the Company other than Common Stock, thereafter the number of such other shares so receivable upon exercise of any Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Sections 6(a) through (j), inclusive, of this Warrant.

5

        (g)    Consideration.    For purposes of any computation respecting consideration received pursuant to this Section 6, the following shall apply:

        A.    in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith;

        B.    in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors of the Company (irrespective of the accounting treatment thereof), whose determination shall be conclusive; and

        C.    in the case of the issuance of securities convertible, exchangeable or exercisable for shares of Common Stock, the aggregate consideration received therefor shall be deemed to be the consideration received by the Company for the issuance of such securities plus the additional minimum consideration, if any, to be received by the Company upon the conversion or exchange thereof (the consideration in each case to be determined in the same manner as provided in clauses (A) and (B) of this Subsection (g)).

        (h)    Voluntary Adjustment by the Company.    The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

        (i)    No Adjustment.    Notwithstanding the foregoing, no adjustment shall be effected due to, or as a result of, any Permitted Issuances.

        (j)    Enforcement of Intent and Principles.    If any event or condition occurs as to which other provisions of this Section 6 are not strictly applicable or if strictly applicable would not fairly protect the exercise or purchase rights of this Warrant in accordance with the essential intent and principles of such provisions, or which might materially and adversely affect the exercise or purchase rights of the Holder under any provisions of the Warrant, then the Company shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles, so as to protect such exercise and purchase rights as aforesaid, and any adjustment necessary with respect to the Exercise Price and the number of shares of Common Stock purchasable hereunder so as to preserve without dilution the rights of the Holders.

        7.    REGISTRATION RIGHTS.    The Warrant Stock shall be entitled to the registration rights set forth in Article V of the Subscription Agreements entered into between the Company and the several subscriber(s) as further described in Section 5 of the Placement Agent Agreement.

        8.    OFFICER'S CERTIFICATE.    Whenever the Exercise Price(s) shall be adjusted as required by the provisions of Section 6 of this Warrant, the Company shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office and with its stock transfer agent, if any, an officer's certificate showing the adjusted Exercise Price(s) and the adjusted number of shares of Common Stock issuable upon exercise of each Warrant, determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment, including a statement of the number of additional shares of Common Stock, if any, and such other facts as shall be necessary to show the reason for and the manner of computing such adjustment. Each such officer's certificate shall immediately be forwarded by certified mail to Holder as provided in Section 13.

        9.    NOTICES TO WARRANT HOLDERS.    So long as this Warrant shall be outstanding, (a) if the Company shall pay any dividend or make any distribution upon Common Stock, or (b) if the Company shall offer to the holders of Common Stock for subscription or purchase by them any share of any class

6

or any other rights, or (c) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another entity, tender offer transaction for the Company's Common Stock, sale, lease or transfer of all or substantially all of the property and assets of the Company, or voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected, or (d) if the Company shall file a registration statement under the Securities Act of 1933, as amended (the "Act"), on any form other than on Form S-4 or S-8 or any successor form, then in any such case, the Company shall cause to be mailed by certified mail to the Holder, at least ten (10) days prior to the date specified in clauses (a), (b), (c) or (d) above, as the case may be, of this Section 9 a notice containing a brief description of the proposed action and stating the date on which (i) a record is to be taken for the purpose of such dividend, distribution or rights, or (ii) such reclassification, reorganization, consolidation, merger, tender offer transaction, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Common Stock or other securities shall receive cash or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up, or (iii) such registration statement is to be filed with the Securities and Exchange Commission.

        10.    RECLASSIFICATION, REORGANIZATION OR MERGER.    In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Company, or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary in which merger the Company is the continuing or surviving corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) or in case of any sale, lease or conveyance of all or substantially all of the assets of the Company, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Company), the Company shall, as a condition precedent to such transaction, cause effective provisions to be made so that (a) the Holder shall have the right thereafter by exercising this Warrant, to purchase the kind and amount of shares of stock and other securities and property receivable upon such reclassification, capital reorganization and other change, consolidation, merger, sale, conveyance or statutory exchange by a holder of the number of shares of Common Stock which could have been purchased upon exercise of this Warrant immediately prior to such reclassification, change, consolidation, merger, sale, conveyance, or statutory exchange and (b) the successor or acquiring entity shall expressly assume the due and punctual observance and performance of each covenant, agreement, obligation and condition of this Warrant to be performed and observed by Company and all obligations and liabilities hereunder (including but not limited to the provisions of Section 6 regarding the increase in the number of shares of Warrant Stock potentially issuable hereunder). Any such provision shall include provision for adjustments which shall be as nearly equivalent as possible to the adjustments provided for in this Warrant. The foregoing provisions of this Section 10 shall similarly apply to successive reclassifications, capital reorganizations and changes of shares of Common Stock and to successive consolidations, mergers, sales or conveyances. In the event that in connection with any such capital reorganization or reclassification, consolidation, merger, sale, conveyance or statutory exchange, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole in part, for a security of the Company other than Common Stock, any such issue shall be treated as an issuance of Common Stock covered by the provisions of Section 6 of this Warrant. Notice of any such event shall be mailed by certified mail to the Holders of the Warrants no less than thirty (30) days prior to such event. A sale of all or substantially all of the Company's assets for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes.

7

        11.    TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933.    This Warrant or the Warrant Stock or any other security issued or issuable upon exercise of this Warrant may not be sold or otherwise disposed of except as follows:

        (a)   to a person who, in the opinion of counsel for the Company, or counsel for the Holder who is reasonably acceptable to the Company, is a person to whom this Warrant or Warrant Stock may legally be transferred without registration and without the delivery of a current prospectus under the Act with respect thereto and then only against receipt of an agreement of such person to comply with the provisions of this Section 11 with respect to any resale or other disposition of such securities which agreement shall be satisfactory in form and substance to the Company and its counsel; or

        (b)   to any person upon delivery of a prospectus then meeting the requirements of the Act relating to such securities and the offering thereof for such sale or disposition.

        12.    GOVERNING LAW; JURISDICTION.    The corporate laws of the State of New York shall govern all issues concerning the relative rights of the Company and its stockholders. All issues concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to the principles of conflicts of law thereof. The parties hereto agree that venue in any and all actions and proceedings related to the subject matter of this Warrant shall be in the state and federal courts in and for New York, New York, which courts shall have exclusive jurisdiction for such purpose, and the parties hereto irrevocably submit to the exclusive jurisdiction of such courts and irrevocably waive the defense of an inconvenient forum to the maintenance of any such action or proceeding. Service of process may be made in any manner recognized by such courts. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought.

        13.    NOTICES.    Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section 13 prior to 6:30 p.m. (New York City time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (New York City time) on such date, (iii) the Business Day following the date of the mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows:

If to the Company:	Photonic Products Group, Inc. 181 Legrand Avenue Northvale, NJ 07647 Attention: Daniel Lehrfeld Fax: (201) 767-9644
If to Casimir:	Casimir Capital L.P. 100 Broadway, 11th Floor New York, NY 10005 Attention: Richard Sands Fax: (212) 798-1300
If to any other Holder:	To the address set forth on the cover page hereof.

        14.    MODIFICATION OF WARRANT.    Other than as provided in Section 6(h), this Warrant shall not be modified, supplemented or altered in any respect, nor any provision waived, except with the

8

consent in writing of the Holders representing not less than fifty percent (50%) of the Warrants then outstanding.

        15.    PAYMENT OF TAXES.    The Company will pay all documentary stamp taxes attributable to the issuance of shares of Common Stock underlying this Warrant upon exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificate for shares of Common Stock underlying this Warrant in a name other than that of the Holder. The Holder is responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving shares of Common Stock underlying this Warrant upon exercise hereof.

        16.    REMEDIES.    Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

        17.    SUCCESSORS AND ASSIGNS.    Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.

        18.    SEVERABILITY.    Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

        19.    HEADINGS.    The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose be deemed a part of this Warrant.

        IN WITNESS WHEREOF, this Warrant has been duly executed as of                        , 2004.

	PHOTONIC PRODUCTS GROUP, INC.
	By:
		Daniel Lehrfeld President and CEO
ATTEST:
Secretary
[CORPORATE SEAL]

9

PHOTONIC PRODUCTS GROUP, INC.
WARRANT EXERCISE FORM

To Photonic Products Group, Inc.:

        The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within warrant ("Warrant") for, and to purchase thereunder by the payment of the Exercise Price and surrender of the Warrant, shares of Common Stock ("Warrant Stock") provided for therein, and requests that certificates for the Warrant Stock be issued as follows:

Name

Address

Federal Tax ID or Social Security Number

and delivered by certified mail to the above address, or electronically (provide DWAC instructions:                        ), or (please specify:                        ).

and, if the number of shares of Warrant Stock shall not be all the Warrant Stock purchasable upon exercise of the Warrant, that a new Warrant for the balance of the Warrant Stock purchasable upon the exercise of this Warrant be registered in the name of the undersigned Holder or the undersigned's Assignee as below indicated and delivered to the address stated below.

Dated:

NOTE: The signature must correspond with the name of the Holder as written on the first page of the Warrant in every particular, without alteration or enlargement or any change whatsoever, unless the Warrant has been assigned.

Name (please print)

Address

Federal Tax ID or Social Security Number

Assignee:

10

ASSIGNMENT

        FOR VALUE RECEIVED                        hereby sells, assigns and transfers unto                        the foregoing Warrant and all rights evidenced thereby, and does irrevocably constitute and appoint                        , attorney, to transfer said Warrant on the books of                        .

Dated:	Signature:
	Address:

PARTIAL ASSIGNMENT

        FOR VALUE RECEIVED                        hereby sells, assigns and transfers unto                        the right to purchase                        shares of Common Stock, par value $.01 per share, of Photonic Products Group, Inc. covered by the foregoing Warrant, and a proportionate part of said Warrant and the rights evidenced thereby, and does irrevocably constitute and appoint                        , attorney, to transfer such part of said Warrant on the books of                        .

Dated:	Signature:
	Address:

11

QuickLinks

Exhibit 4.3

EX-4.4

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 4.4

PROMISSORY NOTE

Principal Amount: $1,700,000
June 30, 2003

        FOR VALUE RECEIVED, INRAD, INC., a New Jersey corporation (hereinafter called "Issuer"), hereby promises to pay to the order of CLAREX, LTD. and its successors and assigns (hereinafter called the "Holder"), at such address as the Holder may designate in writing to Issuer, the principal sum of ONE MILLION SEVEN HUNDRED THOUSAND DOLLARS ($1,700,000) plus all accrued interest owing hereunder in lawful money of the United States of America on or before the Maturity Date (as defined below). For purposes of this Note, "Maturity Date" shall mean January 31, 2005.

Interest.    Interest shall accrue on the unpaid principal amount of this Note at the rate of six and one-half percent (6.0%) per annum and shall be due and payable on the Maturity Date. Interest shall be computed on the basis of a 360 day year for the actual number of days elapsed.

Optional Prepayment; Order of Payments.    Issuer may prepay this Note at any time, in whole or in part, without premium or penalty; provided, however, Issuer shall provide to the Holder written notice at least ten (10) business days prior to such prepayment. All payments made on account of this Note shall be applied first to the payment of any costs of enforcement then due hereunder, second to the payment of accrued and unpaid interest then due hereunder, and the remainder, if any, shall be applied to the unpaid principal balance of this Note.

Event of Default Defined; Acceleration of Maturity.    If one or more of the following events ("Events of Default") shall have occurred:

        a default in the payment of all or any part of the principal or interest due under this Note as and when the same shall become due and payable, at maturity, by declaration as permitted hereunder, upon acceleration or otherwise;

        Issuer shall merge or consolidate with or into any other person or entity, sell, transfer, lease or otherwise dispose of all or any substantial portion of its assets or adopt a plan of liquidation or dissolution; provided, however, that Issuer shall have the right to merge with any other entity without creating an Event of Default so long as Issuer shall be the surviving entity in any such merger;

        Issuer shall have applied for or consented to the appointment of a custodian, receiver, trustee or liquidator, or other court-appointed fiduciary of all or a substantial part of its properties; or a custodian, receiver, trustee or liquidator or other court appointed fiduciary shall have been appointed with the consent of Issuer; or Issuer is generally not paying its debts as they become due or is insolvent, or has made a general assignment for the benefits of its creditors; or Issuer files a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement with its creditors or seeking to take advantage of any insolvency law, or an answer admitting the material allegations of a petition in any bankruptcy, reorganization or

insolvency proceeding or has taken action for the purpose of effecting any of the foregoing; or if, within sixty (60) days after the commencement of any proceeding against Issuer seeking any reorganization, rehabilitation, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the Federal bankruptcy code or similar order under future similar legislation, the appointment of any trustee, receiver, custodian, liquidator, or other court-appointed fiduciary of Issuer or of all or any substantial part of its properties, such order or appointment shall not have been vacated or stayed on appeal or if, within sixty (60) days after the expiration of any such stay, such order or appointment shall not have been vacated (all such events, collectively "Insolvency Events");

Then Holder, by notice in writing to Issuer (the "Acceleration Notice"), may declare the principal amount of this Note and all accrued but unpaid interest to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable; provided that if an Insolvency Event occurs, the principal amount of this Note and all accrued but unpaid interest shall become and be immediately due and payable without any declaration or other act on the part of the Holder.

        Security.    Payment of this Note is secured pursuant to the terms of a separate Security Agreement dated the date of this Note.

Miscellaneous.

        5.1    Binding Effect; Assignability.    This Note shall be binding upon Issuer, its successors and its assigns, and shall inure to the benefit of Holder, its successors and its assigns. This Note is transferable or assignable by the Holder or any transferee of the Holder only to an Affiliate or a partner, or an heir, administrator, executor or successor of the Holder.

        5.2    Governing Law; Jurisdiction; Venue.    This Note has been executed in and shall be governed by the laws of the State of New Jersey. Issuer irrevocably submits to the exclusive jurisdiction of the courts of the State of New Jersey which will be the exclusive jurisdiction for disputes arising under the Note and the United States District Court for the District of New Jersey for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Note.

        IN WITNESS WHEREOF, Issuer has caused this Note to be signed in its name by its duly authorized officer and its corporate seal to be affixed hereto.

INRAD, INC.
By:	/s/  WILLIAM S. MIRAGLIA

QuickLinks

PROMISSORY NOTE

EX-4.5

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 4.5

THIS CONVERTIBLE PROMISSORY NOTE HAS BEEN, AND ANY SHARES ISSUED UPON CONVERSION PURSUANT TO THE TERMS HEREOF WILL BE, ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR SALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THIS CONVERTIBLE PROMISSORY NOTE, AND ANY SECURITIES ISSUED UPON CONVERSION PURSUANT TO THIS NOTE, HAVE NOT BEEN REGISTERED UNDER THE ACT OR ANY STATE SECURITIES LAW, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED PURSUANT TO THE PROVISIONS OF THE ACT OR THOSE LAWS OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE.

SUBORDINATED CONVERTIBLE PROMISSORY NOTE

Principal Amount: $1,000,000 April 1, 2004

        FOR VALUE RECEIVED, Photonic Products Group, INC., a New Jersey corporation (hereinafter called "Issuer"), hereby promises to pay to the order of Clarex, LTD. and its successors and assigns (hereinafter called the "Holder"), at such address as the Holder may designate in writing to Issuer, the principal sum of ONE MILLION DOLLARS ($1,000,000) plus all accrued interest owing hereunder in lawful money of the United States of America on or before the Maturity Date (as defined below), unless this Convertible Promissory Note (the "Note") is converted by the Holder as set forth herein. For purposes of this Note, "Maturity Date" shall mean March 31, 2007.

Interest.    Interest shall accrue on the unpaid principal amount of this Note at the rate of six percent (6%) per annum and shall be due and payable on the Maturity Date. Interest shall be computed on the basis of a 360 day year for the actual number of days elapsed.

Optional Prepayment; Order of Payments.    Issuer may prepay this Note at any time, in whole or in part, without premium or penalty; provided, however, Issuer shall provide to the Holder written notice at least ten (10) business days prior to such prepayment. All payments made on account of this Note shall be applied first to the payment of any costs of enforcement then due hereunder, second to the payment of accrued and unpaid interest then due hereunder, and the remainder, if any, shall be applied to the unpaid principal balance of this Note.

Event of Default Defined; Acceleration of Maturity.    If one or more of the following events ("Events of Default") shall have occurred:

a default in the payment of all or any part of the principal or interest due under this Note as and when the same shall become due and payable, at maturity, by declaration as permitted hereunder, upon acceleration or otherwise;

Issuer shall merge or consolidate with or into any other person or entity, sell, transfer, lease or otherwise dispose of all or any substantial portion of its assets or adopt a plan of liquidation or dissolution; provided, however, that Issuer shall have the right to merge with any other entity so long as Issuer shall be the surviving entity in any such merger;

Issuer shall have applied for or consented to the appointment of a custodian, receiver, trustee or liquidator, or other court-appointed fiduciary of all or a substantial part of its properties; or a custodian, receiver, trustee or liquidator or other court appointed fiduciary shall have been appointed with the consent of Issuer; or Issuer is generally not paying its debts as they become due or is insolvent, or has made a general assignment for the benefits of its creditors; or Issuer files a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement with its creditors or seeking to take advantage of any insolvency law, or an answer admitting the material allegations of a petition in any bankruptcy, reorganization or insolvency proceeding or has taken action for the purpose of effecting any of the foregoing; or if, within sixty (60) days after the commencement of any proceeding against Issuer seeking any reorganization, rehabilitation, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the Federal

bankruptcy code or similar order under future similar legislation, the appointment of any trustee, receiver, custodian, liquidator, or other court-appointed fiduciary of Issuer or of all or any substantial part of its properties, such order or appointment shall not have been vacated or stayed on appeal or if, within sixty (60) days after the expiration of any such stay, such order or appointment shall not have been vacated (all such events, collectively "Insolvency Events");

Then Holder, by notice in writing to Issuer (the "Acceleration Notice"), may declare the principal amount of this Note and all accrued but unpaid interest to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable; provided that if an Insolvency Event occurs, the principal amount of this Note and all accrued but unpaid interest shall become and be immediately due and payable without any declaration or other act on the part of the Holder.

Conversion.    The Holder may, at any time prior to the earlier of the Maturity Date or the prepayment of this Note by Issuer, convert all or a portion of the principal and accrued interest then outstanding under this Note into fully paid and non-assessable shares of Issuer's Common Stock (the "Common Stock"), at the Conversion Price (as defined below) per share. Such conversion shall be effected by the Holder by sending a written notice of conversion and this Note to Issuer for cancellation and issuance of the number of shares of Common Stock into which this Note is being converted. In the event this Note is being converted in part, a replacement Note representing the unconverted portion of this Note shall be delivered to the Holder. Upon conversion of this Note, only whole shares of Common Stock shall be issued. Any remainder due hereunder which is insufficient to purchase a whole share of Common Stock shall be paid by Issuer in cash. The Conversion Price shall be (a) the price at which common stock is first issued for cash after the date of this Note to an unrelated third party investor or (b) the price mutually agreed to by the Issuer and the Holder as its then fair market value if no such issuance has occurred within 12 months of the date hereof (the "Conversion Price"). To supplement clause (a), if after the date hereof but before any third party purchase of Common Stock for cash, the Company issues any security convertible into Common Stock to an unrelated third party investor for cash, the Conversion Price of this Note shall be the same as the conversion price of that convertible security. Once fixed, the Conversion Price and the amount and kind of securities issuable upon conversion of this Note shall be subject to adjustment from time to time in accordance with the provisions of this Section 4.

4.1   Subdivision or Combination of Common Stock.    In case Issuer shall at any time subdivide (by any stock split, stock dividend or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced, and, conversely, in case the outstanding shares of Common Stock shall be combined into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased.

        4.2   Reorganization or Reclassification.    If any capital reorganization or reclassification of the capital stock of Issuer (other than in connection with a merger or other reorganization in which Issuer is not the surviving entity) shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Stock, then, as a condition of such reorganization or reclassification, lawful and adequate provisions shall be made whereby the Holder shall thereupon have the right to receive upon the conversion of this Note, upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore receivable upon the conversion of this Note, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for the shares of Common Stock immediately theretofore receivable upon such conversion had such reorganization or reclassification not taken place, and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder to the end that the provisions hereof shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise of such conversion rights.

2

        4.3   Notice of Adjustment.    Upon any adjustment of the Conversion Price, then and in each such case Issuer shall give written notice thereof, by delivery in person, certified or registered mail, return receipt requested, telecopier or telex, addressed to the Holder at the address of the Holder, as provided to Issuer, which notice shall state the Conversion Price resulting from such adjustment, setting forth in reasonable detail the method upon which such calculation is based.

4.4   Due Issuance of Shares Upon Conversion.    Issuer covenants and agrees that all shares of Common Stock or any such other securities which may be issued upon any whole or partial conversion of this Note will, upon issuance, be validly issued, fully paid and non-assessable and free from all taxes, liens and charges with respect to the issue thereof.

        4.5   Stock to be Reserved.    Issuer will at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issuance upon the conversion of this Note as herein provided, such number of shares of Common Stock as shall then be issuable upon the conversion hereof. Issuer will not take any action which results in any adjustment of the Conversion Price if the total number of shares of Common Stock issued and issuable after such action upon conversion of this Note would, when added to the number of shares of Common Stock then reserved for issuance, exceed the total number of shares of Common Stock then authorized by Issuer's Certificate of Incorporation.

        5.     Subordination.    The Issuer hereby agrees, and the Holder of this Note by its acceptance agrees, that the payment of the principal of and interest on the Note is hereby expressly made subordinate and junior in right of payment, to the extent set forth in the following paragraphs (a), (b) and (c), to the prior payment in full of all Senior Debt of the Issuer, whether such Senior Debt, except as provided in Section 5 below, is incurred prior to, on or after the date hereof:

        (a)   In the event of insolvency or bankruptcy proceedings, or any receivership, liquidation, reorganization or other similar proceedings relative to the Issuer or to any of the property of the Issuer, or in the event or any proceedings for voluntary liquidation, dissolution, or other winding-up of the Issuer, whether or not involving insolvency or bankruptcy, then the holders of Senior Debt shall be entitled to receive payment in full of all principal of and interest on all Senior Debt before the Holder of this Note shall be entitled to receive any payment on account of principal or interest on this Note, and to that end the holders of Senior Debt shall be entitled to receive for application in payment thereof any payment or distribution of any kind or character, whether in cash or property or securities, which may be payable or deliverable in any such proceedings in respect of this Note.

        (b)   In the event that this Note is declared due and payable prior to its stated maturity, by reason of the occurrence of an Event of Default hereunder (under circumstances when the provisions of the foregoing paragraph (a) shall not be applicable), then all principal of and interest on all Senior Debt outstanding at the time of such declaration shall first be paid in full, before any payment on account of principal or interest is made upon this Note.

        (c)   The Issuer may make payments and, subject to Section 1 of this Note, prepayments of the principal of and interest of this Note if, at the time of the payment and immediately after giving effect thereto, (i) there exists no default in any payment with respect to any Senior Debt and (ii) there shall not have occurred an event of default (other than a default in the payment of amounts due thereon) with respect to any Senior Debt, as defined in the instrument under which the same is outstanding, permitting the holders thereof to accelerate the maturity thereof, other than an event of default which shall have been cured or waived or shall have ceased to exist. Should the Holder of this Note, while there exists a default or an event of default as provided in the immediately preceding sentence, and after being notified by the holder of the Senior Debt of the default, receive any such payment, or should the Holder of this Note receive any distribution in bankruptcy, dissolution, or similar insolvency proceedings in regard to the Issuer, the Holder of

3

the Note will hold such payment or distribution in trust for the holder of the Senior Debt and will pay over such amounts to such holder to apply to the Senior Debt until the same is paid in full.

        The provisions of this Section 5 are for the purpose of defining the relative rights of the holders of Senior Debt and the Holder of the Note against the Issuer and its property. Nothing herein shall impair, as between the Issuer and the Holder of this Note, the obligation of the Issuer, which is unconditional and absolute, to pay to the Holder the principal and interest in accordance with the terms and the provisions hereof; nor shall anything herein prevent the Holder of this Note from exercising all remedies otherwise permitted by applicable law or hereunder upon default under this Note, subject to the rights, if any, under this Section 5 of holders of Senior Debt to receive cash, property, stock or obligation otherwise payable or deliverable to the Holder of this Note. The Issuer acknowledges and agrees that the rights of the Holder of this Note with respect to the Issuer's cash, property, rights and other assets of any kind are senior and prior to the rights of any holder of capital stock of the Issuer arising from such capital stock.

        (d)   Definition.    "Senior Debt" shall mean the principal of, interest on and, if applicable, any premium on (i) the debt of the Issuer outstanding as of the date hereof, (ii) additional indebtedness incurred by the Issuer after date hereof for money borrowed from a bank, savings and loan association trust Issuer, insurance Issuer or similar financial institution, (iii) purchase money secured debt, (iv) obligations of the Issuer as lessee under leases of real or personal property which are treated as capital lease obligations under generally accepted accounting principals, and (v) any deferrals, renewals, refinancings or extensions of any of the foregoing.

6.     Miscellaneous.

        6.1   Binding Effect; Assignability.    This Note shall be binding upon Issuer, its successors and its assigns, and shall inure to the benefit of Holder, its successors and its assigns. This Note is transferable or assignable by the Holder or any transferee of the Holder only to an Affiliate or a partner, or an heir, administrator, executor or successor of the Holder; provided that such transfer or assignment is made in compliance with the Act and any applicable state and foreign securities laws.

        6.2   Governing Law; Jurisdiction; Venue.    This Note has been executed in and shall be governed by the laws of the State of New Jersey. Issuer irrevocably submits to the exclusive jurisdiction of the courts of the State of New Jersey which will be the exclusive jurisdiction for disputes arising under the Note and the United States District Court for the District of New Jersey for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Note.

        IN WITNESS WHEREOF, Issuer has caused this Note to be signed in its name by its duly authorized officer and its corporate seal to be affixed hereto.

PHOTONIC PRODUCTS GROUP, INC.
By:	/s/  WILLIAM S. MIRAGLIA
William S. Miraglia, Secretary

4

QuickLinks

SUBORDINATED CONVERTIBLE PROMISSORY NOTE

EX-4.6

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 4.6

THIS CONVERTIBLE PROMISSORY NOTE HAS BEEN, AND ANY SHARES ISSUED UPON CONVERSION PURSUANT TO THE TERMS HEREOF WILL BE, ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR SALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THIS CONVERTIBLE PROMISSORY NOTE, AND ANY SECURITIES ISSUED UPON CONVERSION PURSUANT TO THIS NOTE, HAVE NOT BEEN REGISTERED UNDER THE ACT OR ANY STATE SECURITIES LAW, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED PURSUANT TO THE PROVISIONS OF THE ACT OR THOSE LAWS OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE.

SUBORDINATED CONVERTIBLE PROMISSORY NOTE

Principal Amount: $1,500,000 October 31, 2003

        FOR VALUE RECEIVED, INRAD, INC., a New Jersey corporation (hereinafter called "Issuer"), hereby promises to pay to the order of CLAREX, LTD. and its successors and assigns (hereinafter called the "Holder"), at such address as the Holder may designate in writing to Issuer, the principal sum of ONE MILLION DOLLARS FIVE HUNDRED THOUSAND ($1,500,000) plus all accrued interest owing hereunder in lawful money of the United States of America on or before the Maturity Date (as defined below), unless this Convertible Promissory Note (the "Note") is converted by the Holder as set forth herein. For purposes of this Note, "Maturity Date" shall mean January 31, 2006.

Interest.    Interest shall accrue on the unpaid principal amount of this Note at the rate of six percent (6%) per annum and shall be due and payable on the Maturity Date. Interest shall be computed on the basis of a 360 day year for the actual number of days elapsed.

Optional Prepayment; Order of Payments.    Issuer may prepay this Note at any time, in whole or in part, without premium or penalty; provided, however, Issuer shall provide to the Holder written notice at least ten (10) business days prior to such prepayment. All payments made on account of this Note shall be applied first to the payment of any costs of enforcement then due hereunder, second to the payment of accrued and unpaid interest then due hereunder, and the remainder, if any, shall be applied to the unpaid principal balance of this Note.

Event of Default Defined; Acceleration of Maturity.    If one or more of the following events ("Events of Default") shall have occurred:

        a default in the payment of all or any part of the principal or interest due under this Note as and when the same shall become due and payable, at maturity, by declaration as permitted hereunder, upon acceleration or otherwise;

        Issuer shall merge or consolidate with or into any other person or entity, sell, transfer, lease or otherwise dispose of all or any substantial portion of its assets or adopt a plan of liquidation or dissolution; provided, however, that Issuer shall have the right to merge with any other entity so long as Issuer shall be the surviving entity in any such merger;

        Issuer shall have applied for or consented to the appointment of a custodian, receiver, trustee or liquidator, or other court-appointed fiduciary of all or a substantial part of its properties; or a custodian, receiver, trustee or liquidator or other court appointed fiduciary shall have been appointed with the consent of Issuer; or Issuer is generally not paying its debts as they become due or is insolvent, or has made a general assignment for the benefits of its creditors; or Issuer files a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement with its creditors or seeking to take advantage of any insolvency law, or an answer admitting the material allegations of a petition in any bankruptcy, reorganization or insolvency proceeding or has taken action for the purpose of effecting any of the foregoing; or if, within sixty (60) days after the commencement of any proceeding against Issuer seeking any reorganization, rehabilitation, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the Federal bankruptcy code or similar order under future similar legislation, the appointment of any trustee, receiver, custodian, liquidator, or other court-appointed fiduciary of Issuer or of all or any substantial part of its properties, such order or appointment shall not have been vacated or stayed on appeal or if, within sixty (60) days after the expiration of any such stay, such order or appointment shall not have been vacated (all such events, collectively "Insolvency Events");

Then Holder, by notice in writing to Issuer (the "Acceleration Notice"), may declare the principal amount of this Note and all accrued but unpaid interest to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable; provided that if an Insolvency Event occurs, the principal amount of this Note and all accrued but unpaid interest shall become and be immediately due and payable without any declaration or other act on the part of the Holder.

Conversion.    The Holder may, at any time prior to the earlier of the Maturity Date or the prepayment of this Note by Issuer, convert all or a portion of the principal and accrued interest then outstanding under this Note into fully paid and non-assessable shares of Issuer's Common Stock (the "Common Stock"), at the Conversion Price (as defined below) per share. Such conversion shall be effected by the Holder by sending a written notice of conversion and this Note to Issuer for cancellation and issuance of the number of shares of Common Stock into which this Note is being converted. In the event this Note is being converted in part, a replacement Note representing the unconverted portion of this Note shall be delivered to the Holder. Upon conversion of this Note, only whole shares of Common Stock shall be issued. Any remainder due hereunder which is insufficient to purchase a whole share of Common Stock shall be paid by Issuer in cash. The Conversion Price shall be (a) the price at which common stock is first issued for cash after the date of this Note to an unrelated third party investor or (b) the price mutually agreed to by the Issuer and the Holder as its then fair market value if no such

issuance has occurred within 12 months of the date hereof (the "Conversion Price"). To supplement clause (a), if after the date hereof but before any third party purchase of Common Stock for cash, the Company issues any security convertible into Common Stock to an unrelated third party investor for cash, the Conversion Price of this Note shall be the same as the conversion price of that convertible security. Once fixed, the Conversion Price and the amount and kind of securities issuable upon conversion of this Note shall be subject to adjustment from time to time in accordance with the provisions of this Section 4.

4.1Subdivision or Combination of Common Stock. In case Issuer shall at any time subdivide (by any stock split, stock dividend or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced, and, conversely, in case the outstanding shares of Common Stock shall be combined into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased.

4.2Reorganization or Reclassification. If any capital reorganization or reclassification of the capital stock of Issuer (other than in connection with a merger or other reorganization in which Issuer is not the surviving entity) shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Stock, then, as a condition of such reorganization or reclassification, lawful and adequate provisions shall be made whereby the Holder shall thereupon have the right to receive upon the conversion of this Note, upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore receivable upon the conversion of this Note, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for the shares of Common Stock immediately theretofore receivable upon such conversion had such reorganization or reclassification not taken place, and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder to the end that the provisions hereof shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise of such conversion rights.

        4.3    Notice of Adjustment. Upon any adjustment of the Conversion Price, then and in each such case Issuer shall give written notice thereof, by delivery in person, certified or registered mail, return receipt requested, telecopier or telex, addressed to the Holder at the address of the Holder, as provided to Issuer, which notice shall state the Conversion Price resulting from such adjustment, setting forth in reasonable detail the method upon which such calculation is based.

4.4Due Issuance of Shares Upon Conversion. Issuer covenants and agrees that all shares of Common Stock or any such other securities which may be issued upon any whole or partial conversion of this Note will, upon issuance, be validly issued, fully paid and non-assessable and free from all taxes, liens and charges with respect to the issue thereof.

4.5Stock to be Reserve. Issuer will at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issuance upon the conversion of this Note as herein provided, such number of shares of Common Stock as shall then be issuable upon the conversion hereof. Issuer will not take any action which results in any adjustment of the Conversion Price if the total number of shares of Common Stock issued and issuable after such action upon conversion of this Note would, when added to the number of shares of Common Stock then reserved for issuance, exceed the total number of shares of Common Stock then authorized by Issuer's Certificate of Incorporation.

        5.    Subordination.    The Issuer hereby agrees, and the Holder of this Note by its acceptance agrees, that the payment of the principal of and interest on the Note is hereby expressly made subordinate and junior in right of payment, to the extent set forth in the following paragraphs (a), (b) and (c), to the prior payment in full of all Senior Debt of the Issuer, whether such Senior Debt, except as provided in Section 5 below, is incurred prior to, on or after the date hereof:

        (a)   In the event of insolvency or bankruptcy proceedings, or any receivership, liquidation, reorganization or other similar proceedings relative to the Issuer or to any of the property of the Issuer, or in the event or any proceedings for voluntary liquidation, dissolution, or other winding-up of the Issuer, whether or not involving insolvency or bankruptcy, then the holders of Senior Debt shall be entitled to receive payment in full of all principal of and interest on all Senior Debt before the Holder of this Note shall be entitled to receive any payment on account of principal or interest on this Note, and to that end the holders of Senior Debt shall be entitled to receive for application in payment thereof any payment or distribution of any kind or character, whether in cash or property or securities, which may be payable or deliverable in any such proceedings in respect of this Note.

        (b)   In the event that this Note is declared due and payable prior to its stated maturity, by reason of the occurrence of an Event of Default hereunder (under circumstances when the provisions of the foregoing paragraph (a) shall not be applicable), then all principal of and interest on all Senior Debt outstanding at the time of such declaration shall first be paid in full, before any payment on account of principal or interest is made upon this Note.

        (c)   The Issuer may make payments and, subject to Section 1 of this Note, prepayments of the principal of and interest of this Note if, at the time of the payment and immediately after giving effect thereto, (i) there exists no default in any payment with respect to any Senior Debt and (ii) there shall not have occurred an event of default (other than a default in the payment of amounts due thereon) with respect to any Senior Debt, as defined in the instrument under which the same is outstanding, permitting the holders thereof to accelerate the maturity thereof, other than an event of default which shall have been cured or waived or shall have ceased to exist. Should the Holder of this Note, while there exists a default or an event of default as provided in the immediately preceding sentence, and after being notified by the holder of the Senior Debt of the default, receive any such payment, or should the Holder of this Note receive any distribution in bankruptcy, dissolution, or similar insolvency proceedings in

regard to the Issuer, the Holder of the Note will hold such payment or distribution in trust for the holder of the Senior Debt and will pay over such amounts to such holder to apply to the Senior Debt until the same is paid in full.

        The provisions of this Section 5 are for the purpose of defining the relative rights of the holders of Senior Debt and the Holder of the Note against the Issuer and its property. Nothing herein shall impair, as between the Issuer and the Holder of this Note, the obligation of the Issuer, which is unconditional and absolute, to pay to the Holder the principal and interest in accordance with the terms and the provisions hereof; nor shall anything herein prevent the Holder of this Note from exercising all remedies otherwise permitted by applicable law or hereunder upon default under this Note, subject to the rights, if any, under this Section 5 of holders of Senior Debt to receive cash, property, stock or obligation otherwise payable or deliverable to the Holder of this Note. The Issuer acknowledges and agrees that the rights of the Holder of this Note with respect to the Issuer's cash, property, rights and other assets of any kind are senior and prior to the rights of any holder of capital stock of the Issuer arising from such capital stock.

        (d)   Definition. "Senior Debt" shall mean the principal of, interest on and, if applicable, any premium on (i) the debt of the Issuer outstanding as of the date hereof, (ii) additional indebtedness incurred by the Issuer after date hereof for money borrowed from a bank, savings and loan association trust Issuer, insurance Issuer or similar financial institution, (iii) purchase money secured debt, (iv) obligations of the Issuer as lessee under leases of real or personal property which are treated as capital lease obligations under generally accepted accounting principals, and (v) any deferrals, renewals, refinancings or extensions of any of the foregoing.

        6.    Miscellaneous.

        6.1    Binding Effect; Assignability. This Note shall be binding upon Issuer, its successors and its assigns, and shall inure to the benefit of Holder, its successors and its assigns. This Note is transferable or assignable by the Holder or any transferee of the Holder only to an Affiliate or a partner, or an heir, administrator, executor or successor of the Holder; provided that such transfer or assignment is made in compliance with the Act and any applicable state and foreign securities laws.

        6.2    Governing Law; Jurisdiction; Venue. This Note has been executed in and shall be governed by the laws of the State of New Jersey. Issuer irrevocably submits to the exclusive jurisdiction of the courts of the State of New Jersey which will be the exclusive jurisdiction for disputes arising under the Note and the United States District Court for the District of New Jersey for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Note.

        IN WITNESS WHEREOF, Issuer has caused this Note to be signed in its name by its duly authorized officer and its corporate seal to be affixed hereto.

Photonic Products Group, INC.
By:	/s/  WILLIAM S. MIRAGLIA William S. Miraglia, Secretary

QuickLinks

SUBORDINATED CONVERTIBLE PROMISSORY NOTE

EX-4.7

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 4.7

THIS CONVERTIBLE PROMISSORY NOTE HAS BEEN, AND ANY SHARES ISSUED UPON CONVERSION PURSUANT TO THE TERMS HEREOF WILL BE, ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR SALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THIS CONVERTIBLE PROMISSORY NOTE, AND ANY SECURITIES ISSUED UPON CONVERSION PURSUANT TO THIS NOTE, HAVE NOT BEEN REGISTERED UNDER THE ACT OR ANY STATE SECURITIES LAW, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED PURSUANT TO THE PROVISIONS OF THE ACT OR THOSE LAWS OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE.

SUBORDINATED CONVERTIBLE PROMISSORY NOTE

Principal Amount: $1,000,000 December 31, 2002

        FOR VALUE RECEIVED, INRAD, INC., a New Jersey corporation (hereinafter called "Issuer"), hereby promises to pay to the order of WELLAND, LTD. and its successors and assigns (hereinafter called the "Holder"), at such address as the Holder may designate in writing to Issuer, the principal sum of ONE MILLION DOLLARS ($1,000,000) plus all accrued interest owing hereunder in lawful money of the United States of America on or before the Maturity Date (as defined below), unless this Convertible Promissory Note (the "Note") is converted by the Holder as set forth herein. For purposes of this Note, "Maturity Date" shall mean January 31, 2006.

Interest.    Interest shall accrue on the unpaid principal amount of this Note at the rate of six percent (6%) per annum and shall be due and payable on the Maturity Date. Interest shall be computed on the basis of a 360 day year for the actual number of days elapsed.

Optional Prepayment; Order of Payments.    Issuer may prepay this Note at any time, in whole or in part, without premium or penalty; provided, however, Issuer shall provide to the Holder written notice at least ten (10) business days prior to such prepayment. All payments made on account of this Note shall be applied first to the payment of any costs of enforcement then due hereunder, second to the payment of accrued and unpaid interest then due hereunder, and the remainder, if any, shall be applied to the unpaid principal balance of this Note.

Event of Default Defined; Acceleration of Maturity.    If one or more of the following events ("Events of Default") shall have occurred:

        a default in the payment of all or any part of the principal or interest due under this Note as and when the same shall become due and payable, at maturity, by declaration as permitted hereunder, upon acceleration or otherwise;

        Issuer shall merge or consolidate with or into any other person or entity, sell, transfer, lease or otherwise dispose of all or any substantial portion of its assets or adopt a plan of liquidation or dissolution; provided, however, that Issuer shall have the right to merge with any other entity so long as Issuer shall be the surviving entity in any such merger;

        Issuer shall have applied for or consented to the appointment of a custodian, receiver, trustee or liquidator, or other court-appointed fiduciary of all or a substantial part of its properties; or a custodian, receiver, trustee or liquidator or other court appointed fiduciary shall have been appointed with the consent of Issuer; or Issuer is generally not paying its debts as they become due or is insolvent, or has made a general assignment for the benefits of its creditors; or Issuer files a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement with its creditors or seeking to take advantage of any insolvency law, or an answer admitting the material allegations of a petition in any bankruptcy, reorganization or insolvency proceeding or has taken action for the purpose of effecting any of the foregoing; or if, within sixty (60) days after the commencement of any proceeding against Issuer seeking any reorganization, rehabilitation, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the Federal bankruptcy code or similar order under future similar legislation, the appointment of any trustee, receiver, custodian, liquidator, or other court-appointed fiduciary of Issuer or of all or any substantial part of its properties, such order or appointment shall not have been vacated or stayed on appeal or if, within sixty (60) days after the expiration of any such stay, such order or appointment shall not have been vacated (all such events, collectively "Insolvency Events");

Then Holder, by notice in writing to Issuer (the "Acceleration Notice"), may declare the principal amount of this Note and all accrued but unpaid interest to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable; provided that if an Insolvency Event occurs, the principal amount of this Note and all accrued but unpaid interest shall become and be immediately due and payable without any declaration or other act on the part of the Holder.

Conversion.    The Holder may, at any time prior to the earlier of the Maturity Date or the prepayment of this Note by Issuer, convert all or a portion of the principal and accrued interest then outstanding under this Note into fully paid and non-assessable shares of Issuer's Common Stock (the "Common Stock"), at the Conversion Price (as defined below) per share. Such conversion shall be effected by the Holder by sending a written notice of conversion and this Note to Issuer for cancellation and issuance of the number of shares of Common Stock into which this Note is being converted. In the event this Note is being converted in part, a replacement Note representing the unconverted portion of this Note shall be delivered to the Holder. Upon conversion of this Note, only whole shares of Common Stock shall be issued. Any remainder due hereunder which is insufficient to purchase a whole share of Common Stock shall be paid by Issuer in cash. The Conversion Price shall be (a) the price at which common stock is first issued for cash after the date of this Note to an unrelated third party investor or (b) the price mutually agreed to by the Issuer and the Holder as its then fair market value if no such issuance has occurred within 12 months of the date hereof (the "Conversion Price"). To

supplement clause (a), if after the date hereof but before any third party purchase of Common Stock for cash, the Company issues any security convertible into Common Stock to an unrelated third party investor for cash, the Conversion Price of this Note shall be the same as the conversion price of that convertible security. Once fixed, the Conversion Price and the amount and kind of securities issuable upon conversion of this Note shall be subject to adjustment from time to time in accordance with the provisions of this Section 4.

4.1Subdivision or Combination of Common Stock. In case Issuer shall at any time subdivide (by any stock split, stock dividend or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced, and, conversely, in case the outstanding shares of Common Stock shall be combined into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased.

4.2Reorganization or Reclassification. If any capital reorganization or reclassification of the capital stock of Issuer (other than in connection with a merger or other reorganization in which Issuer is not the surviving entity) shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Stock, then, as a condition of such reorganization or reclassification, lawful and adequate provisions shall be made whereby the Holder shall thereupon have the right to receive upon the conversion of this Note, upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore receivable upon the conversion of this Note, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for the shares of Common Stock immediately theretofore receivable upon such conversion had such reorganization or reclassification not taken place, and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder to the end that the provisions hereof shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise of such conversion rights.

        4.3    Notice of Adjustment. Upon any adjustment of the Conversion Price, then and in each such case Issuer shall give written notice thereof, by delivery in person, certified or registered mail, return receipt requested, telecopier or telex, addressed to the Holder at the address of the Holder, as provided to Issuer, which notice shall state the Conversion Price resulting from such adjustment, setting forth in reasonable detail the method upon which such calculation is based.

4.4Due Issuance of Shares Upon Conversion. Issuer covenants and agrees that all shares of Common Stock or any such other securities which may be issued upon any whole or partial conversion of this Note will, upon issuance, be validly issued, fully paid and non-assessable and free from all taxes, liens and charges with respect to the issue thereof.

4.5Stock to be Reserved. Issuer will at all times reserve and keep

available out of its authorized Common Stock, solely for the purpose of issuance upon the conversion of this Note as herein provided, such number of shares of Common Stock as shall then be issuable upon the conversion hereof. Issuer will not take any action which results in any adjustment of the Conversion Price if the total number of shares of Common Stock issued and issuable after such action upon conversion of this Note would, when added to the number of shares of Common Stock then reserved for issuance, exceed the total number of shares of Common Stock then authorized by Issuer's Certificate of Incorporation.

        5.    Subordination. The Issuer hereby agrees, and the Holder of this Note by its acceptance agrees, that the payment of the principal of and interest on the Note is hereby expressly made subordinate and junior in right of payment, to the extent set forth in the following paragraphs (a), (b) and (c), to the prior payment in full of all Senior Debt of the Issuer, whether such Senior Debt, except as provided in Section 5 below, is incurred prior to, on or after the date hereof:

        (a)    In the event of insolvency or bankruptcy proceedings, or any receivership, liquidation, reorganization or other similar proceedings relative to the Issuer or to any of the property of the Issuer, or in the event or any proceedings for voluntary liquidation, dissolution, or other winding-up of the Issuer, whether or not involving insolvency or bankruptcy, then the holders of Senior Debt shall be entitled to receive payment in full of all principal of and interest on all Senior Debt before the Holder of this Note shall be entitled to receive any payment on account of principal or interest on this Note, and to that end the holders of Senior Debt shall be entitled to receive for application in payment thereof any payment or distribution of any kind or character, whether in cash or property or securities, which may be payable or deliverable in any such proceedings in respect of this Note.

        (b)    In the event that this Note is declared due and payable prior to its stated maturity, by reason of the occurrence of an Event of Default hereunder (under circumstances when the provisions of the foregoing paragraph (a) shall not be applicable), then all principal of and interest on all Senior Debt outstanding at the time of such declaration shall first be paid in full, before any payment on account of principal or interest is made upon this Note.

        (c)    The Issuer may make payments and, subject to Section 1 of this Note, prepayments of the principal of and interest of this Note if, at the time of the payment and immediately after giving effect thereto, (i) there exists no default in any payment with respect to any Senior Debt and (ii) there shall not have occurred an event of default (other than a default in the payment of amounts due thereon) with respect to any Senior Debt, as defined in the instrument under which the same is outstanding, permitting the holders thereof to accelerate the maturity thereof, other than an event of default which shall have been cured or waived or shall have ceased to exist. Should the Holder of this Note, while there exists a default or an event of default as provided in the immediately preceding sentence, and after being notified by the holder of the Senior Debt of the default, receive any such payment, or should the Holder of this Note receive any distribution in bankruptcy, dissolution, or similar insolvency proceedings in regard to the Issuer, the Holder of the Note will hold such payment or distribution in trust for

the holder of the Senior Debt and will pay over such amounts to such holder to apply to the Senior Debt until the same is paid in full.

        The provisions of this Section 5 are for the purpose of defining the relative rights of the holders of Senior Debt and the Holder of the Note against the Issuer and its property. Nothing herein shall impair, as between the Issuer and the Holder of this Note, the obligation of the Issuer, which is unconditional and absolute, to pay to the Holder the principal and interest in accordance with the terms and the provisions hereof; nor shall anything herein prevent the Holder of this Note from exercising all remedies otherwise permitted by applicable law or hereunder upon default under this Note, subject to the rights, if any, under this Section 5 of holders of Senior Debt to receive cash, property, stock or obligation otherwise payable or deliverable to the Holder of this Note. The Issuer acknowledges and agrees that the rights of the Holder of this Note with respect to the Issuer's cash, property, rights and other assets of any kind are senior and prior to the rights of any holder of capital stock of the Issuer arising from such capital stock.

        (d)    Definition. "Senior Debt" shall mean the principal of, interest on and, if applicable, any premium on (i) the debt of the Issuer outstanding as of the date hereof, (ii) additional indebtedness incurred by the Issuer after date hereof for money borrowed from a bank, savings and loan association trust Issuer, insurance Issuer or similar financial institution, (iii) purchase money secured debt, (iv) obligations of the Issuer as lessee under leases of real or personal property which are treated as capital lease obligations under generally accepted accounting principals, and (v) any deferrals, renewals, refinancings or extensions of any of the foregoing.

        6.    Miscellaneous.

        6.1    Binding Effect; Assignability. This Note shall be binding upon Issuer, its successors and its assigns, and shall inure to the benefit of Holder, its successors and its assigns. This Note is transferable or assignable by the Holder or any transferee of the Holder only to an Affiliate or a partner, or an heir, administrator, executor or successor of the Holder; provided that such transfer or assignment is made in compliance with the Act and any applicable state and foreign securities laws.

        6.2    Governing Law; Jurisdiction; Venue. This Note has been executed in and shall be governed by the laws of the State of New Jersey. Issuer irrevocably submits to the exclusive jurisdiction of the courts of the State of New Jersey which will be the exclusive jurisdiction for disputes arising under the Note and the United States District Court for the District of New Jersey for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Note.

        IN WITNESS WHEREOF, Issuer has caused this Note to be signed in its name by its duly authorized officer and its corporate seal to be affixed hereto.

INRAD, INC.
By:	/s/ WILLIAM S. MIRAGLIA
William S. Miraglia, Secretary

QuickLinks

SUBORDINATED CONVERTIBLE PROMISSORY NOTE

EX-5.1

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 5.1

August 25, 2004

Photonic Products Group, Inc.
181 Legrand Avenue
Northvale, NJ 07647

Dear Sirs:

        In connection with the registration by Photonic Products Group, Inc., a New Jersey corporation (the "Company"), under the Securities Act of 1933, as amended (the "Act"), of shares of the Company's common stock, par value $.01 per share ("Common Stock") being offered for sale by the selling shareholders ("Selling Shareholders") as contemplated by the Company's Registration Statement on Form S-1, as amended from time to time (the "Registration Statement"), we have examined such corporate records, certificates and other documents and such questions of law as we have considered necessary or appropriate for the purposes of this opinion.

        Based on such examination, we are of the opinion that the Common Stock being registered pursuant to the Registration Statement have been (and the shares of Common Stock issuable upon the exercise of warrants, when issued and delivered in accordance with the applicable warrant approved by the Company's board of directors and upon receipt by the Company of such lawful consideration therefor in accordance with the terms of the warrant related thereto, will be) validly issued, fully paid, and non-assessable.

        This opinion is limited to the provisions of the New Jersey Business Corporation Act.

        We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the references to this firm under the heading "Legal Matters" in the prospectus contained in the Registration Statement. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act.

Very truly yours,

/s/ LOWENSTEIN SANDLER PC LOWENSTEIN SANDLER PC

QuickLinks

Exhibit 5.1

EX-10.1

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.1

INRAD, INC.

2000 EQUITY COMPENSATION PROGRAM

        1.    Purposes.    This INRAD, Inc. Equity Compensation Program (the "Program") is intended to secure for INRAD, Inc. (the "Corporation"), its direct and indirect present and future subsidiaries, including without limitation any entity which the Corporation reasonably expects to become a subsidiary (the "Subsidiaries"), and its shareholders, the benefits arising from ownership of the Corporation's Common Stock, par value $.01 per share ("Common Stock"), by those selected directors, officers, key employees and consultants of the Corporation and the Subsidiaries who are responsible for future growth. The Program is designed to help attract and retain superior individuals for positions of substantial responsibility with the Corporation and the Subsidiaries and to provide these persons with an additional incentive to contribute to the success of the Corporation and the Subsidiaries.

        2.    Elements of the Program.    In order to maintain flexibility in the award of benefits, the Program is comprised of four parts -- the Incentive Stock Option Plan ("Incentive Plan"), the Supplemental Stock Option Plan ("Supplemental Plan"), the Stock Appreciation Rights Plan ("SAR Plan"), and the Performance Share Plan ("Performance Share Plan"). Copies of the Incentive Plan, Supplemental Plan, SAR Plan, and Performance Plan are attached hereto as Parts I, II, III, and IV, respectively. Each such plan is referred to herein as a "Plan" and all such plans are collectively referred to herein as the "Plans." The grant of an option, stock appreciation right, or performance share under one of the Plans shall not be construed to prohibit the grant of an option, stock appreciation right or performance share under any of the other Plans.

        3.    Applicability of General Provisions.    Unless any Plan specifically indicates to the contrary, all Plans shall be subject to the general provisions of the Program set forth below under the heading "General Provisions of the Equity Compensation Program" (the "General Provisions").

GENERAL PROVISIONS OF THE EQUITY COMPENSATION PROGRAM

        Article 1.    Administration.    The Program shall be administered by the Board of Directors of the Corporation (the "Board" or the "Board of Directors") or any duly created committee appointed by the Board and charged with the administration of the Program. To the extent required in order to satisfy the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), such committee shall consist solely of "Outside Directors" (as defined herein). The Board, or any duly appointed committee, when acting to administer the Program, is referred to as the "Program Administrator". Any action of the Program Administrator shall be taken by majority vote at a meeting or by unanimous written consent of all members without a meeting. No Program Administrator or member of the Board of the Corporation shall be liable for any action or determination made in good faith with respect to the Program or with respect to any option, stock appreciation right, or performance share granted pursuant to the Program. For purposes of the Program, the term "Outside Director" shall mean a director who (a) is not a current employee of the Corporation or the Subsidiaries; (b) is not a former employee of the Corporation or the Subsidiaries who receives compensation for prior services (other than benefits under a tax-qualified retirement plan) during the then current taxable year; (c) has not been an officer of the Corporation or the Subsidiaries; and (d) does not receive remuneration (which shall be deemed to include any payment in exchange for goods or services) from the Corporation or the Subsidiaries, either directly or indirectly, in any capacity other than as a director, except as otherwise permitted under Code Section 162(m) and the regulations thereunder.

        Article 2.    Authority of Program Administrator.    Subject to the other provisions of this Program, and with a view to effecting its purpose, the Program Administrator shall have the authority: (a) to construe and interpret the Program; (b) to define the terms used herein; (c) to prescribe, amend and rescind rules and regulations relating to the Program; (d) to determine the persons to whom options, stock appreciation rights, and performance shares shall be granted under the Program; (e) to determine the time or times at which options, stock appreciation rights, or performance shares shall be granted under the Program; (f) to determine the number of shares subject to any option or stock appreciation right under the Program and the number of shares to be awarded as performance shares under the Program as well as the option price, and the duration of each option, stock appreciation right, and performance share, and any other terms and conditions of options, stock appreciation rights, and performance shares; and (g) to make any other determinations necessary or advisable for the administration of the Program and to do everything necessary or appropriate to administer the Program. All decisions, determinations and interpretations made by the Program Administrator shall be binding and conclusive on all participants in the Program and on their legal representatives, heirs and beneficiaries.

        Article 3.    Maximum Number of Shares Subject to the Program.    The maximum aggregate number of shares of Common Stock issuable pursuant to the Program shall be 1,500,000 shares. No one person participating in the Program may receive options, separately exercisable stock appreciation rights or other awards for more than 400,000 shares of Common Stock in any calendar year. All such shares may be issued under any Plan, which is part of the Program. If any of the options (including incentive stock options) or stock appreciation rights granted under the Program expire or terminate for any reason before they have been exercised in full, the unissued shares subject to those expired or terminated options and/or stock appreciation rights shall again be available for purposes of the Program. If the performance objectives associated with the grant of any performance shares are not achieved within the specified performance objective period or if the performance share grant terminates for any reason before the performance objective date arrives, the shares of Common Stock associated with such performance shares shall again be available for purposes of the Program. Any shares of Common Stock delivered pursuant to the Program may consist, in whole or in part, of authorized and unissued shares or treasury shares.

        Article 4.    Eligibility and Participation.    All directors, officers, employees and consultants of the Corporation and the Subsidiaries shall be eligible to participate in the Program. The term "employee" shall include any person who has agreed to become an employee and the term "consultant" shall include any person who has agreed to become a consultant.

        Article 5.    Effective Date and Term of Program.    The Program shall become effective May 5, 2000 upon approval of the Program by the Board of Directors of the Corporation, subject to approval of the Program by the shareholders of the Corporation within twelve months after the date of approval of the Program by the Board of Directors. The Program shall continue in effect for a term of ten years from the date that the Program is adopted by the Board of Directors, unless sooner terminated by the Board of Directors of the Corporation.

        Article 6.    Adjustments.    In the event that the outstanding shares of Common Stock of the Corporation are hereafter increased, decreased, changed into or exchanged for a different number or kind of shares or securities through merger, consolidation, combination, exchange of shares, other reorganization, recapitalization, reclassification, stock dividend, stock split or reverse stock split (an "Adjustment Event"), an appropriate and proportionate adjustment shall be made by the Program Administrator in the maximum number and kind of shares as to which options, stock appreciation rights, and performance shares may be granted under the Program. A corresponding adjustment changing the number or kind of shares allocated to unexercised options, stock appreciation rights, and performance shares or portions thereof, which shall have been granted prior to any such Adjustment Event, shall likewise be made. Any such adjustment in outstanding options and stock appreciation rights shall be made without change in the aggregate purchase price applicable to the unexercised portion of the option or stock appreciation right but with a corresponding adjustment in the price for

each share or other unit of any security covered by the option or stock appreciation right. In making any adjustment pursuant to this Article 6, any fractional shares shall be disregarded.

        Article 7.    Termination and Amendment of Program and Awards.    No options, stock appreciation rights or performance shares shall be granted under the Program after the termination of the Program. The Program Administrator may at any time amend or revise the terms of the Program or of any outstanding option, stock appreciation right or performance share issued under the Program, provided, however, that (a) any shareholder approval required by applicable law or regulation shall be obtained and (b) no amendment, suspension or termination of the Program or of any outstanding option, stock appreciation right or performance share shall, without the consent of the person who has received an option, stock appreciation right, or performance share, impair any of that person's rights or obligations under such option, stock appreciation right or performance share.

        Article 8.    Privileges of Stock Ownership.    Notwithstanding the exercise of any option or stock appreciation rights granted pursuant to the terms of the Program or the achievement of any performance objective specified in any performance share granted pursuant to the terms of the Program, no person shall have any of the rights or privileges of a stockholder of the Corporation in respect of any shares of stock issuable upon the exercise of his or her option or stock appreciation right or achievement of his or her performance objective until certificates representing the shares of Common Stock covered thereby have been issued and delivered. No adjustment shall be made for dividends or any other distributions for which the record date is prior to the date on which any stock certificate is issued pursuant to the Program.

        Article 9.    Reservation of Shares of Common Stock.    During the term of the Program, the Corporation will at all times reserve and keep available such number of shares of its Common Stock as shall be sufficient to satisfy the requirements of the Program.

        Article 10.    Tax Withholding.    The exercise of any option, stock appreciation right or performance share under the Program is subject to the condition that, if at any time the Corporation shall determine, in its discretion, that the satisfaction of withholding tax or other withholding liabilities under any state or federal law is necessary or desirable as a condition of, or in any connection with, such exercise or the delivery or purchase of shares pursuant thereto, then, in such event, the exercise of the option, stock appreciation right or performance share shall not be effective unless such withholding tax or other withholding liabilities shall have been satisfied in a manner acceptable to the Corporation.

        Article 11.    Employment; Service as a Consultant or Director.    Nothing in the Program gives to any person any right to continued employment by the Corporation or the Subsidiaries or to continued service as a consultant to or director of the Corporation or the Subsidiaries or limits in any way the right of the Corporation or the Subsidiaries at any time to terminate or alter the terms of that employment or service.

        Article 12.    Investment Letter; Restrictions on Obligation of the Corporation to Issue Securities; Restrictive Legend.    Any person acquiring or receiving Common Stock or other securities of the Corporation pursuant to the Program, as a condition precedent to receiving the shares of Common Stock or other securities, may be required by the Program Administrator to submit a letter to the Corporation stating that the shares of Common Stock or other securities are being acquired for investment and not with a view to the distribution thereof. The Corporation shall not be obligated to sell or issue any shares of Common Stock or other securities pursuant to the Program unless, on the date of sale and issuance thereof, the shares of Common Stock or other securities are either registered under the Securities Act of 1933, as amended, and all applicable state securities laws, or exempt from registration thereunder. All shares of Common Stock and other securities issued pursuant to the Program shall bear a restrictive legend referring to any restrictions on transferability applicable thereto, including those imposed by federal and state securities laws.

        Article 13.    Rights Upon Termination of Employment, Service as a Consultant or Service as a Director.     Notwithstanding any other provision of the Program, any benefit granted to an individual who has agreed to become an employee or a consultant of the Corporation or any Subsidiary or to

become an employee of any entity which the Corporation reasonably expects to become a Subsidiary, shall immediately terminate if the Program Administrator determines, in its sole discretion, that such person will not become an employee or consultant of the Corporation or any Subsidiary. If a recipient ceases to be employed by or to provide consulting services or services as a director to the Corporation or any Subsidiary, or a corporation or a parent or subsidiary of such corporation issuing or assuming a stock option in a transaction to which Section 424(a) of the Code applies, for any reason other than death or disability, then, unless any other provision of the Program provides for earlier termination or the Option grant agreement provides otherwise:

        (a) all options and stock appreciation rights (other than "Naked Rights", as hereinafter defined) shall terminate immediately in the event the recipient's employment or consulting services are terminated for cause and shall be exercisable, to the extent exercisable on the date of termination, for a period of:

        (i) 90 days after the date of such termination if such termination is due to the recipient's resignation; and

        (ii) 12 months after the date of such termination if such termination is due to the involuntary termination of the recipient's service or employment other than for cause.

        (b) subject to Section 5(b) of the SAR Plan, all Naked Rights not payable on the date of termination shall terminate immediately; and

        (c) all performance share awards shall terminate immediately unless the performance objectives have been achieved and the performance objective period has expired.

        Article 14.    Rights Upon Disability.    If a recipient becomes disabled within the meaning of Section 22(e)(3) of the Code while employed by or while rendering consulting services or services as a director to the Corporation or any Subsidiary (or a corporation or a parent or subsidiary of such corporation issuing or assuming a stock option in a transaction to which Section 424(a) of the Code applies), then, unless any other provision of the Program provides for earlier termination or the Option grant agreement provides otherwise:

        (a) all options and stock appreciation rights (other than Naked Rights) may be exercised, to the extent exercisable on the date of termination,, at any time within one year after the date of termination due to disability;

        (b) all Naked Rights shall be fully paid by the Corporation as of the date of disability; and

        (c) all performance share awards for which all performance objectives have been achieved (other than continued employment or status as a consultant on the Vesting Date) shall be paid in full by the Corporation; all other performance shares shall terminate immediately.

        Article 15.    Rights Upon Death.    If a recipient dies while employed by or while rendering consulting services or services as a director to the Corporation or any Subsidiary (or a corporation or a parent or subsidiary of such corporation issuing or assuming a stock option in a transaction to which Section 424(a) of the Code applies), then, unless any other provision of the Program provides for earlier termination or the Option grant agreement provides otherwise:

        (a) all options and stock appreciation rights (other than Naked Rights) may be exercised by the person or persons to whom the recipient's rights shall pass by will or by the laws of descent and distribution, to the extent exercisable on the date of death,, at any time within one year after the date of death unless any other provision of the Program provides for earlier termination;

        (b) all Naked Rights shall be fully paid by the Corporation as of the date of death; and

        (c) all performance share awards for which all performance objectives have been achieved (other than continued employment or status as a consultant on the Vesting Date) shall be paid in full by the Corporation; all other performance share awards shall terminate immediately.

        Article 16.    Non-transferability.    Options and stock appreciation rights granted under the Program may not be sold, pledged, assigned or transferred in any manner by the recipient otherwise than by will or by the laws of descent and distribution and shall be exercisable (a) during the recipient's lifetime only by the recipient and (b) after the recipient's death only by the recipient's executor, administrator or personal representative, provided, however that the Program Administrator may permit the recipient of an option granted pursuant to Part II of the Program to transfer options and/or stock appreciation rights granted in tandem with such options to a family member or a trust or partnership created for the benefit of family members. In the case of such a transfer, the transferee's rights and obligations with respect to the applicable options or stock appreciation rights shall be determined by reference to the recipient and the recipient's rights and obligations with respect to the applicable options or stock appreciation rights had no transfer been made. The recipient shall remain obligated pursuant to Articles 10 and 12 hereunder if required by applicable law. Common Stock, which represents either performance, shares prior to the satisfaction of the stated performance objectives and the expiration of the stated performance objective periods may not be sold, pledged, assigned or transferred in any manner.

        Article 17.    Change in Control.    The Program Administrator shall have the authority to provide, either at the time that any option or any stock appreciation right or performance share is granted or thereafter, that such option or stock appreciation right shall become fully exercisable upon the occurrence of a Change in Control Event or that all restrictions, performance objectives, performance objective periods and risks of forfeiture pertaining to a performance share or stock bonus award shall lapse upon the occurrence of a Change in Control Event. As used in the Program, a "Change in Control Event" shall be deemed to have occurred if any of the following events occur:

        (a) the consummation of any consolidation or merger of the Corporation in which the Corporation is not the continuing or surviving corporation or any consolidation or merger in which the holders of the Corporation's Shares immediately prior to the consolidation or merger do not own fifty percent (50%) or more of the common stock of the surviving corporation immediately after the consolidation or merger; or

        (b) the consummation of any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Corporation, other than to a subsidiary or affiliate; or

        (c) an approval by the shareholders of the Corporation of any plan or proposal for the liquidation or dissolution of the Corporation; or

        (d) (A) a purchase by any person (as such term is defined in Section 13(d) of the Exchange Act), corporation or other entity of any voting securities of the Corporation (the "Voting Securities") (or securities convertible into Voting Securities) for cash, securities or any other consideration pursuant to a tender offer or exchange offer, unless, prior to the making of such purchase of Voting Securities (or securities convertible into Voting Securities), the Board shall determine that the making of such purchase shall not be deemed a Change in Control for purposes of the Program, or (B) any action pursuant to which any person (as such term is defined in Section 13(d) of the Exchange Act), corporation or other entity (other than the Corporation or any benefit plan sponsored by the Corporation or any of its subsidiaries) shall become the "beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing fifty percent (50%) or more of the combined voting power of the Corporation's then outstanding Voting Securities ordinarily (and apart from any rights accruing under special circumstances) having the right to vote in the election of directors (calculated as provided in Rule 13d-3(d) in the case of rights to acquire any such securities), unless, prior to such person so becoming such beneficial owner, the Board shall determine that such person so becoming such beneficial owner shall not be deemed to constitute a Change in Control for purposes of the Program; or

        (e) the individuals (A) who, as of the date on which the Program is first adopted by the Board of Directors, constitute the Board (the "Original Directors") and (B) who thereafter are elected to

the Board and whose election, or nomination for election, to the Board was approved by a vote of at least two thirds of the Original Directors then still in office (such Directors being called "Additional Original Directors") and (C) who thereafter are elected to the Board and whose election or nomination for election to the Board was approved by a vote of at least two thirds of the Original Directors and Additional Original Directors then still in office, cease for any reason to constitute a majority of the members of the Board.

        Article 18.    Merger or Asset Sale.    For purposes of the Program, a merger or consolidation which would constitute a Change in Control Event pursuant to Article 17 and a sale of assets which would constitute a Change in Control Event pursuant to Article 17 are hereinafter referred to as "Article 18 Events". In the event of an Article 18 Event, each outstanding option, stock appreciation right, and performance share award shall be assumed or an equivalent benefit shall be substituted by the entity determined by the Board of Directors of the Corporation to be the successor corporation. However, in the event that any such successor corporation does not agree in writing, at least 15 days prior to the anticipated date of consummation of such Article 18 Event, to assume or so substitute each such option, stock appreciation right, and performance share award, each option, stock appreciation right, or performance share award not so assumed or substituted shall be deemed to be fully vested and exercisable. If an option, stock appreciation right or performance share award becomes fully vested and exercisable pursuant to the terms of this Article 18, the Program Administrator shall notify the holder thereof in writing or electronically that (a) such holder's option, stock appreciation right or performance share award shall be fully exercisable until immediately prior to the consummation of such Article 18 Event and (b) such holder's option, stock appreciation right or performance share award shall terminate upon the consummation of such Article 18 Event. For purposes of this Article 18, an option, stock appreciation right or performance share award shall be considered assumed if, following consummation of the applicable Article 18 Event, the option, stock appreciation right or performance share award confers the right to purchase or receive, for each share of Common Stock subject to the option, stock appreciation right or performance share award immediately prior to the consummation of such Article 18 Event, the consideration (whether stock, cash or other securities or property) received in such Article 18 Event by holders of Common Stock for each share of Common Stock held on the effective date of such Article 18 Event (and, if holders of Common Stock are offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if such consideration received in such Article 18 Event is not solely common stock of such successor, the Program Administrator may, with the consent of such successor corporation, provide for the consideration to be received in connection with such option, stock appreciation right or performance share award to be solely common stock of such successor equal in fair market value to the per share consideration received by holders of Common Stock in the Article 18 Event.

        Article 19.    Method of Exercise.    Any optionee may exercise his or her option from time to time by giving written notice thereof to the Corporation at its principal office together with payment in full for the shares of Common Stock to be purchased. The date of such exercise shall be the date on which the Corporation receives such notice. Such notice shall state the number of shares to be purchased. The purchase price of any shares purchased upon the exercise of any option granted pursuant to the Program shall be paid in full at the time of exercise of the option by certified or bank cashier's check payable to the order of the Corporation, by tender of shares of Common Stock which have a Fair Market Value on the date of tender equal to the purchase price, or by a combination of checks and shares of Common Stock; provided however that any shares of Common Stock so tendered shall have been owned by the optionee for a period of least six months free of any substantial risk of forfeiture or were purchased on the open market without assistance, direct or indirect, from the Corporation. The Program Administrator shall, subject to such rules and procedures as the Program Administrator may prescribe, permit an optionee to make "cashless exercise" arrangements, to the extent permitted by applicable law, and may require optionees to utilize the services of a single broker selected by the Program Administrator in connection with any cashless exercise. No option may be exercised for a fraction of a share of Common Stock. If any portion of the purchase price is paid in shares of Common

Stock, those shares shall be valued at their then Fair Market Value as determined by the Program Administrator in accordance with Section 4 of the Incentive Plan.

        Article 20.    Ten-year Limitations.    Notwithstanding any other provision of the Program, (a) no option may be granted pursuant to the Program more than ten years after the date on which the Program was adopted by the Board of Directors and (b) any option granted under the Program shall, by its terms, not be exercisable more than ten years after the date of grant.

        Article 21.    Sunday or Holiday.    In the event that the time for the performance of any action or the giving of any notice is called for under the Program within a period of time which ends or falls on a Sunday or legal holiday, such period shall be deemed to end or fall on the next day following such Sunday or legal holiday which is not a Sunday or legal holiday.

        Article 22.    Governing Law.    The Program shall be governed by and construed in accordance with the laws of the State of New Jersey.

        Article 23.    Pooling Transactions.    Notwithstanding anything contained in the Program to the contrary, in the event of a Change in Control which is also intended to constitute a Pooling Transaction (as defined herein), the Program Administrator shall take such actions, if any, which are specifically recommended by an independent accounting firm retained by the Corporation to the extent reasonably necessary in order to assure that the Pooling Transaction will qualify as such, including but not limited to (a) deferring the vesting, exercise, payment or settlement with respect to any benefit granted under the Program, (b) providing that the payment or settlement in respect of any such benefit be made in the form of cash, Shares or securities of a successor or acquirer of the Corporation, or a combination of the foregoing and (c) providing for the extension of the term of any such benefit to the extent necessary to accommodate the foregoing, but not beyond the maximum term permitted for any such benefit. For purposes of the Program, the term "Pooling Transaction" shall mean an acquisition of the Corporation in a transaction that is intended to be treated as a "pooling of interests" under generally accepted accounting principles.

        Article 24.    Covenant Against Competition.    The Program Administrator shall have the right to condition the award to an employee of the Corporation or the Subsidiaries of any option, stock appreciation right or performance share under the Program upon the recipient's execution and delivery to the Corporation of an agreement in a form satisfactory to the Program Administrator containing such non-compete, non-solicitation and non-disclosure terms as shall be determined by the Program Administrator.

QuickLinks

INRAD, INC. 2000 EQUITY COMPENSATION PROGRAM

EX-10.2

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.2

        This Warrant and the shares of Common Stock which may be acquired upon exercise of this Warrant may not be publicly offered or sold unless at the time of such offer or sale, the person making such offer or sale delivers a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, forming a part of a registration statement, or post-effective amendment thereto, which is effective under said Act, or unless in the opinion of counsel to the Company and such person, such offer and sale is exempt from the applicable provisions of Section 5 of said Act.

WARRANT

For the Purchase
of 200,000 Shares of Common Stock
of INRAD, INC.

Void After 5 P.M. New York City time
on March 31, 2008

March 31, 2004
No. W-1

Warrant to Purchase
200,000 Shares

        THIS IS TO CERTIFY, that, for value received, CLAREX, LTD., a Cayman Islands Company (the "Purchaser"), or registered assigns, is entitled, subject to the terms and conditions hereinafter set forth, on or after March 31, 2004, and at any time prior to 5 P.M., New York City time, on March 31, 2008, but not thereafter, to purchase from Photonic Products Group, INC., a New Jersey corporation (the "Company"), up to 200,000 shares (the "Shares") of the Common Stock of the Company, par value $.01 per share (the "Common Stock"), upon payment to the Company of forty two and one half cents ($.425) per Share (the "Purchase Price"), if and to the extent this Warrant is exercised, in whole or in part, during the period this Warrant remains in force, subject in all cases to adjustment as provided in Article II hereof, and to receive certificates representing the Common Stock so purchased, upon presentation and surrender to the Company of this Warrant, with the form of subscription attached hereto duly executed, and accompanied by payment of the Purchase Price of each Share purchased as provided herein.

        This Warrant is being issued in consideration of the Purchaser's issuance of a $1,700,000 Senior Note due January, 2005.

ARTICLE I—TERMS OF THE WARRANT

Section 1.01    Subject to the provisions of Sections 1.05 hereof, this Warrant may be exercised at any time and from time to time after the date hereof (the "Commencement Date"), but no later than 5:00 P.M., New York City time, on March 31, 2008 (the "Expiration Time"). If March 31, 2008 is a day on which banking institutions are authorized by law to close, then the date on which this Warrant shall expire shall be the next succeeding day which shall not be such a day. If this Warrant is not exercised on or before the Expiration Time it shall become void, and all rights hereunder shall thereupon cease.

Section 1.02    (1) The holder of this Warrant (the "Holder") may exercise this Warrant, in whole or in part, upon surrender of this Warrant with the form of subscription attached hereto duly executed, to the Company at its corporate office in Northvale, New Jersey, together with the full Purchase Price for each Share to be purchased by certified or bank cashier's check payable in United States dollars to the order of the Company, and upon compliance with and subject to the conditions set forth herein.

        (2)   Upon receipt of this Warrant with the form of subscription duly executed and accompanied by payment of the aggregate Purchase Price for the Shares for which this Warrant is then being exercised, together with all taxes applicable upon such exercise, the Company shall cause to be issued certificates

for the total number of whole shares of Common Stock for which this Warrant is being exercised in such denominations as are required for delivery to the Holder, and the Company shall thereupon deliver such certificates to the Holder or its nominee.

        (3)   In case the Holder shall exercise this Warrant with respect to less than all of the Shares that may be purchased under this Warrant, the Company shall execute a new Warrant for the balance of the Shares that may be purchased upon exercise of this Warrant and deliver such new Warrant to the Holder.

        (4)   The Company covenants and agrees that it will pay when due and payable any and all taxes that may be payable in respect of the issue of this Warrant, or the issue of any shares of Common Stock upon the exercise of this Warrant. The Company shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issuance or delivery of this Warrant or of the shares of Common Stock in a name other than that of the Holder at the time of surrender, and until the payment of such tax the Company shall not be required to issue such shares of Common Stock.

Section 1.03    This Warrant may be split-up, combined or exchanged for another Warrant or Warrants of like tenor to purchase a like aggregate number of Shares. If the Holder desires to split-up, combine or exchange this Warrant, he shall make such request in writing delivered to the Company at its corporate office and shall surrender this Warrant and any other Warrants to be so split-up, combined or exchanged at such office. Upon any such surrender for a split-up, combination or exchange, the Company shall execute and deliver to the person entitled thereto a Warrant or Warrants, as the case may be, as so requested. The Company shall not be required to effect any split-up, combination or exchange that will result in the issuance of a Warrant entitling the Holder to purchase upon exercise a fraction of a Share. The Company may require the holder to pay a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any split-up, combination or exchange of Warrants.

Section 1.04    Prior to due presentment for registration or transfer of this Warrant, the Company may deem and treat the Holder, as registered on the books of the Company maintained for that purpose, as the absolute owner of this Warrant (notwithstanding any endorsement or notation of ownership or other writing hereon) for the purpose of any exercise hereof and for all other purposes and the Company shall not be affected by any notice to the contrary.

Section 1.05    This Warrant and the Shares as shall be issuable upon the exercise hereof may not be sold, transferred, gifted, pledged or hypothecated unless the Company shall have been supplied evidence reasonably satisfactory to it (including such opinions of counsel as the Company shall require) that such transfer is not in violation of the Securities Act of 1933, as amended (the "Act"). A restrictive legend in substantially the following form shall be placed on the certificate(s) representing the Shares issuable upon exercise of this Warrant:

"The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended ("Act"). Such shares have been acquired for investment and may not be publicly offered or sold in the absence of (1) an effective registration statement for such shares under the Act; or (2) opinions of counsel to the Company and to the holder hereof and presented to the Company prior to any proposed transfer to the effect that registration is not required under the Act."

Subject to the satisfaction of the aforesaid condition and upon surrender of this Warrant or the Shares issued upon the exercise hereof at the office of the Company with the appropriate assignment form duly executed and funds sufficient to pay any transfer tax, the Company shall deliver a new Warrant or Warrants or a new Share certificate or certificates to and in the name of the assignee or assignees named therein.

2

Section 1.06    Any assignment permitted hereunder shall be made by surrender of this Warrant to the Company at its principal office with the form of assignment attached hereto duly executed and funds sufficient to pay any transfer tax. In such event, the Company shall, without charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be canceled.

Section 1.07    Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to consent or to receive notice as a stockholder in respect of any meetings of stockholders for the election of directors or any other matter, or as having any rights whatsoever as a stockholder of the Company.

Section 1.08    If this Warrant is lost, stolen, mutilated or destroyed, the Company shall, on such reasonable terms as to indemnity or otherwise as it may impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as, and in substitution for, this Warrant, which shall thereupon become void. Any such new Warrant shall constitute an independent contractual obligation of the Company, whether or not the Warrant so lost, stolen, destroyed or mutilated shall at any time be enforceable by anyone.

Section 1.09    (1) The Company covenants and agrees that at all times it shall reserve and keep available for the exercise of this Warrant such number of authorized shares of Common Stock as are sufficient to permit the exercise in full of this Warrant.

        (2)   The Company covenants that all shares of Common Stock when issued upon the exercise of this Warrant will be validly issued, fully paid, nonassessable and free of preemptive rights.

ARTICLE II—ADJUSTMENT OF PURCHASE PRICE
AND NUMBER OF SHARES OF COMMON STOCK
PURCHASABLE UPON EXERCISE

Section 2.01    Stock Dividends; Stock Splits; Etc.    Subject to the provisions of this Article II, the Purchase Price in effect from time to time shall be subject to adjustment as follows: In case the Company shall (i) declare a dividend or make a distribution on the outstanding shares of its Common Stock in shares of its Common Stock, (ii) subdivide the outstanding shares of its Common Stock into a greater number of shares, or (iii) combine the outstanding shares of its Common Stock into a smaller number of shares, then in each case the Purchase Price in effect immediately after the record date for such dividend or distribution or the effective date of such subdivision or combination shall be adjusted so that it shall equal the price determined by multiplying the Purchase Price in effect immediately prior thereto by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding immediately before such dividend, distribution, subdivision or combination, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such dividend, distribution, subdivision or combination. Any shares of Common Stock of the Company issuable in payment of a dividend shall be deemed to have been issued immediately prior to the record date for such dividend.

Section 2.02    No adjustment in the Purchase Price in accordance with the provisions of Subsection 2.01 hereof need be made if such adjustment would amount to a change of less than 1% in such Purchase Price; provided that the amount by which any adjustment is not made by reason of the provisions of this Section 2.02 shall be carried forward and taken into account at the time of any subsequent adjustment in the Purchase Price.

Section 2.03    Upon each adjustment of the Purchase Price pursuant to Subsection 2.01 each Warrant shall thereupon evidence the right to purchase that number of shares of Common Stock (calculated to the nearest whole share) obtained by multiplying the number of shares of Common Stock purchasable immediately prior to such adjustment upon exercise of the Warrant by the Purchase Price

3

in effect immediately prior to such adjustment and dividing the product so obtained by the Purchase Price in effect immediately after such adjustment.

Section 2.04    In case of any capital reorganization, other than in the cases referred to in Section 2.01 hereof, or the consolidation or merger of the Company with or into another corporation (other than a merger or consolidation in which the Company is the continuing corporation and which does not result in any reclassification of the outstanding shares of Common Stock or the conversion of such outstanding shares of Common Stock into shares of other stock or other securities or property), or the sale of the property of the Company as an entirety or substantially as an entirety, or the conversion, however effected, of the Company into another form of entity (collectively such actions being hereinafter referred to as "Reorganizations"), there shall thereafter be deliverable upon exercise of any Warrant (as to the shares of Common Stock subject thereto and in lieu of the number of shares of Common Stock theretofore deliverable) the number of shares of stock or other securities or property to which a holder of the number of shares of Common Stock that would otherwise have been deliverable upon the exercise of such Warrant would have been entitled upon such Reorganization if such Warrant had been exercised in full immediately prior to such Reorganization. In case of any Reorganization, appropriate adjustment, as determined in good faith by the Board of Directors of the Company, shall be made in the application of the provisions herein set forth with respect to the rights and interests of Warrant holders so that the provisions set forth herein shall thereafter be applicable, as nearly as possible, in relation to any shares or other property thereafter deliverable upon exercise of Warrants. The Company shall not effect any such Reorganization, unless upon or prior to the consummation thereof the successor entity, or if the Company shall be the surviving entity in any such Reorganization and is not the issuer of the shares of stock or other securities or property to be delivered to holders of shares of the Common Stock outstanding at the effective time thereof, then such issuer shall assume by written instrument the obligation to deliver to the Holder such shares of stock, securities, cash or other property as the Holder shall be entitled to purchase in accordance with the foregoing provisions. In the event of a sale or conveyance or other transfer of all or substantially all of the assets of the Company as a part of a plan for liquidation of the Company, all rights to exercise any Warrant shall terminate on the date such sale or conveyance or other transfer is to be consummated.

Section 2.05    Irrespective of any adjustments pursuant to this Article II, Warrants theretofore or thereafter issued need not be amended or replaced, but certificates thereafter issued shall bear an appropriate legend or other notice of any adjustments.

Section 2.06    The Company shall not be required upon the exercise of any Warrant to issue fractional shares of Common Stock that may result from adjustments in accordance with this Article II to the Purchase Price or number of shares of Common Stock purchasable under each Warrant. If more than one Warrant is exercised at one time by the same Holder, the number of full shares of Common Stock that shall be deliverable shall be computed based on the number of shares of Common Stock deliverable in exchange for the aggregate number of Warrants exercised. With respect to any final fraction of a share called for upon the exercise of any Warrant or Warrants, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the market value of a share of Common Stock on the business day next preceding the date of such exercise. The Holder, by his acceptance of the Warrant, shall expressly waive any right to receive any fractional share of Common Stock upon exercise of the Warrants. For the purposes of this Section 2.08, the market price per share of Common Stock at any date shall mean the last reported sale price regular way or, in case no such reported sale takes place on such date, the average of the last reported closing bid and asked prices regular way, in either case as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or its successor, if any. If the price of the Common Stock is not so reported, then such market price shall mean the last known price paid per share by a purchaser

4

of such stock in an arms' length transaction. All calculations under this Section 2.08 shall be made to the nearest 1/100th of a share.

Section 2.07    In no event shall the Purchase Price be adjusted below the par value per share of the Common Stock.

ARTICLE III—OTHER MATTERS

Section 3.01    All the covenants and provisions of this Warrant by or for the benefit of the Company shall bind and inure to the benefit of its successors and assigns hereunder.

Section 3.02    Notices or demands pursuant to this Warrant to be given or made by the Holder to or on the Company shall be sufficiently given or made if sent by certified or registered mail, return receipt requested, postage prepaid, and addressed, until another address is designated in writing by the Company, as follows:

Photonic Products Group, Inc.
181 Legrand Avenue
Northvale, New Jersey 07647
Attention: William Miraglia

Notices to the Holder provided for in this Warrant shall be deemed given or made by the Company if sent by certified or registered mail, return receipt requested, postage prepaid, and addressed to the Holder at his last known address as it shall appear on the books of the Company.

Section 3.03    THE VALIDITY, INTERPRETATION AND PERFORMANCE OF THIS WARRANT SHALL BE GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF NEW JERSEY.

Section 3.04    Nothing in this Warrant expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or give to, any person or corporation other than the Company and the Holder any right, remedy or claim under promise or agreement hereof, and all covenants, conditions, stipulations, promises and agreements contained in this Warrant shall be for the sole and exclusive benefit of the Company and its successors and of the Holder, its successors and, if permitted, its assignees.

Section 3.05    The headings herein are for convenience only and are not part of this Warrant and shall not affect the interpretation thereof.

IN WITNESS WHEREOF, this Warrant has been duly executed by the Company on March 31, 2004.

	PHOTONIC PRODUCTS GROUP, INC.
	By:
		Name:  Daniel Lehrfeld, CEO
Attest:
William Miraglia, Secretary

5

PHOTONIC PRODUCTS GROUP, INC.

Subscription Form

(To be executed by the registered holder to exercise the right to purchase Common Stock evidenced by the foregoing Warrant)

Photonic Products Group, Inc.
181 Legrand Avenue
Northvale, New Jersey 07647
Attention: William Miraglia

        The undersigned hereby irrevocably subscribes for the purchase of              Shares of your Common Stock pursuant to and in accordance with the terms and conditions of this Warrant, and herewith makes payment, covering the purchase of such Shares. Certificates for the shares of Common Stock comprising such Shares should be delivered to the undersigned at the address stated below. If such number of Shares shall not be all of the Shares purchasable hereunder, please deliver a new Warrant of like tenor for the balance of the remaining shares purchasable hereunder to the undersigned at the address stated below.

        The undersigned agrees that: (1) the undersigned will not offer, sell, transfer or otherwise dispose of any such shares of Common Stock being purchased hereunder unless either (a) a registration statement covering the sale of such shares of Common Stock has been filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the "Act"), and such sale, transfer or other disposition is accompanied by a prospectus meeting the requirements of Section 10 of the Act forming a part of such registration statement which is in effect under the Act covering the sale of the shares of Common Stock to be so sold, transferred or otherwise disposed of, or (b) counsel acceptable to Photonic Products Group, Inc. and satisfactory to the undersigned has rendered an opinion acceptable to the Company in writing and addressed to the Company that such proposed offer, sale, transfer or other disposition of the shares of Common Stock is exempt from the provisions of Section 5 of the Act in view of the circumstances of such proposed offer, sale, transfer or other disposition; (2) the Company may notify the transfer agent for its Common Stock that the certificates for the Common Stock acquired by the undersigned pursuant hereto are not to be transferred unless the transfer agent receives advice from the Company that one or both of the conditions referred to in (1)(a) and (1)(b) above have been satisfied; and (3) the Company may affix the legend set forth in Section 1.05 of this Warrant to the certificates for shares of Common Stock hereby subscribed for.

Dated:
Signed:

Signature guaranteed:
Address:

6

PHOTONIC PRODUCTS GROUP, INC.
Assignment Form

(To be executed by the registered holder to effect assignment of the foregoing warrant)

FOR VALUE RECEIVED                        hereby sells, assigns and transfers unto                        the right to purchase                        Shares of the Common Stock of the Company purchasable pursuant to the within Warrant, on the terms and conditions set forth therein, and does hereby irrevocably constitute and appoint Photonic Products Group, Inc. and/or its transfer agent Attorney to transfer on the books of the Company Warrants representing such rights, with full power of substitution.

Dated:
	Signed:
Signature guaranteed:

7

QuickLinks

WARRANT

EX-10.3

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.3

        This Warrant and the shares of Common Stock which may be acquired upon exercise of this Warrant may not be publicly offered or sold unless at the time of such offer or sale, the person making such offer or sale delivers a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, forming a part of a registration statement, or post-effective amendment thereto, which is effective under said Act, or unless in the opinion of counsel to the Company and such person, such offer and sale is exempt from the applicable provisions of Section 5 of said Act.

WARRANT

For the Purchase
of 200,000 Shares of Common Stock
of Photonic Products Group, INC.

Void After 5 P.M. New York City time
on May 18, 2008

May 19, 2004
No. W-1
Warrant to Purchase
200,000 Shares

        THIS IS TO CERTIFY, that, for value received, CLAREX, LTD., a Cayman Islands Company (the "Purchaser"), or registered assigns, is entitled, subject to the terms and conditions hereinafter set forth, on or after May 19, 2004, and at any time prior to 5 P.M., New York City time, on May 18, 2008, but not thereafter, to purchase from Photonic Products Group, INC., a New Jersey corporation (the "Company"), up to 200,000 shares (the "Shares") of the Common Stock of the Company, par value $.01 per share (the "Common Stock"), upon payment to the Company of one dollar and eight cents ($1.08) per Share (the "Purchase Price"), if and to the extent this Warrant is exercised, in whole or in part, during the period this Warrant remains in force, subject in all cases to adjustment as provided in Article II hereof, and to receive certificates representing the Common Stock so purchased, upon presentation and surrender to the Company of this Warrant, with the form of subscription attached hereto duly executed, and accompanied by payment of the Purchase Price of each Share purchased as provided herein.

        This Warrant is being issued in consideration of the Purchaser's extension of maturity of $1,700,000 of Senior Debt to June 30, 2007.

ARTICLE I—TERMS OF THE WARRANT

Section 1.01    Subject to the provisions of Sections 1.05 hereof, this Warrant may be exercised at any time and from time to time after the date hereof (the "Commencement Date"), but no later than 5:00 P.M., New York City time, on May 18, 2008 (the "Expiration Time"). If May 18, 2008 is a day on which banking institutions are authorized by law to close, then the date on which this Warrant shall expire shall be the next succeeding day which shall not be such a day. If this Warrant is not exercised on or before the Expiration Time it shall become void, and all rights hereunder shall thereupon cease.

Section 1.02    (1)  The holder of this Warrant (the "Holder") may exercise this Warrant, in whole or in part, upon surrender of this Warrant with the form of subscription attached hereto duly executed, to the Company at its corporate office in Northvale, New Jersey, together with the full Purchase Price for each Share to be purchased by certified or bank cashier's check payable in United States dollars to the order of the Company, and upon compliance with and subject to the conditions set forth herein.

        (2)   Upon receipt of this Warrant with the form of subscription duly executed and accompanied by payment of the aggregate Purchase Price for the Shares for which this Warrant is then being exercised, together with all taxes applicable upon such exercise, the Company shall cause to be issued certificates

for the total number of whole shares of Common Stock for which this Warrant is being exercised in such denominations as are required for delivery to the Holder, and the Company shall thereupon deliver such certificates to the Holder or its nominee.

        (3)   In case the Holder shall exercise this Warrant with respect to less than all of the Shares that may be purchased under this Warrant, the Company shall execute a new Warrant for the balance of the Shares that may be purchased upon exercise of this Warrant and deliver such new Warrant to the Holder.

        (4)   The Company covenants and agrees that it will pay when due and payable any and all taxes that may be payable in respect of the issue of this Warrant, or the issue of any shares of Common Stock upon the exercise of this Warrant. The Company shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issuance or delivery of this Warrant or of the shares of Common Stock in a name other than that of the Holder at the time of surrender, and until the payment of such tax the Company shall not be required to issue such shares of Common Stock.

Section 1.03    This Warrant may be split-up, combined or exchanged for another Warrant or Warrants of like tenor to purchase a like aggregate number of Shares. If the Holder desires to split-up, combine or exchange this Warrant, he shall make such request in writing delivered to the Company at its corporate office and shall surrender this Warrant and any other Warrants to be so split-up, combined or exchanged at such office. Upon any such surrender for a split-up, combination or exchange, the Company shall execute and deliver to the person entitled thereto a Warrant or Warrants, as the case may be, as so requested. The Company shall not be required to effect any split-up, combination or exchange that will result in the issuance of a Warrant entitling the Holder to purchase upon exercise a fraction of a Share. The Company may require the holder to pay a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any split-up, combination or exchange of Warrants.

Section 1.04    Prior to due presentment for registration or transfer of this Warrant, the Company may deem and treat the Holder, as registered on the books of the Company maintained for that purpose, as the absolute owner of this Warrant (notwithstanding any endorsement or notation of ownership or other writing hereon) for the purpose of any exercise hereof and for all other purposes and the Company shall not be affected by any notice to the contrary.

Section 1.05    This Warrant and the Shares as shall be issuable upon the exercise hereof may not be sold, transferred, gifted, pledged or hypothecated unless the Company shall have been supplied evidence reasonably satisfactory to it (including such opinions of counsel as the Company shall require) that such transfer is not in violation of the Securities Act of 1933, as amended (the "Act"). A restrictive legend in substantially the following form shall be placed on the certificate(s) representing the Shares issuable upon exercise of this Warrant:

"The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended ("Act"). Such shares have been acquired for investment and may not be publicly offered or sold in the absence of (1) an effective registration statement for such shares under the Act; or (2) opinions of counsel to the Company and to the holder hereof and presented to the Company prior to any proposed transfer to the effect that registration is not required under the Act."

Subject to the satisfaction of the aforesaid condition and upon surrender of this Warrant or the Shares issued upon the exercise hereof at the office of the Company with the appropriate assignment form duly executed and funds sufficient to pay any transfer tax, the Company shall deliver a new Warrant or Warrants or a new Share certificate or certificates to and in the name of the assignee or assignees named therein.

2

Section 1.06    Any assignment permitted hereunder shall be made by surrender of this Warrant to the Company at its principal office with the form of assignment attached hereto duly executed and funds sufficient to pay any transfer tax. In such event, the Company shall, without charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be canceled.

Section 1.07    Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to consent or to receive notice as a stockholder in respect of any meetings of stockholders for the election of directors or any other matter, or as having any rights whatsoever as a stockholder of the Company.

Section 1.08    If this Warrant is lost, stolen, mutilated or destroyed, the Company shall, on such reasonable terms as to indemnity or otherwise as it may impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as, and in substitution for, this Warrant, which shall thereupon become void. Any such new Warrant shall constitute an independent contractual obligation of the Company, whether or not the Warrant so lost, stolen, destroyed or mutilated shall at any time be enforceable by anyone.

Section 1.09    (1)  The Company covenants and agrees that at all times it shall reserve and keep available for the exercise of this Warrant such number of authorized shares of Common Stock as are sufficient to permit the exercise in full of this Warrant.

        (2)   The Company covenants that all shares of Common Stock when issued upon the exercise of this Warrant will be validly issued, fully paid, nonassessable and free of preemptive rights.

ARTICLE II—ADJUSTMENT OF PURCHASE PRICE
AND NUMBER OF SHARES OF COMMON STOCK
PURCHASABLE UPON EXERCISE

Section 2.01Stock Dividends; Stock Splits; Etc.    Subject to the provisions of this Article II, the Purchase Price in effect from time to time shall be subject to adjustment as follows: In case the Company shall (i) declare a dividend or make a distribution on the outstanding shares of its Common Stock in shares of its Common Stock, (ii) subdivide the outstanding shares of its Common Stock into a greater number of shares, or (iii) combine the outstanding shares of its Common Stock into a smaller number of shares, then in each case the Purchase Price in effect immediately after the record date for such dividend or distribution or the effective date of such subdivision or combination shall be adjusted so that it shall equal the price determined by multiplying the Purchase Price in effect immediately prior thereto by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding immediately before such dividend, distribution, subdivision or combination, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such dividend, distribution, subdivision or combination. Any shares of Common Stock of the Company issuable in payment of a dividend shall be deemed to have been issued immediately prior to the record date for such dividend.

Section 2.02    No adjustment in the Purchase Price in accordance with the provisions of Subsection 2.01 hereof need be made if such adjustment would amount to a change of less than 1% in such Purchase Price; provided that the amount by which any adjustment is not made by reason of the provisions of this Section 2.02 shall be carried forward and taken into account at the time of any subsequent adjustment in the Purchase Price.

Section 2.03    Upon each adjustment of the Purchase Price pursuant to Subsection 2.01 each Warrant shall thereupon evidence the right to purchase that number of shares of Common Stock (calculated to the nearest whole share) obtained by multiplying the number of shares of Common Stock purchasable immediately prior to such adjustment upon exercise of the Warrant by the Purchase Price

3

in effect immediately prior to such adjustment and dividing the product so obtained by the Purchase Price in effect immediately after such adjustment.

Section 2.04    In case of any capital reorganization, other than in the cases referred to in Section 2.01 hereof, or the consolidation or merger of the Company with or into another corporation (other than a merger or consolidation in which the Company is the continuing corporation and which does not result in any reclassification of the outstanding shares of Common Stock or the conversion of such outstanding shares of Common Stock into shares of other stock or other securities or property), or the sale of the property of the Company as an entirety or substantially as an entirety, or the conversion, however effected, of the Company into another form of entity (collectively such actions being hereinafter referred to as "Reorganizations"), there shall thereafter be deliverable upon exercise of any Warrant (as to the shares of Common Stock subject thereto and in lieu of the number of shares of Common Stock theretofore deliverable) the number of shares of stock or other securities or property to which a holder of the number of shares of Common Stock that would otherwise have been deliverable upon the exercise of such Warrant would have been entitled upon such Reorganization if such Warrant had been exercised in full immediately prior to such Reorganization. In case of any Reorganization, appropriate adjustment, as determined in good faith by the Board of Directors of the Company, shall be made in the application of the provisions herein set forth with respect to the rights and interests of Warrant holders so that the provisions set forth herein shall thereafter be applicable, as nearly as possible, in relation to any shares or other property thereafter deliverable upon exercise of Warrants. The Company shall not effect any such Reorganization, unless upon or prior to the consummation thereof the successor entity, or if the Company shall be the surviving entity in any such Reorganization and is not the issuer of the shares of stock or other securities or property to be delivered to holders of shares of the Common Stock outstanding at the effective time thereof, then such issuer shall assume by written instrument the obligation to deliver to the Holder such shares of stock, securities, cash or other property as the Holder shall be entitled to purchase in accordance with the foregoing provisions. In the event of a sale or conveyance or other transfer of all or substantially all of the assets of the Company as a part of a plan for liquidation of the Company, all rights to exercise any Warrant shall terminate on the date such sale or conveyance or other transfer is to be consummated.

Section 2.05    Irrespective of any adjustments pursuant to this Article II, Warrants theretofore or thereafter issued need not be amended or replaced, but certificates thereafter issued shall bear an appropriate legend or other notice of any adjustments.

Section 2.06    The Company shall not be required upon the exercise of any Warrant to issue fractional shares of Common Stock that may result from adjustments in accordance with this Article II to the Purchase Price or number of shares of Common Stock purchasable under each Warrant. If more than one Warrant is exercised at one time by the same Holder, the number of full shares of Common Stock that shall be deliverable shall be computed based on the number of shares of Common Stock deliverable in exchange for the aggregate number of Warrants exercised. With respect to any final fraction of a share called for upon the exercise of any Warrant or Warrants, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the market value of a share of Common Stock on the business day next preceding the date of such exercise. The Holder, by his acceptance of the Warrant, shall expressly waive any right to receive any fractional share of Common Stock upon exercise of the Warrants. For the purposes of this Section 2.08, the market price per share of Common Stock at any date shall mean the last reported sale price regular way or, in case no such reported sale takes place on such date, the average of the last reported closing bid and asked prices regular way, in either case as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or its successor, if any. If the price of the Common Stock is not so reported, then such market price shall mean the last known price paid per share by a purchaser

4

of such stock in an arms' length transaction. All calculations under this Section 2.08 shall be made to the nearest 1/100th of a share.

Section 2.07    In no event shall the Purchase Price be adjusted below the par value per share of the Common Stock.

ARTICLE III—OTHER MATTERS

Section 3.01    All the covenants and provisions of this Warrant by or for the benefit of the Company shall bind and inure to the benefit of its successors and assigns hereunder.

Section 3.02    Notices or demands pursuant to this Warrant to be given or made by the Holder to or on the Company shall be sufficiently given or made if sent by certified or registered mail, return receipt requested, postage prepaid, and addressed, until another address is designated in writing by the Company, as follows:

Photonic Products Group, Inc.
181 Legrand Avenue
Northvale, New Jersey 07647
Attention: William Miraglia

Notices to the Holder provided for in this Warrant shall be deemed given or made by the Company if sent by certified or registered mail, return receipt requested, postage prepaid, and addressed to the Holder at his last known address as it shall appear on the books of the Company.

Section 3.03    THE VALIDITY, INTERPRETATION AND PERFORMANCE OF THIS WARRANT SHALL BE GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF NEW JERSEY.

Section 3.04    Nothing in this Warrant expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or give to, any person or corporation other than the Company and the Holder any right, remedy or claim under promise or agreement hereof, and all covenants, conditions, stipulations, promises and agreements contained in this Warrant shall be for the sole and exclusive benefit of the Company and its successors and of the Holder, its successors and, if permitted, its assignees.

Section 3.05    The headings herein are for convenience only and are not part of this Warrant and shall not affect the interpretation thereof.

IN WITNESS WHEREOF, this Warrant has been duly executed by the Company on March 31, 2004.

PHOTONIC PRODUCTS GROUP, INC.
By:
	Daniel Lehrfeld, CEO

Attest:

William Miraglia, Secretary

5

PHOTONIC PRODUCTS GROUP, INC.

Subscription Form

(To be executed by the registered holder to exercise the right to purchase Common Stock evidenced by the foregoing Warrant)

Photonic Products Group, Inc.
181 Legrand Avenue
Northvale, New Jersey 07647
Attention: William Miraglia

        The undersigned hereby irrevocably subscribes for the purchase of             Shares of your Common Stock pursuant to and in accordance with the terms and conditions of this Warrant, and herewith makes payment, covering the purchase of such Shares. Certificates for the shares of Common Stock comprising such Shares should be delivered to the undersigned at the address stated below. If such number of Shares shall not be all of the Shares purchasable hereunder, please deliver a new Warrant of like tenor for the balance of the remaining shares purchasable hereunder to the undersigned at the address stated below.

        The undersigned agrees that: (1) the undersigned will not offer, sell, transfer or otherwise dispose of any such shares of Common Stock being purchased hereunder unless either (a) a registration statement covering the sale of such shares of Common Stock has been filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the "Act"), and such sale, transfer or other disposition is accompanied by a prospectus meeting the requirements of Section 10 of the Act forming a part of such registration statement which is in effect under the Act covering the sale of the shares of Common Stock to be so sold, transferred or otherwise disposed of, or (b) counsel acceptable to Photonic Products Group, Inc. and satisfactory to the undersigned has rendered an opinion acceptable to the Company in writing and addressed to the Company that such proposed offer, sale, transfer or other disposition of the shares of Common Stock is exempt from the provisions of Section 5 of the Act in view of the circumstances of such proposed offer, sale, transfer or other disposition; (2) the Company may notify the transfer agent for its Common Stock that the certificates for the Common Stock acquired by the undersigned pursuant hereto are not to be transferred unless the transfer agent receives advice from the Company that one or both of the conditions referred to in (1)(a) and (1)(b) above have been satisfied; and (3) the Company may affix the legend set forth in Section 1.05 of this Warrant to the certificates for shares of Common Stock hereby subscribed for.

Dated: Signed:

Signature guaranteed: Address:

6

PHOTONIC PRODUCTS GROUP, INC.

Assignment Form

(To be executed by the registered holder to effect assignment of the foregoing warrant)

        FOR VALUE RECEIVED            hereby sells, assigns and transfers unto            the right to purchase            Shares of the Common Stock of the Company purchasable pursuant to the within Warrant, on the terms and conditions set forth therein, and does hereby irrevocably constitute and appoint Photonic Products Group, Inc. and/or its transfer agent Attorney to transfer on the books of the Company Warrants representing such rights, with full power of substitution.

Dated:
	Signed:

Signature guaranteed:

7

QuickLinks

WARRANT For the Purchase of 200,000 Shares of Common Stock of Photonic Products Group, INC.

EX-10.4

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.4

EMPLOYMENT CONTRACT

        This Contract, entered into this 20th day of October, 1999 by and between Inrad, Inc., with its principal offices at 181 Legrand Avenue, Northvale, NJ 07647 (hereinafter called the "Company"), and Daniel Lehrfeld, residing at 34 Greenwood Drive, New City, New York 10956 (hereinafter called the "Executive").

WITNESSETH

        In consideration of the mutual covenants herein contained and other good and valuable considerations, the parties hereto agree as follows:

SECTION 1—DUTIES AND TERM OF EMPLOYMENT

        1.1   The Company hereby employs the Executive as its President and Chief Operating Officer subject to the order, supervision, and direction of the Board of Directors of the Company and the current Chief Executive Officer. It is the present intention of the Company to elect Executive as Chief Executive Officer of the Company on or about March 1, 2000. The Company will promptly appoint Executive to the Board of Directors, and will nominate him for election to the Board at the next meeting of stockholders.

        1.2   The Executive hereby accepts this offer of employment and agrees to remain in the employ of the Company in the aforesaid capacity upon the terms, conditions, and provisions herein stated.

        1.3   The term of this Contract shall commence on September 24, 1999 (the "Effective Date") and shall end on the date of the Executive's 65th birthday, or later at the discretion of the Company's Board of Directors; provided, however, that this Contract may be terminated by the Executive or the Company as provided in Section 5 of this Contract.

        1.4   During the term of his employment, the Executive agrees to devote substantially all of his normal business time and attention (reasonable vacations and period of leave excepted), skill, and efforts to the business conducted by the Company and to continue to act as President and Chief Operating Officer as aforesaid, and faithfully to perform such executive, administrative, and supervisory duties and to exercise such powers as specified in the Regulations of the Company from time to time and as the Board of Directors may prescribe. Executive shall be permitted to serve as a Director or Trustee of other organizations, provided such service does not prevent Executive from performing his duties under this Contract.

        1.5   The Executive's duties shall be performed principally at the Company's headquarters located in Northvale, NJ, although Executive understands and agrees that travel, including overseas travel, is an integral part of his responsibilities. If the requirements of the Company, as determined by the Board of Directors, make it desirable to relocate the principal offices of the Company to another location more than fifty miles from Northvale, NJ, during the term of this Contract, the Executive will be consulted in advance of any such relocation and will not be required to render services hereunder without his approval. Whether or not such approval is given, the Executive shall be entitled to the Compensation provided for in Section 2.

SECTION 2—COMPENSATION

        2.1   The annual Base Salary of the Employee shall be $160,000. Such salary shall be payable in equal weekly, bi-weekly, or semi-monthly installments, as determined under the policies of the Company. The Board of Directors of the Company reserves the right to increase the Base Salary of the Executive, and benefits, specified in this instrument, at any time or times during the term of this Contract, but merely as an amendment to this Section 2, and all the other terms, provisions, and conditions of this Contract shall continue in force and effect as herein provided.

        2.2   The Executive will work with the Executive Committee of the Board of Directors of the Company to define and establish an Incentive Cash Bonus Plan, subject to the approval of the Board of Directors, covering all executives and employees, to come into effect for Calendar Year 2000 and thereafter. Executive shall be a participant in said Plan, as well as in subsequent plans (if any) which may hereafter be adopted. Pursuant to said plan, it shall be possible for Executive to earn a bonus provided that the prescribed targets and objectives set out in the Cash Bonus Plan are achieved.

        2.3   In consideration of the covenants of the Executive under this Contract and his services to the Company, and as an inducement for the Executive to enter into this Contract, the Company hereby grants to the Executive:

a)

An option to purchase 100,000 shares of the Company's common stock at $0.625 per share which the parties agree is the fair market value of that stock on the date hereof. This option is hereby granted pursuant to the Incentive Stock Option provisions of the Company's Key Employee Compensation Program adopted by the Company's shareholders on June 20, 1996, and attached hereto as Schedule 1 (the "Plan"), and is subject to all the terms and conditions of the Plan; provided, however, that the Company shall use its best efforts to cause the

stockholders to make whatever changes to the Plan are necessary to conform the Plan to this Agreement if they can do so in a manner consistent with the provisions of the Internal Revenue Code relating to Incentive Stock Options.

b)

When the Executive shall become the Chief Executive Officer of the Company, he shall be entitled to receive options to purchase an additional 310,000 shares of the common stock of the Company pursuant to the provisions of the Plan. These options shall be granted according to the following schedule, and shall be exercisable, when vested in accordance with the Plan, at the market price of the Company's stock on the date such options are granted:

110,000 shares on the first anniversary of the Contract
100,000 shares on the second anniversary of the Contract
100,000 shares on the third anniversary of the Contract

After the third anniversary of this Agreement, or at any time that it so determines, the Board may grant, but shall not be obligated to grant, additional Incentive Stock Options to Employee.

        2.4   The Executive will be reimbursed for his reasonable expenses, including but not limited to travel and communication expenses, incurred while on, or in connection with, Company business.

SECTION 3—BENEFITS

        3.1   Executive shall be entitled to receive all benefits generally made available to executives of the Company, as set forth on Schedule 2 attached hereto.

SECTION 4—NONCOMPETITION AND SECRECY

        4.1   So long as this Contract is in effect, and for a period of nine months thereafter, the Executive shall not become or serve as an officer or employee of or consultant to an individual, partnership, or corporation, or owner or part owner of any business (however this shall not prohibit ownership of not more than 5% of the voting stock of any publicly held corporation), or member of any partnership, limited partnership, LLC or other entity which conducts a business which, in the reasonable judgment of the Board of Directors of the Company, competes with the Company in any geographic area where the Company is doing business when this Contract terminates or expires, unless the Executive shall have obtained the written consent of the Board of Directors of the Company.

        4.2   Except for actions taken in the course of his employment hereunder, at no time shall Executive knowingly divulge, furnish, or make accessible to any outside person or firm any information of a proprietary nature or secret information or trade secrets of the Company not previously disclosed (unless written consent of the Company is first obtained).

SECTION 5—TERMINATION

        5.1   Termination By Company.

a)

Company shall have the right to terminate this Contract under the following circumstances:



i)

Upon death of the Executive.



ii)

Upon notice from Company to Executive in the event of an illness or other disability which has incapacitated him from performing his duties, in the good faith opinion of the Board of Directors, for three consecutive months or six non-consecutive months in any eighteen month period,



iii)

For good cause upon notice from Company. Termination by Company of Executive's employment "for good cause" as used in this Contract shall be limited to the commitment of a significant act of dishonesty such as misappropriation of funds, the conviction of a felony, gross negligence or repeated malfeasance by the Executive in the performance of his duties under this Contract (despite receiving specific written cure notices from the Company and being given 30 days to substantially remedy such failure), or the voluntary resignation by Executive as an employee of the Company without the prior written consent of the Company and without "Good Reason" as defined in Section 5.2b.



iv)

Upon 45 days written notice, without "good cause".

2

b)

If this Contract is terminated pursuant to paragraphs 5.1a) i) or ii) hereof, Executive or his estate shall be entitled to receive 100% of his Base Salary for 12 months following the date of on which his employment ceases together with the bonus provided for in Section 2.2 hereof with respect to that 12 month period. Company may purchase insurance to cover all or any part of its obligations set forth in the preceding sentence, and Executive agrees to take a physical examination to facilitate the obtaining of such insurance.



c)

If this Contract is terminated pursuant to paragraph 5.1a iii) above, Executive shall be entitled to receive his Base Salary so long as he is working but not otherwise and all Bonus payments accrued through the effective date of his termination, but all accrued but unused vacation and sick pay and all granted but non-vested stock options shall be forfeit. In that event, the severance and separation provisions of Section 6 shall not be applicable.



d)

If this Contract is terminated by Company pursuant to paragraph 5.1a) iv) hereof (i.e., without "good cause"), the severance and separation benefit provisions of Section 6 of this Contract shall apply.



e)

Whenever compensation is payable to Executive hereunder during a time when he is partially or totally disabled and such disability (except for the provisions hereof) would entitle him to disability income or to salary continuation payments from Company according to the terms of any plan now or hereafter provided by Company or according to any Company policy in effect at the time of such disability, the compensation payable to him hereunder shall be inclusive of any such disability income or salary continuation and shall not be in addition thereto. If disability is payable to executive under an insurance policy paid for by the Company, the amounts paid to him by said insurance company shall be considered part of the payments to be made by Company to him pursuant to this section, and shall not be in addition thereto.

        5.2   Termination By Executive

a)

Executive shall have the right to terminate his employment without good reason upon delivery of 45 days written notice to the Company. When Executive terminates his employment pursuant to this sub-section, he shall be entitled to receive his Base Salary so long as he is working but not otherwise and all Bonus payments accrued through the effective date of his termination, but all granted but non-vested stock options shall be forfeit.



b)

Executive shall have the right to terminate his employment for good reason under this Contract upon 45 days' notice to Company given within 60 days after the occurrence of an event described in sub-sections i) or ii) and within 180 days after the occurrence of an event described in sub-sections iii below. For the purpose of this Contract "for good reason" shall be understood to mean the occurrence of any of the following events:



i)

Executive is not elected as Chief Executive Officer on or about March 1, 2000, or is not retained as Chief Executive Officer and a member of the Board of Directors after March 1, 2000.



ii)

Company acts to materially reduce Executive's duties and responsibilities or compensation hereunder.



iii)

In the event that the Company is (or substantially all of its assets are) sold to, or combined with, another entity, or is dissolved, Executives duties and responsibilities shall be deemed to be materially reduced for purposes hereof if his authority with respect to the business of the Company after the sale is substantially less than it was before the sale, or the Executive does not report directly to the Chief Executive Officer of the acquiring corporation, or his title does not remain President of the Company, or the geographic location of the performance of the Executive's duties in the resulting new entity changes by more than 50 miles from Northvale, NJ.



iv)

Company acts to change the geographic location of the performance of the Executive's duties by more than 50 miles without his prior written consent.



c)

If this Contract is terminated by Executive pursuant to paragraph 5.2 b) hereof (i.e., "for good reason"), the severance and separation benefit provisions of Section 6 of this Contract shall apply. If this Contract is terminated by Executive pursuant to paragraph 5.2 a) hereof (i.e., "without good reason"), the severance and separation benefit provisions of Section 6 of this Contract shall not be applicable.

SECTION 6—SEVERANCE AND SEPARATION BENEFITS

        6.1   If this Contract is terminated by the Company without good cause pursuant to paragraph 5.1 a)iv), hereof, or if Company shall terminate Executive's employment under this Contract in any other way that is a breach of this Contract by Company, or if the Executive shall terminate this Contract for good reason pursuant to paragraph 5.2b hereof, the following shall apply:

3

a)

The Company will pay to the Executive an amount equal 12 months of Base Salary and cash bonus payments paid to Executive during the preceding 12 months. The payments will be made in 12 equal monthly installments, without interest, commencing one month after the effective date of such termination.



b)

All stock options granted to Executive pursuant to Section 2.3 of this Contract shall vest immediately upon termination and shall be exercisable at any time during a period of one year following termination.



c)

The Executive will receive continuance of all medical insurance, dental insurance, and short and long-term disability insurance benefits covering the Executive for a period terminating on the earlier of i) 12 months after the date of termination of employment or longer to the extent that COBRA is applicable, or ii) the commencement of equivalent benefits from a new employer. Executive will continue to pay to Company an amount equal to the Executive's regular contribution for such participation. If the existing policies do not permit such continued participation, or if the Company so selects, the Company shall arrange to have issued for the benefit of the Executive equivalent benefits, provided further that the Executive shall not be required to pay any premiums or other charges or amounts on an after tax basis than that which Executive would have paid in order to participate in Employer's plans.



d)

The Executive will receive 12 months executive outplacement assistance with Lee, Hecht, Harrison, Woodcliff Lake, NJ, at a cost to the Company not to exceed $9,000.

SECTION 7—DISPUTES

        7.0   Any dispute, controversy, or claim arising under this Contract shall be settled by arbitration in accordance with the Rules of the American Arbitration Association then in effect. The controversy or claim shall be submitted to three arbitrators, one of whom shall be chosen by the Company, one of whom shall be chosen by the Executive, and the third of whom shall be chosen by the two so selected. The party desiring arbitration shall give written notice to the other party of its desire to arbitrate the particular matter in question, naming the arbitrator selected by it.

        If the other party shall fail within a period of 15 days to after such notice to have given a reply in writing naming the arbitrator selected by it, then the party not in default may apply to the American Arbitration Association for the appointment of the second arbitrator. If the two arbitrators chosen as above should fail within 15 days to after their selection to agree on the third arbitrator, then either party may apply to the American Arbitrator Association for the appointment of an arbitrator to fill the place so remaining vacant. The decision of any two of the arbitrators shall be final and binding upon the parties hereto and shall be delivered in writing signed in triplicate by the concurring arbitrators to each of the parties hereto. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.

SECTION 8—BINDING CONTRACT

        8.0   This Contract shall be binding upon and inure to the benefit of the Executive, his heirs, distributees and assigns and upon the Company, its successors and assigns and the acquirer of substantially all the Company's assets. Executive may not, without the express written permission of the Company, assign or pledge any rights or obligations hereunder to any person, firm, or corporation.

SECTION 9—AMENDMENT; WAIVER

        9.0   This instrument contains the entire Contract of the parties with respect to the employment of Executive by Company. No amendment or modification of this Contract shall be valid unless evidenced by a written instrument executed by the parties hereto. No waiver by either party of any breach by the other party of any provision or condition of this Contract shall be deemed a waiver of any similar or dissimilar provision or condition at the same or any prior or subsequent time.

SECTION 10—GOVERNING LAW

        10.0 This Contract shall be governed by and construed in accordance with the laws of the State of New Jersey.

SECTION 11—NOTICES

        11.0 All notices which a party is required or may desire to give to the other party under or in conjunction with this Contract shall be given in writing by addressing the same to the other party as follows:

4

If to Executive to:

Daniel Lehrfeld
34 Greenwood Drive
New City, NY 10956

If to Company, to:

Inrad, Inc.
181 Legrand Avenue
Northvale, NJ 07647
Attn:  Chairman of the Board

Or at such other place as may be designated in writing by like notice. Any notice shall be deemed to have been given within 48 hours after being addressed as required herein and deposited, first-class postage prepaid, in the United States mail.

5

        IN WITNESS THEREOF, the parties have executed this Contract as of the day and year first written above.

/s/  DANIEL LEHRFELD Daniel Lehrfeld
INRAD, INC.
By:	/s/  WARREN RUDERMAN Warren Ruderman, President

6

QuickLinks

EMPLOYMENT CONTRACT

EX-21.1

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 21.1

SUBSIDIARIES OF PHOTONIC PRODUCTS GROUP, INC.*

        The following is a list of the Subsidiaries of Photonic Products Group, Inc.:

NAME	STATE OF INCORPORATION	NAMES UNDER WHICH SUCH SUBSIDIARIES DO BUSINESS
Laser Optics Holdings, Inc.	New Jersey	Laser Optics

QuickLinks

SUBSIDIARIES OF PHOTONIC PRODUCTS GROUP, INC.

EX-23.1

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 23.1

CONSENT OF REGISTERED PUBLIC ACCOUNTANTS

        We consent to the use in this Registration Statement of Photonic Products Group, Inc. and Subsidiaries on Form S-1 of our report dated March 25, 2004, appearing in the Prospectus, which is part of this Registration Statement, and of our report dated March 25, 2004 relating to the financial statement schedules appearing elsewhere in this Registration Statement.

        We also consent to the reference to us under the headings "Selected Financial Data" and "Experts" in such Prospectus.

/s/  HOLTZ RUBENSTEIN & CO., LLP HOLTZ RUBENSTEIN & CO., LLP
Melville, New York

August 20, 2004

QuickLinks

Exhibit 23.1

CONSENT OF REGISTERED PUBLIC ACCOUNTANTS