10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2022

or

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

For the transition period from ___________ to ___________

Commission File Number 0-11668

INRAD OPTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

New Jersey	22-2003247
State or Other Jurisdiction of Incorporation or Organization	I.R.S. Employer Identification No.
181 Legrand Avenue, Northvale, NJ	07647
Address of Principal Executive Offices	Zip Code

(201) 767-1910

Registrant’s Telephone Number, Including Area Code

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒     No ☐

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

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

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

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

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

The number of shares of the registrant’s common stock outstanding, $0.01 par value, as of May 13, 2022, was 14,022,320.

INRAD OPTICS, INC AND SUBSIDIARIES

INDEX

Part I.	CONDENSED FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements:
	Condensed consolidated balance sheets as of March 31, 2022 (unaudited) and December 31, 2021	1
	Condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021 (unaudited)	2
	Condensed consolidated statements of shareholders equity for the three months ended March 31, 2022 and 2021 (unaudited)	3
	Condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 (unaudited)	4
	Notes to condensed consolidated financial statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	16
Item 4.	Controls and Procedures	16
Part II.	OTHER INFORMATION	17
Item 1.	Legal Proceedings	17
Item 1A.	Risk Factors	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3.	Defaults upon Senior Securities	17
Item 4.	Mine Safety Disclosures	17
Item 5.	Other Information	17
Item 6.	Exhibits	18
Signatures		19

INRAD OPTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,		December 31,
	2022		2021
Assets	(Unaudited)
Current assets:
Cash and cash equivalents	$	1,792,800	$	1,801,188
Accounts receivable, net		1,200,372		1,287,653
Inventories, net		2,892,823		2,524,871
Other current assets		142,834		260,116
Total current assets		6,028,829		5,873,828
Plant and equipment:
Plant and equipment, at cost		15,909,169		15,393,241
Less: Accumulated depreciation and amortization		(14,764,389)		(14,709,744)
Total plant and equipment		1,144,780		683,497
Precious metals		561,909		561,909
Lease right-of-use, net		50,654		125,724
Other assets		26,993		26,993
Total Assets	$	7,813,165	$	7,271,951
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of other long term notes	$	60,029	$	16,403
Accounts payable and accrued liabilities		706,342		554,604
Contract liabilities		672,644		576,474
Current portion of lease obligation		65,265		141,536
Total current liabilities		1,504,280		1,289,017
Related party convertible notes payable		2,500,000		2,500,000
Other long term notes, net of current portion		372,476		157,578
Lease obligation, net of current portion		—		2,692
Total liabilities		4,376,756		3,949,287
Shareholders’ equity:
Common stock: $.01 par value; 60,000,000 authorized shares; 14,026,920 shares issued at March 31, 2022, and 13,967,257 shares issued at December 31, 2021		140,271		139,674
Capital in excess of par value		19,805,712		19,733,996
Accumulated deficit		(16,494,624)		(16,536,056)
		3,451,359		3,337,614
Less - Common stock in treasury, at cost (4,600 shares)		(14,950)		(14,950)
Total shareholders’ equity		3,436,409		3,322,664
Total Liabilities and shareholders’ equity	$	7,813,165	$	7,271,951

See Notes to Condensed Consolidated Financial Statements (Unaudited)

1

INRAD OPTICS, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended March 31,
	2022		2021
Total revenue	$	2,437,096	$	2,779,548
Cost and expenses:
Cost of goods sold		1,677,531		1,966,807
Selling, general and administrative expenses		676,551		608,758
		2,354,082		2,575,565
Income from operations		83,014		203,983
Other income (expense):
Gain on forgiveness of PPP loan		—		973,166
Interest expense-net		(41,582)		(36,815)
		(41,582)		936,351
Income before income taxes		41,432		1,140,334
Income tax (provision) benefit		—		—
Net income	$	41,432	$	1,140,334
Net income per common share - basic	$	0.00	$	0.08
Net income per common share - diluted	$	0.00	$	0.08
Weighted average shares outstanding - basic		13,992,489		13,820,328
Weighted average shares outstanding - diluted		14,586,524		14,099,251

See Notes to Condensed Consolidated Financial Statements (Unaudited)

2

INRAD OPTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

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

				Capital in						Total
	Common Stock			excess of		Accumulated		Treasury		Shareholders’
	Shares	Amount		par value		Deficit		Stock		Equity
Balance, January 1, 2022	13,967,257	$	139,674	$	19,733,996	$	(16,536,056)	$	(14,950)	$	3,322,664
401K contribution	59,663		597		50,158		—		—		50,755
Stock-based compensation expense	—		—		21,558		—		—		21,558
Net income March 31, 2022	—		—		—		41,432		—		41,432
Balance, March 31, 2022	14,026,920	$	140,271	$	19,805,712	$	(16,494,624)	$	(14,950)	$	3,436,409

See Notes to Condensed Consolidated Financial Statements (Unaudited)

3

INRAD OPTICS, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended
	March 31,
	2022		2021
Cash flows from operating activities:
Net income	$	41,432	$	1,140,334
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Depreciation and amortization		54,645		42,375
401K common stock contribution - non cash item		50,755		—
Stock based compensation		21,558		29,303
Gain on forgiveness of PPP loan		—		(973,166)
Changes in operating assets and liabilities:
Accounts receivable		87,281		(451,809)
Inventories, net		(367,952)		177,885
Other assets		117,282		19,966
Accounts payable and accrued liabilities		147,846		145,992
Contract liabilities		96,170		(200,659)
Total adjustments and changes		251,211		(1,210,113)
Net cash provided by (used in) operating activities		292,643		(69,779)
Cash flows from investing activities:
Capital expenditures		(515,928)		(13,554)
Net cash (used in) investing activities		(515,928)		(13,554)
Cash flows from financing activities:
Principal payments on notes payable-other		214,897		—
Net cash (used in) financing activities		214,897		—
Net (decrease) in cash and cash equivalents		(8,388)		(83,333)
Cash and cash equivalents at beginning of period		1,801,188		1,129,703
Cash and cash equivalents at end of period	$	1,792,800	$	1,046,370
Supplemental disclosure of cash flow information:
Interest paid	$	42,113	$	37,824
Income taxes paid	$	—	$	—
Supplemental disclosure of non-cash investing and financing activities:
Acquisition of equipment by issuing a note payable	$	270,320	$	—

See Notes to Condensed Consolidated Financial Statements (Unaudited)

4

INRAD OPTICS, INC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

The condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments of a normal recurring nature considered necessary for a fair presentation have been included. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. For further information, refer to the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

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

Management Estimates

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

Accounts Receivable

Accounts receivable are carried at net realizable value, net of write-offs and allowances. The Company establishes an allowance for doubtful accounts based on estimates as to the collectability of accounts receivable. Management specifically analyzes past-due accounts receivable balances and, additionally, considers bad debt history, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. Uncollectible accounts receivable are written-off when it is determined that the balance will not be collected. Reserves for uncollectible accounts receivable are recorded as part of selling, general and administrative expenses in the Consolidated Statements of Operations, and were $46,000 at March 31, 2022, and $90,000 at December 31, 2021.

Inventories

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

5

Inventories are comprised of the following and are shown net of inventory reserves of $2,398,000 and $2,480,000 at March 31, 2022 and December 31, 2021, respectively:

	March 31,		December 31,
	2022		2021
	(Unaudited)
		(in thousands)
Raw materials	$	1,158	$	1,160
Work in process, including manufactured parts and components		1,426		1,020
Finished goods		309		345
	$	2,893	$	2,525

Income Taxes

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

In evaluating the Company’s ability to recover deferred tax assets in future periods, management considers the available positive and negative factors, including the Company’s recent operating results, the existence of cumulative losses and near-term forecasts of future taxable income consistent with the plans and estimates that management uses to manage the underlying business. A significant piece of objective negative evidence evaluated was the cumulative loss incurred by the Company over the three-year period ended December 31, 2021. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future growth.

On the basis of this evaluation as of March 31, 2022, the Company’s management concluded that it is more likely than not that the Company will not be able to realize any portion of the benefit on the deferred tax asset balance of $3,302,000 and therefore the Company continues to maintain a valuation allowance for the full amount of the net deferred tax asset balance. When sufficient positive evidence exists, the Company’s income tax expense will be charged with the increase or decrease in its valuation allowance. An increase or reversal of the Company’s valuation allowance could have a significant negative or positive impact on the Company’s future earnings.

For the three months ended March 31, 2022 and 2021, the Company did not record a current provision for income taxes due to the permanent difference related to loan forgiveness and the availability of net operating loss carryforwards to offset taxable income for both income tax and financial reporting purposes.

Net Income (Loss) per Common Share

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

For the three months ended March 31, 2022, 2,500,000 common shares and 1,875,000 common shares from warrants issuable upon conversion of outstanding related party convertible notes were excluded from the computation of basic and diluted net income per common share because their effect is anti-dilutive. In addition, 162,500 common stock options were excluded from the computation of basic and diluted net income per common share because their effect is anti-dilutive.

For the three months ended March 31, 2021, 2,500,000 common shares and 1,875,000 common shares from warrants issuable upon conversion of outstanding related party convertible notes were excluded from the computation of basic and diluted net income per common share because their effect is anti-dilutive. In addition, 476,300 common stock options were excluded from basic and diluted net income per common share because their effect is anti-dilutive.

6

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

	Three Months Ended					Three Months Ended
	March 31, 2022					March 31, 2021
	Income(Loss)		Shares	Per Share		Income(Loss)		Shares	Per Share
	(Numerator)		(Denominator)	Amount		(Numerator)		(Denominator)	Amount
Basic Income Per Share:
Net Income	$	41,432	13,992,489	$	0.00	$	1,140,334	13,820,328	$	0.08
Effect of dilutive securities:
Convertible Notes		—	—		—		—	—		—
Accrued Interest on Convertible Notes		—	—		—		—	—		—
Warrants		—	—		—		—	—		—
Stock Options		—	594,035		—		—	278,923		—
Diluted Income Per Share:	$	41,432	14,586,524	$	0.00	$	1,140,334	14,099,251	$	0.08

Stock-Based Compensation

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

Recent Accounting Standards

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”) which amended guidance on the accounting for credit losses on financial instruments within its scope. The guidance introduces an expected loss model for estimating credit losses, replacing the incurred loss model. The new guidance also changes the impairment model for available-for-sale debt securities, requiring the use of an allowance to record estimated credit losses (and subsequent recoveries). The new guidance is effective for interim and annual periods beginning in 2023, with earlier application permitted. The Company does not expect that the adoption of this guidance will have a material impact on the Company’s consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU update is intended to simplify the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. This guidance is effective for the Company for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company does not expect the adoption of this guidance will have a material impact on the Company’s consolidated financial statements.

7

NOTE 2 –REVENUE

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

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

The Company’s performance obligations under long-term government contracts are generally satisfied over time. Revenue from products or services transferred to customers under these performance obligations accounted for approximately 0% and 1.5% of revenue for the three months ended March 31, 2022 and 2021, respectively. This revenue is generally recognized using an input measure based upon the proportion of actual costs incurred to estimated total project costs, which is a method used to best depict the Company’s performance to date under the terms of the contract.

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

The majority of the Company’s revenue is from products and services transferred to customers at a point in time and was approximately 100% and 98.5% of revenue for the three months ended March 31, 2022 and 2021, respectively. The Company recognizes revenue at the point in time in which the customer obtains control of the product or service, which is generally when product title passes to the customer upon shipment. In limited cases, title does not transfer and revenue is not recognized until the customer has received the products at its physical location.

8

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

	Three Months Ended
	March 31,
	2022		2021
Aerospace & Defense	$	847,293	$	1,176,330
Process Control & Metrology		1,403,133		1,077,376
Laser Systems		64,567		114,746
Scientific / R&D		122,103		411,096
Total	$	2,437,096	$	2,779,548

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

	Three Months Ended
	March 31,
	2022		2021
Transfer at point in time	$	2,437,096	$	2,739,329
Transfer over time		—		40,219
Total net sales	$	2,437,096	$	2,779,548

The timing of revenue recognition, billings and cash collections results in billed receivables, costs in excess of billings (contract assets), and billings in excess of costs (contract liabilities, previously deferred revenue) on the Consolidated Balance Sheet. Contract liabilities also include customer advances or prepayments. Costs in excess of billings and billings in excess of costs associated with long-term government contracts were not significant at March 31, 2022 or 2021. At March 31, 2022 and 2021, there was no remaining revenue to be recognized from the long-term government contracts.

On March 31, 2022, the Company had approximately $17.4 million of performance obligations, which is also referred to as backlog. Approximately 22% of the March 31, 2022, backlog is related to projects that will extend beyond March 31, 2023.

NOTE 3- EQUITY COMPENSATION PROGRAM AND STOCK BASED COMPENSATION

a)    Stock Option Expense

The Company’s results of operations for the three months ended March 31, 2022 and 2021, include stock-based compensation expense for stock option grants totaling $21,558 and $29,302, respectively. The following table shows the amounts for stock-based compensation included in cost of sales and selling, general and administrative expense for the three months ended March 31, 2022 and 2021:

	Three Months Ended
	March 31,
	2022		2021
Cost of sales	$	3,252	$	7,202
Selling, general and administrative		18,306		22,101
Total stock-based compensation expense	$	21,558	$	29,303

As of March 31, 2022 and 2021, there were $299,000 and $211,000 of unrecognized compensation cost, net of estimated forfeitures, related to non-vested stock options, which are expected to be recognized over a weighted average period of approximately 1.54 and 1.57 years, respectively.

9

There were 200,000 stock options granted during each of the three months ended March 31, 2022, and 2021. The following range of weighted-average assumptions were used to determine the fair value of stock option grants during the three months ended March 31, 2022 and 2021:

	Three Months Ended
	March 31,
	2022		2021
Expected Dividend yield	—	%	—	%
Expected Volatility	105	%	106	%
Risk-free interest rate	1.54	%	0.86	%
Expected term	10	years	10	years

b)    Stock Option Activity

The following table represents stock options granted, exercised and forfeited during the three months ended March 31, 2022:

		Weighted		Weighted
		Average		Average
		Exercise		Remaining	Aggregate
	Number of	Price per		Contractual	Intrinsic
Stock Options	Options	Option		Term (years)	Value
Outstanding January 1, 2022	1,152,667	$	0.60	7.40	$	107,573
Granted	200,000		1.20	—		—
Exercised	—		—	—		—
Expired/Forfeited	—		—	—		—
Outstanding March 31, 2022	1,352,667	$	0.69	7.38	$	970,105
Exercisable at March 31, 2022	1,011,832	$	0.59	5.95	$	854,550

The following table represents non-vested stock options granted, vested and forfeited for the three months ended March 31, 2022:

	Weighted-average
	Grant-date Fair Value
	Options	($)
Non-Vested - January 1, 2022	276,670	0.89
Granted	200,000	1.09
Vested	(135,835)	0.70
Forfeited	—	—
Non-Vested - March 31, 2022	340,835	0.89

NOTE 4 - STOCKHOLDERS’ EQUITY

The Company approved a matching contribution to participants in the Inrad Optics 401k Plan (the “Plan”) for the year ended December 31, 2021, in February 2022. The Company contributed 59,663 common shares of Inrad Optics, Inc. and cash of $76,133 to the Plan in March, 2022.

NOTE 5 – RELATED PARTY TRANSACTIONS

On July 22, 2020, the maturity dates of a $1,500,000 Subordinated Convertible Promissory Note to Clarex Limited (“Clarex”) and a $1,000,000 Subordinated Convertible Promissory Note to an affiliate of Clarex were each extended to April 1, 2024, from April 1, 2021. The notes bear interest at 6%. Interest accrues yearly and is payable on maturity. Unpaid interest, along with principal, may be converted into securities of the Company as follows: the notes are convertible in the aggregate into 1,500,000 units and 1,000,000 units, respectively, with each unit consisting of one share of common stock and one warrant. Each warrant allows the holder to acquire 0.75 shares of common stock at a price of $1.35 per share. As part of the agreement to extend the maturity date of the notes, the expiration dates of the warrants were extended from April 1, 2024 to April 1, 2027.

10

NOTE 6 – OTHER LONG-TERM NOTES

Other Long-Term Notes consist of the following:

	March 31,		December 31,
	2022		2021
	(Unaudited)
	(in thousands)
U.S. Small Business Administration term note payable in equal monthly installments of $1,922 and bearing an interest rate of 4.0% and expiring in July 2029	$	170	$	174
Long-term equipment financing in equal installments of $5,236 and bearing an interest rate of 6.1% and expiring in January 2027 (1)		262		—
Less current portion		(60)		(16)
Long-term debt, excluding current portion	$	372	$	158

(1) The Company purchased certain equipment in the three months ended March 31, 2022, financing approximately $270,000 at a fixed annual interest rate of 6.1% for five years in equal monthly installments.

NOTE 7 – PAYROLL PROTECTION PROGRAM

On May 6, 2020, the Company received loan proceeds of approximately $973,000 (the “PPP Loan”), under the Paycheck Protection Program (“PPP”). The PPP was established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) which was enacted March 27, 2020. The PPP Loan, which was in the form of a promissory note, dated May 4, 2020, issued by the Company, initially matured on May 4, 2022, and bore interest at a rate of 1.0% per annum.

On January 19, 2021, the Company received notification from the Small Business Association that the Company’s Forgiveness Application of the PPP Loan and accrued interest, totaling $980,000, was approved in full, and the Company had no further obligations related to the PPP Loan. Accordingly, the Company recorded a gain on the forgiveness of the PPP Loan in the three-month period ending March 31, 2021.

11

NOTE 8 – LEASE AMENDMENT

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

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

An initial right-of-use asset of $0.8 million was recognized as a non-cash asset addition with the signing of the July 8, 2019, office lease. Cash paid for amounts included in the present value of operating lease liability was $0.1 million during the three months ended March 31, 2021, and is included in operating cash flows.

Operating lease costs were $0.1 million during each of the three months ended March 31, 2022 and 2021, respectively.

NOTE 9 – IMPACT OF COVID-19

The COVID-19 pandemic has created significant volatility and economic disruption and the impact on our future consolidated results of operations remains uncertain. The extent to which COVID-19 impacts our employees, operations, customers, suppliers and financial results depends on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the pandemic (and whether there is a resurgence or multiple resurgences in the future, including the impact of new variants); government actions taken in response to the pandemic, including required shutdowns, vaccine or testing mandates; supply chain disruptions; rising inflation; labor shortages; and the effect on our customers demand for our products. We may also be impacted by state actions, orders and policies regarding the COVID-19 pandemic. While our operations were considered essential business under the Executive Orders of New Jersey’s Governor, we cannot predict whether new temporary closures, shelter-in-place orders, travel, or quarantine policies will have an impact on our operations.

12

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Caution Regarding Forward Looking Statements

This Quarterly Report contains forward-looking statements as that term is defined in the federal securities laws. The Company wishes to ensure that any forward-looking statements are accompanied by meaningful cautionary statements in order to comply with the terms of the safe harbor provided by the Private Securities Litigation Reform Act of 1995. The events described in the forward-looking statements contained in this Quarterly Report may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of the Company’s plans or strategies, projected or anticipated benefits of acquisitions made by the Company, projections involving anticipated revenues, earnings, or other aspects of the Company’s operating results. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions are intended to identify forward-looking statements. The Company cautions you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks, and other influences, many of which are beyond the Company’s control, that may influence the accuracy of the statements and the projections upon which the statements are based. Factors which may affect the Company’s results include, but are not limited to, the risks and uncertainties discussed in Items 1A, 7 and 7A of the Company’s most recent Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission on March 30, 2022. Any one or more of these uncertainties, risks, and other influences could materially affect the Company’s results of operations and whether forward-looking statements made by the Company ultimately prove to be accurate. Readers are further cautioned that the Company’s financial results can vary from quarter to quarter, and the financial results for any period may not necessarily be indicative of future results. The foregoing is not intended to be an exhaustive list of all factors that could cause actual results to differ materially from those expressed in forward-looking statements made by the Company. The Company’s actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether from new information, future events, or otherwise.

Critical Accounting Policies and Estimates

Our significant accounting policies are described in Note 1 of the accompanying condensed consolidated financial statements and further discussed in our annual financial statements included in our annual report on Form 10-K for the year ended December 31, 2021. In preparing our unaudited condensed consolidated financial statements, we made estimates and judgments that affect the results of our operations and the value of assets and liabilities we report. Our inventories are stated at the lower of cost (first-in-first-out basis) and net realizable value. The Company records a reserve for slow moving inventory as a charge against earnings for all products identified as surplus, slow-moving or discontinued. Excess work-in-process costs are charged against earnings whenever estimated costs-of-completion exceed unbilled revenues. The Company’s estimates also include the amount and timing of future taxable income in determining the valuation allowance for deferred income tax assets. Our actual results may differ from these estimates under different assumptions or conditions.

For additional information regarding our critical accounting policies and estimates, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report filed with the Securities and Exchange Commission on Form 10-K for the year ended December 31, 2021.

Ongoing Impact of COVID-19

The COVID-19 pandemic has created significant volatility and economic disruption and the impact on our future consolidated results of operations remains uncertain. The extent to which COVID-19 impacts our employees, operations, customers, suppliers and financial results depends on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the pandemic (and whether there is a resurgence or multiple resurgences in the future, including the impact of new variants); government actions taken in response to the pandemic, including required shutdowns, vaccine or testing mandates; supply chain disruptions; rising inflation; labor shortages; and the effect on our customers demand for our products. We may also be impacted by state actions, orders and policies regarding the COVID-19 pandemic. While our operations were considered essential business under the Executive Orders of New Jersey’s Governor, we cannot predict whether new temporary closures, shelter-in-place orders, travel, or quarantine policies will have an impact on our operations.

13

Results of Operations

Inrad Optics is a vertically integrated manufacturer specializing in glass, crystal, and metal based optical components and assemblies. Manufacturing capabilities include super-precision optical surfacing, precision diamond turning, the ability to handle large substrates, proprietary optical contacting processes, thin film coatings, and high resolution in-process metrology. The Company built its reputation on the growth and fabrication of UV filter crystals and non-linear crystals and devices. Today, product offerings include optical components and assemblies for the ultraviolet to infrared range, and bent crystal assemblies for x-ray applications.

Inrad Optics’ customers include leading corporations in semiconductor wafer inspection, industrial and scientific process control and metrology, defense, space, and laser systems sectors, as well as the U.S. Government, National Laboratories and universities and institutions worldwide.

All R&D, engineering, manufacturing and administrative operations are undertaken in our 42,000 square foot facility in Northvale, New Jersey.

Revenue

Sales for the three months ended March 31, 2022, were $2.4 million, a decrease of 12.3%, or $0.3 million, compared to $2.8 million for the three months ended March 31, 2021.

Sales to the defense/aerospace market decreased by $0.3 million or 28.8% to $0.8 million in the three months ended March 31, 2022, compared to $1.2 million for the three months ended March 31, 2021. The decrease in sales in the defense/aerospace market was due to timing of deliveries.

Process control and metrology (“PC&M”) sales were $1.4 million for the three months ended March 31, 2022, an increase of $0.3 million, or 30.2%, from $1.1 million for the three months ended March 31, 2021. The increase in demand, particularly in the semi-conductor industry, has contributed to the increase in sales in the PC&M market for the three months ended March 31, 2022, compared to the three months ended March 31, 2021.

Sales to customers in the laser systems market were $0.1 million in each of the three months ended March 31, 2022 and 2021. Products sold into this market segment largely consist of legacy materials for replacement units and small volume buys.

Sales to customers in the Scientific/R&D market were $0.1 million for the three months ended March 31, 2022, compared to $0.4 million for the three months ended March 31, 2021. The decrease in sales in the Scientific/R&D market is due to the completion of a federal government R&D contract that ended in March 2021.

In the three-month period ended March 31, 2022, three customers represented 10% or more of revenues while only one customer represented 10% or more of revenues in the three-month period ended March 31, 2021.

The Company’s top five customers represented 64.7% of sales in the three-month period ended March 31, 2022, compared to 51.5% in the same period in 2021.

Orders booked during the first three months of 2022, totaled $7.4 million, compared to $3.1 million for the same period last year, an increase of 138.7%. Order backlog at March 31, 2022 and 2021, was $17.4 million and $7.9 million, respectively. We anticipate shipping a majority of the present backlog during fiscal year 2022. However, our current backlog consists of orders with delivery schedules that extend beyond 12 months into the future.

Cost of Goods Sold

For the three months ended March 31, 2022 and 2021, cost of goods sold was $1.7 million and $2.0 million, or 68.8% and 70.8% of total revenues, respectively. Cost of goods sold decreased as a result of sales mix and lower sales year over year.

Gross profit for each of the three months ended March 31, 2022 and 2021, was $0.8 million. Gross profit was 31.2% of sales in the three months ended March 31, 2022, and 29.2% of sales in the three months ended March 31, 2021.

14

Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A” expenses) in the three months ended March 31, 2022, amounted to $0.7 million, or 27.8% of sales compared to $0.6 million, or 21.9% of sales, for the same period a year ago. The increase in SG&A expenses reflects an increase in personnel related costs and insurance, offset by a reduction in uncollectible accounts.

Income from Operations

The Company had operating income of $0.1 million for the three months ended March 31, 2022, compared to operating income of $0.2 million for the three months ended March 31, 2021. The decrease in operating income reflects the impact of the Company’s lower sales in the three months ended March 31, 2022, compared to the same period last year, coupled with an increase in SG&A costs, partially offset by a decrease in cost of goods sold.

Other Income (Expense)

Other income in 2021 reflects the gain on the forgiveness of the PPP loan of $1.0 million. There was a slight increase in interest expense for the three months ended March 31, 2022, compared to the same period in 2021 due to the financing of new equipment.

Income Taxes

For the three months ended March 31, 2022, the Company did not record a current provision for income taxes due to the availability of net operating loss carryforwards to offset taxable income for both income tax and financial reporting purposes. For the three months ended March 31, 2021, the Company did not record a current provision for income taxes due to the permanent difference related to loan forgiveness and the availability of net operating loss carryforwards to offset taxable income for both income tax and financial reporting purposes.

Net Income

The Company had net income of $41,000 for the three months ended March 31, 2022, compared to net income of $1.1 million for the three months ended March 31, 2021. The 2021 results reflect higher sales, and the gain resulting from the PPP loan forgiveness.

Liquidity and Capital Resources

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

As of March 31, 2022 and December 31, 2021, the Company had cash and cash equivalents of $1.8 million and $1.8 million, respectively.

The Company occupies approximately 42,000 square feet of space located at 181 Legrand Avenue, Northvale, New Jersey pursuant to a net lease which was amended on July 8, 2019, retroactive to June 1, 2019, for an additional three-year term. The current lease term expires on May 31, 2022. The Company is currently negotiating an extension of the lease. Under the terms of the lease, the Company is obligated for all real estate taxes, maintenance and operating costs of the facility.

On July 22, 2020, the maturity dates of a $1,500,000 Subordinated Convertible Promissory Note to Clarex Limited (“Clarex”) and a $1,000,000 Subordinated Convertible Promissory Note to an affiliate of Clarex were each extended to April 1, 2024, from April 1, 2021. The notes bear interest at 6%. Interest accrues yearly and is payable on maturity. Unpaid interest, along with principal, may be converted into securities of the Company as follows: the notes are convertible in the aggregate into 1,500,000 units and 1,000,000 units, respectively, with each unit consisting of one share of common stock and one warrant. Each warrant allows the holder to acquire 0.75 shares of common stock at a price of $1.35 per share. As part of the agreement to extend the maturity date of the notes, the expiration dates of the warrants were extended from April 1, 2024 to April 1, 2027.

15

The following table summarizes net cash (used in) operating, investing and financing activities for the three months ended March 31, 2022 and 2021:

	Three Months Ended
	March 31,
	2022		2021
	(in thousands)
Net cash provided by (used in) operating activities	$	249	$	(70)
Net cash (used in) investing activities		(246)		(14)
Net cash (used in) by financing activities		(12)		—
Net (decrease) in cash and cash equivalents	$	(8)	$	(83)

Net cash provided by operating activities was $249,000 for the three months ended March 31, 2022, compared to net cash used in operating activities of $70,000 in the same period last year. Net cash provided by operating activities in the three months ended March 31, 2022, resulted primarily from an increase in inventories, an increase in accounts payable and accrued liabilities, and an increase in contract liabilities.

Net cash used in investing activities was $246,000 during the three months ended March 31, 2022, compared to $14,000 in the same period last year reflecting capital expenditures in both periods.

Overall, cash and cash equivalents decreased by $8,000 and $83,000 for the three months ended March 31, 2022 and 2021, respectively.

On May 6, 2020, the Company received loan proceeds of approximately $973,000 (the “PPP Loan”), under the Paycheck Protection Program (“PPP”). The PPP was established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) which was enacted March 27, 2020. The PPP Loan, which is in the form of a promissory note, dated May 4, 2020, issued by the Company, initially matured on May 4, 2022, and bore interest at a rate of 1.0% per annum.

On January 19, 2021, the Company received notification from the Small Business Association that the Company’s Forgiveness Application of the PPP Loan and accrued interest, totaling $980,000, was approved in full, and the Company had no further obligations related to the PPP Loan. Accordingly, the Company recognized a gain from forgiveness on PPP Loan in the three months ended March 31, 2021.

Management believes, based on the Company’s operations and its existing working capital resources together with existing cash flows, that the Company has sufficient cash flows to fund operations through at least May 13, 2023.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

a.    Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of March 31, 2022 (the “Evaluation Date”), have concluded that as of the Evaluation Date, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports we file or submit under the Exchange Act (1) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and (2) is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.

b.    Changes in Internal Controls over Financial Reporting

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

16

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

Not applicable

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UNDER SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

None

17

ITEM 6. EXHIBITS

31.1	Certificate of the Registrant’s Chief Executive Officer, Amy Eskilson, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certificate of the Registrant’s Chief Financial Officer, Theresa A. Balog, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certificate of the Registrant’s Chief Executive Officer, Amy Eskilson, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.2	Certificate of the Registrant’s Chief Financial Officer, Theresa A. Balog, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101.INS	Inline XBRL Instance Document*
101.SCH	Inline XBRL Taxonomy Extension Schema*
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase*
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase*
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase*
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase*
104	Cover Page Interactive Data File (embedded within the Inline XBRL and Contained in Exhibit 101)

* Filed herewith

**Furnished herewith

18

SIGNATURES

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

		Inrad Optics, Inc.
	By:	/s/ Amy Eskilson
		Amy Eskilson
		President and Chief Executive Officer
	By:	/s/ Theresa A. Balog
		Theresa A. Balog
		Chief Financial Officer,
		Secretary and Treasurer
Date: May 13, 2022

19

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Amy Eskilson certify that:

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

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

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

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

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

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

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

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

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

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

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

Dated: May 13, 2022	/s/Amy Eskilson
	President and Chief Executive Officer

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

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Theresa A. Balog certify that:

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

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

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

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

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

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

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

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

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

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

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

Dated: May 13, 2022	/s/ Theresa A. Balog
	Chief Financial Officer, Secretary and Treasurer

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

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Inrad Optics, Inc. on Form 10-Q for the period ended March 31, 2022, filed with the Securities and Exchange Commission (the “Report”), I, Amy Eskilson, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

Dated: May 13, 2022	/s/Amy Eskilson
	President and Chief Executive Officer

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

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

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Inrad Optics, Inc. on Form 10-Q for the period ended March 31, 2022, filed with the Securities and Exchange Commission (the “Report”), I, Theresa A. Balog of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

Dated: May 13, 2022	/s/ Theresa A. Balog
	Chief Financial Officer, Secretary and Treasurer

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

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

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	Mar. 31, 2022	May 13, 2022
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Mar. 31, 2022
Entity File Number	0-11668
Entity Registrant Name	INRAD OPTICS, INC.
Entity Address, State or Province	NJ
Entity Tax Identification Number	22-2003247
Entity Address, Address Line One	181 Legrand Avenue
Entity Address, City or Town	Northvale
Entity Incorporation, State or Country Code	NJ
Entity Address, Postal Zip Code	07647
City Area Code	201
Local Phone Number	767-1910
Title of 12(b) Security	None
No Trading Symbol Flag	true
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		14,022,320
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q1
Entity Central Index Key	0000719494
Current Fiscal Year End Date	--12-31
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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Mar. 31, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 1,792,800	$ 1,801,188
Accounts receivable, net	1,200,372	1,287,653
Inventories, net	2,892,823	2,524,871
Other current assets	142,834	260,116
Total current assets	6,028,829	5,873,828
Plant and equipment:
Plant and equipment, at cost	15,909,169	15,393,241
Less: Accumulated depreciation and amortization	(14,764,389)	(14,709,744)
Total plant and equipment	1,144,780	683,497
Precious metals	561,909	561,909
Lease right-of-use, net	50,654	125,724
Other assets	26,993	26,993
Total Assets	7,813,165	7,271,951
Current liabilities:
Current portion of other long term notes	60,029	16,403
Accounts payable and accrued liabilities	706,342	554,604
Contract liabilities	672,644	576,474
Current portion of lease obligation	65,265	141,536
Total current liabilities	1,504,280	1,289,017
Related party convertible notes payable	2,500,000	2,500,000
Other long term notes, net of current portion	372,476	157,578
Lease obligation, net of current portion	0	2,692
Total liabilities	4,376,756	3,949,287
Shareholders' equity:
Common stock: $.01 par value; 60,000,000 authorized shares; 14,026,920 shares issued at March 31, 2022, and 13,967,257 shares issued at December 31, 2021	140,271	139,674
Capital in excess of par value	19,805,712	19,733,996
Accumulated deficit	(16,494,624)	(16,536,056)
Stockholders' Equity before Treasury Stock	3,451,359	3,337,614
Less - Common stock in treasury, at cost (4,600 shares)	(14,950)	(14,950)
Total shareholders' equity	3,436,409	3,322,664
Total Liabilities and shareholders' equity	$ 7,813,165	$ 7,271,951

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2022	Dec. 31, 2021
CONDENSED CONSOLIDATED BALANCE SHEETS
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	60,000,000	60,000,000
Common stock, shares issued	14,026,920	13,967,257
Treasury stock, shares	4,600	4,600

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Total revenue	$ 2,437,096	$ 2,779,548
Cost and expenses:
Cost of goods sold	1,677,531	1,966,807
Selling, general and administrative expenses	676,551	608,758
Costs and Expenses, Total	2,354,082	2,575,565
Income from operations	83,014	203,983
Other income (expense):
Gain on forgiveness of PPP loan	0	973,166
Interest expense-net	(41,582)	(36,815)
Nonoperating Income (Expense)	(41,582)	936,351
Income before income taxes	41,432	1,140,334
Income tax (provision) benefit	0	0
Net income	$ 41,432	$ 1,140,334
Net income per common share - basic	$ 0.00	$ 0.08
Net income per common share - diluted	$ 0.00	$ 0.08
Weighted average shares outstanding - basic	13,992,489	13,820,328
Weighted average shares outstanding - diluted	14,586,524	14,099,251

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CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($)	Common Stock	Capital in excess of par value	Accumulated Deficit	Treasury Stock	Total
Beginning balance at Dec. 31, 2020	$ 138,251	$ 19,516,363	$ (18,284,953)	$ (14,950)	$ 1,354,711
Beginning balance (in shares) at Dec. 31, 2020	13,824,928
401K contribution	$ 0	0	0	0	0
401K contribution (in shares)	0
Stock-based compensation expense	$ 0	29,303	0	0	29,303
Net income	0	0	1,140,334	0	1,140,334
Ending balance at Mar. 31, 2021	$ 138,251	19,545,666	(17,144,619)	(14,950)	2,524,348
Ending balance (in shares) at Mar. 31, 2021	13,824,928
Beginning balance at Dec. 31, 2021	$ 139,674	19,733,996	(16,536,056)	(14,950)	3,322,664
Beginning balance (in shares) at Dec. 31, 2021	13,967,257
401K contribution	$ 597	50,158	0	0	50,755
401K contribution (in shares)	59,663
Stock-based compensation expense	$ 0	21,558	0	0	21,558
Net income	0	0	41,432	0	41,432
Ending balance at Mar. 31, 2022	$ 140,271	$ 19,805,712	$ (16,494,624)	$ (14,950)	$ 3,436,409
Ending balance (in shares) at Mar. 31, 2022	14,026,920

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Cash flows from operating activities:
Net income	$ 41,432	$ 1,140,334
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Depreciation and amortization	54,645	42,375
401K common stock contribution - non cash item	50,755	0
Stock based compensation	21,558	29,303
Gain on forgiveness of PPP loan	0	(973,166)
Changes in operating assets and liabilities:
Accounts receivable	87,281	(451,809)
Inventories, net	(367,952)	177,885
Other assets	117,282	19,966
Accounts payable and accrued liabilities	147,846	145,992
Contract liabilities	96,170	(200,659)
Total adjustments and changes	251,211	(1,210,113)
Net cash provided by (used in) operating activities	292,643	(69,779)
Cash flows from investing activities:
Capital expenditures	(515,928)	(13,554)
Net cash (used in) investing activities	(515,928)	(13,554)
Cash flows from financing activities:
Principal payments on notes payable-other	214,897	0
Net cash (used in) financing activities	214,897	0
Net (decrease) in cash and cash equivalents	(8,388)	(83,333)
Cash and cash equivalents at beginning of period	1,801,188	1,129,703
Cash and cash equivalents at end of period	1,792,800	1,046,370
Supplemental disclosure of cash flow information:
Interest paid	42,113	37,824
Income taxes paid	0	0
Supplemental disclosure of non-cash investing and financing activities:
Acquisition of equipment by issuing a note payable	$ 270,320	$ 0

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2022

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

The condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments of a normal recurring nature considered necessary for a fair presentation have been included. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. For further information, refer to the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

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

Management Estimates

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

Accounts Receivable

Accounts receivable are carried at net realizable value, net of write-offs and allowances. The Company establishes an allowance for doubtful accounts based on estimates as to the collectability of accounts receivable. Management specifically analyzes past-due accounts receivable balances and, additionally, considers bad debt history, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. Uncollectible accounts receivable are written-off when it is determined that the balance will not be collected. Reserves for uncollectible accounts receivable are recorded as part of selling, general and administrative expenses in the Consolidated Statements of Operations, and were $46,000 at March 31, 2022, and $90,000 at December 31, 2021.

Inventories

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

Inventories are comprised of the following and are shown net of inventory reserves of $2,398,000 and $2,480,000 at March 31, 2022 and December 31, 2021, respectively:

	March 31,		December 31,
	2022		2021
	(Unaudited)
		(in thousands)
Raw materials	$	1,158	$	1,160
Work in process, including manufactured parts and components		1,426		1,020
Finished goods		309		345
	$	2,893	$	2,525

Income Taxes

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

In evaluating the Company’s ability to recover deferred tax assets in future periods, management considers the available positive and negative factors, including the Company’s recent operating results, the existence of cumulative losses and near-term forecasts of future taxable income consistent with the plans and estimates that management uses to manage the underlying business. A significant piece of objective negative evidence evaluated was the cumulative loss incurred by the Company over the three-year period ended December 31, 2021. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future growth.

On the basis of this evaluation as of March 31, 2022, the Company’s management concluded that it is more likely than not that the Company will not be able to realize any portion of the benefit on the deferred tax asset balance of $3,302,000 and therefore the Company continues to maintain a valuation allowance for the full amount of the net deferred tax asset balance. When sufficient positive evidence exists, the Company’s income tax expense will be charged with the increase or decrease in its valuation allowance. An increase or reversal of the Company’s valuation allowance could have a significant negative or positive impact on the Company’s future earnings.

For the three months ended March 31, 2022 and 2021, the Company did not record a current provision for income taxes due to the permanent difference related to loan forgiveness and the availability of net operating loss carryforwards to offset taxable income for both income tax and financial reporting purposes.

Net Income (Loss) per Common Share

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

For the three months ended March 31, 2022, 2,500,000 common shares and 1,875,000 common shares from warrants issuable upon conversion of outstanding related party convertible notes were excluded from the computation of basic and diluted net income per common share because their effect is anti-dilutive. In addition, 162,500 common stock options were excluded from the computation of basic and diluted net income per common share because their effect is anti-dilutive.

For the three months ended March 31, 2021, 2,500,000 common shares and 1,875,000 common shares from warrants issuable upon conversion of outstanding related party convertible notes were excluded from the computation of basic and diluted net income per common share because their effect is anti-dilutive. In addition, 476,300 common stock options were excluded from basic and diluted net income per common share because their effect is anti-dilutive.

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

	Three Months Ended					Three Months Ended
	March 31, 2022					March 31, 2021
	Income(Loss)		Shares	Per Share		Income(Loss)		Shares	Per Share
	(Numerator)		(Denominator)	Amount		(Numerator)		(Denominator)	Amount
Basic Income Per Share:
Net Income	$	41,432	13,992,489	$	0.00	$	1,140,334	13,820,328	$	0.08
Effect of dilutive securities:
Convertible Notes		—	—		—		—	—		—
Accrued Interest on Convertible Notes		—	—		—		—	—		—
Warrants		—	—		—		—	—		—
Stock Options		—	594,035		—		—	278,923		—
Diluted Income Per Share:	$	41,432	14,586,524	$	0.00	$	1,140,334	14,099,251	$	0.08

Stock-Based Compensation

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

Recent Accounting Standards

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”) which amended guidance on the accounting for credit losses on financial instruments within its scope. The guidance introduces an expected loss model for estimating credit losses, replacing the incurred loss model. The new guidance also changes the impairment model for available-for-sale debt securities, requiring the use of an allowance to record estimated credit losses (and subsequent recoveries). The new guidance is effective for interim and annual periods beginning in 2023, with earlier application permitted. The Company does not expect that the adoption of this guidance will have a material impact on the Company’s consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU update is intended to simplify the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. This guidance is effective for the Company for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company does not expect the adoption of this guidance will have a material impact on the Company’s consolidated financial statements.

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REVENUE

3 Months Ended

Mar. 31, 2022

REVENUE

REVENUE

NOTE 2 –REVENUE

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

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

The Company’s performance obligations under long-term government contracts are generally satisfied over time. Revenue from products or services transferred to customers under these performance obligations accounted for approximately 0% and 1.5% of revenue for the three months ended March 31, 2022 and 2021, respectively. This revenue is generally recognized using an input measure based upon the proportion of actual costs incurred to estimated total project costs, which is a method used to best depict the Company’s performance to date under the terms of the contract.

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

The majority of the Company’s revenue is from products and services transferred to customers at a point in time and was approximately 100% and 98.5% of revenue for the three months ended March 31, 2022 and 2021, respectively. The Company recognizes revenue at the point in time in which the customer obtains control of the product or service, which is generally when product title passes to the customer upon shipment. In limited cases, title does not transfer and revenue is not recognized until the customer has received the products at its physical location.

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

	Three Months Ended
	March 31,
	2022		2021
Aerospace & Defense	$	847,293	$	1,176,330
Process Control & Metrology		1,403,133		1,077,376
Laser Systems		64,567		114,746
Scientific / R&D		122,103		411,096
Total	$	2,437,096	$	2,779,548

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

	Three Months Ended
	March 31,
	2022		2021
Transfer at point in time	$	2,437,096	$	2,739,329
Transfer over time		—		40,219
Total net sales	$	2,437,096	$	2,779,548

The timing of revenue recognition, billings and cash collections results in billed receivables, costs in excess of billings (contract assets), and billings in excess of costs (contract liabilities, previously deferred revenue) on the Consolidated Balance Sheet. Contract liabilities also include customer advances or prepayments. Costs in excess of billings and billings in excess of costs associated with long-term government contracts were not significant at March 31, 2022 or 2021. At March 31, 2022 and 2021, there was no remaining revenue to be recognized from the long-term government contracts.

On March 31, 2022, the Company had approximately $17.4 million of performance obligations, which is also referred to as backlog. Approximately 22% of the March 31, 2022, backlog is related to projects that will extend beyond March 31, 2023.

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EQUITY COMPENSATION PROGRAM AND STOCK BASED COMPENSATION

3 Months Ended

Mar. 31, 2022

EQUITY COMPENSATION PROGRAM AND STOCK BASED COMPENSATION

EQUITY COMPENSATION PROGRAM AND STOCK BASED COMPENSATION

NOTE 3- EQUITY COMPENSATION PROGRAM AND STOCK BASED COMPENSATION

a)    Stock Option Expense

The Company’s results of operations for the three months ended March 31, 2022 and 2021, include stock-based compensation expense for stock option grants totaling $21,558 and $29,302, respectively. The following table shows the amounts for stock-based compensation included in cost of sales and selling, general and administrative expense for the three months ended March 31, 2022 and 2021:

	Three Months Ended
	March 31,
	2022		2021
Cost of sales	$	3,252	$	7,202
Selling, general and administrative		18,306		22,101
Total stock-based compensation expense	$	21,558	$	29,303

As of March 31, 2022 and 2021, there were $299,000 and $211,000 of unrecognized compensation cost, net of estimated forfeitures, related to non-vested stock options, which are expected to be recognized over a weighted average period of approximately 1.54 and 1.57 years, respectively.

There were 200,000 stock options granted during each of the three months ended March 31, 2022, and 2021. The following range of weighted-average assumptions were used to determine the fair value of stock option grants during the three months ended March 31, 2022 and 2021:

	Three Months Ended
	March 31,
	2022		2021
Expected Dividend yield	—	%	—	%
Expected Volatility	105	%	106	%
Risk-free interest rate	1.54	%	0.86	%
Expected term	10	years	10	years

b)    Stock Option Activity

The following table represents stock options granted, exercised and forfeited during the three months ended March 31, 2022:

		Weighted		Weighted
		Average		Average
		Exercise		Remaining	Aggregate
	Number of	Price per		Contractual	Intrinsic
Stock Options	Options	Option		Term (years)	Value
Outstanding January 1, 2022	1,152,667	$	0.60	7.40	$	107,573
Granted	200,000		1.20	—		—
Exercised	—		—	—		—
Expired/Forfeited	—		—	—		—
Outstanding March 31, 2022	1,352,667	$	0.69	7.38	$	970,105
Exercisable at March 31, 2022	1,011,832	$	0.59	5.95	$	854,550

The following table represents non-vested stock options granted, vested and forfeited for the three months ended March 31, 2022:

	Weighted-average
	Grant-date Fair Value
	Options	($)
Non-Vested - January 1, 2022	276,670	0.89
Granted	200,000	1.09
Vested	(135,835)	0.70
Forfeited	—	—
Non-Vested - March 31, 2022	340,835	0.89

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STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2022

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY

NOTE 4 - STOCKHOLDERS’ EQUITY

The Company approved a matching contribution to participants in the Inrad Optics 401k Plan (the “Plan”) for the year ended December 31, 2021, in February 2022. The Company contributed 59,663 common shares of Inrad Optics, Inc. and cash of $76,133 to the Plan in March, 2022.

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RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2022

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

NOTE 5 – RELATED PARTY TRANSACTIONS

On July 22, 2020, the maturity dates of a $1,500,000 Subordinated Convertible Promissory Note to Clarex Limited (“Clarex”) and a $1,000,000 Subordinated Convertible Promissory Note to an affiliate of Clarex were each extended to April 1, 2024, from April 1, 2021. The notes bear interest at 6%. Interest accrues yearly and is payable on maturity. Unpaid interest, along with principal, may be converted into securities of the Company as follows: the notes are convertible in the aggregate into 1,500,000 units and 1,000,000 units, respectively, with each unit consisting of one share of common stock and one warrant. Each warrant allows the holder to acquire 0.75 shares of common stock at a price of $1.35 per share. As part of the agreement to extend the maturity date of the notes, the expiration dates of the warrants were extended from April 1, 2024 to April 1, 2027.

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OTHER LONG-TERM NOTES

3 Months Ended

Mar. 31, 2022

OTHER LONG-TERM NOTES

OTHER LONG-TERM NOTES

NOTE 6 – OTHER LONG-TERM NOTES

Other Long-Term Notes consist of the following:

	March 31,		December 31,
	2022		2021
	(Unaudited)
	(in thousands)
U.S. Small Business Administration term note payable in equal monthly installments of $1,922 and bearing an interest rate of 4.0% and expiring in July 2029	$	170	$	174
Long-term equipment financing in equal installments of $5,236 and bearing an interest rate of 6.1% and expiring in January 2027 (1)		262		—
Less current portion		(60)		(16)
Long-term debt, excluding current portion	$	372	$	158

(1) The Company purchased certain equipment in the three months ended March 31, 2022, financing approximately $270,000 at a fixed annual interest rate of 6.1% for five years in equal monthly installments.

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PAYROLL PROTECTION PROGRAM

3 Months Ended

Mar. 31, 2022

PAYROLL PROTECTION PROGRAM

PAYROLL PROTECTION PROGRAM

NOTE 7 – PAYROLL PROTECTION PROGRAM

On May 6, 2020, the Company received loan proceeds of approximately $973,000 (the “PPP Loan”), under the Paycheck Protection Program (“PPP”). The PPP was established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) which was enacted March 27, 2020. The PPP Loan, which was in the form of a promissory note, dated May 4, 2020, issued by the Company, initially matured on May 4, 2022, and bore interest at a rate of 1.0% per annum.

On January 19, 2021, the Company received notification from the Small Business Association that the Company’s Forgiveness Application of the PPP Loan and accrued interest, totaling $980,000, was approved in full, and the Company had no further obligations related to the PPP Loan. Accordingly, the Company recorded a gain on the forgiveness of the PPP Loan in the three-month period ending March 31, 2021.

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LEASE AMENDMENT

3 Months Ended

Mar. 31, 2022

LEASE AMENDMENT

LEASE AMENDMENT

NOTE 8 – LEASE AMENDMENT

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

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

An initial right-of-use asset of $0.8 million was recognized as a non-cash asset addition with the signing of the July 8, 2019, office lease. Cash paid for amounts included in the present value of operating lease liability was $0.1 million during the three months ended March 31, 2021, and is included in operating cash flows.

Operating lease costs were $0.1 million during each of the three months ended March 31, 2022 and 2021, respectively.

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IMPACT OF COVID-19

3 Months Ended

Mar. 31, 2022

IMPACT OF COVID-19

IMPACT OF COVID-19

NOTE 9 – IMPACT OF COVID-19

The COVID-19 pandemic has created significant volatility and economic disruption and the impact on our future consolidated results of operations remains uncertain. The extent to which COVID-19 impacts our employees, operations, customers, suppliers and financial results depends on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the pandemic (and whether there is a resurgence or multiple resurgences in the future, including the impact of new variants); government actions taken in response to the pandemic, including required shutdowns, vaccine or testing mandates; supply chain disruptions; rising inflation; labor shortages; and the effect on our customers demand for our products. We may also be impacted by state actions, orders and policies regarding the COVID-19 pandemic. While our operations were considered essential business under the Executive Orders of New Jersey’s Governor, we cannot predict whether new temporary closures, shelter-in-place orders, travel, or quarantine policies will have an impact on our operations.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2022

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business and Operations

Basis of Presentation

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

The condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments of a normal recurring nature considered necessary for a fair presentation have been included. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. For further information, refer to the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

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

Management Estimates

Management Estimates

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

Accounts receivable

Accounts Receivable

Accounts receivable are carried at net realizable value, net of write-offs and allowances. The Company establishes an allowance for doubtful accounts based on estimates as to the collectability of accounts receivable. Management specifically analyzes past-due accounts receivable balances and, additionally, considers bad debt history, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. Uncollectible accounts receivable are written-off when it is determined that the balance will not be collected. Reserves for uncollectible accounts receivable are recorded as part of selling, general and administrative expenses in the Consolidated Statements of Operations, and were $46,000 at March 31, 2022, and $90,000 at December 31, 2021.

Inventories

Inventories

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

Inventories are comprised of the following and are shown net of inventory reserves of $2,398,000 and $2,480,000 at March 31, 2022 and December 31, 2021, respectively:

	March 31,		December 31,
	2022		2021
	(Unaudited)
		(in thousands)
Raw materials	$	1,158	$	1,160
Work in process, including manufactured parts and components		1,426		1,020
Finished goods		309		345
	$	2,893	$	2,525

Income taxes

Income Taxes

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

In evaluating the Company’s ability to recover deferred tax assets in future periods, management considers the available positive and negative factors, including the Company’s recent operating results, the existence of cumulative losses and near-term forecasts of future taxable income consistent with the plans and estimates that management uses to manage the underlying business. A significant piece of objective negative evidence evaluated was the cumulative loss incurred by the Company over the three-year period ended December 31, 2021. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future growth.

On the basis of this evaluation as of March 31, 2022, the Company’s management concluded that it is more likely than not that the Company will not be able to realize any portion of the benefit on the deferred tax asset balance of $3,302,000 and therefore the Company continues to maintain a valuation allowance for the full amount of the net deferred tax asset balance. When sufficient positive evidence exists, the Company’s income tax expense will be charged with the increase or decrease in its valuation allowance. An increase or reversal of the Company’s valuation allowance could have a significant negative or positive impact on the Company’s future earnings.

For the three months ended March 31, 2022 and 2021, the Company did not record a current provision for income taxes due to the permanent difference related to loan forgiveness and the availability of net operating loss carryforwards to offset taxable income for both income tax and financial reporting purposes.

Net Income (Loss) per Common Share

Net Income (Loss) per Common Share

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

For the three months ended March 31, 2022, 2,500,000 common shares and 1,875,000 common shares from warrants issuable upon conversion of outstanding related party convertible notes were excluded from the computation of basic and diluted net income per common share because their effect is anti-dilutive. In addition, 162,500 common stock options were excluded from the computation of basic and diluted net income per common share because their effect is anti-dilutive.

For the three months ended March 31, 2021, 2,500,000 common shares and 1,875,000 common shares from warrants issuable upon conversion of outstanding related party convertible notes were excluded from the computation of basic and diluted net income per common share because their effect is anti-dilutive. In addition, 476,300 common stock options were excluded from basic and diluted net income per common share because their effect is anti-dilutive.

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

	Three Months Ended					Three Months Ended
	March 31, 2022					March 31, 2021
	Income(Loss)		Shares	Per Share		Income(Loss)		Shares	Per Share
	(Numerator)		(Denominator)	Amount		(Numerator)		(Denominator)	Amount
Basic Income Per Share:
Net Income	$	41,432	13,992,489	$	0.00	$	1,140,334	13,820,328	$	0.08
Effect of dilutive securities:
Convertible Notes		—	—		—		—	—		—
Accrued Interest on Convertible Notes		—	—		—		—	—		—
Warrants		—	—		—		—	—		—
Stock Options		—	594,035		—		—	278,923		—
Diluted Income Per Share:	$	41,432	14,586,524	$	0.00	$	1,140,334	14,099,251	$	0.08

Stock-based compensation

Stock-Based Compensation

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

Recent Accounting Standards

Recent Accounting Standards

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”) which amended guidance on the accounting for credit losses on financial instruments within its scope. The guidance introduces an expected loss model for estimating credit losses, replacing the incurred loss model. The new guidance also changes the impairment model for available-for-sale debt securities, requiring the use of an allowance to record estimated credit losses (and subsequent recoveries). The new guidance is effective for interim and annual periods beginning in 2023, with earlier application permitted. The Company does not expect that the adoption of this guidance will have a material impact on the Company’s consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU update is intended to simplify the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. This guidance is effective for the Company for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company does not expect the adoption of this guidance will have a material impact on the Company’s consolidated financial statements.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Mar. 31, 2022

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Schedule of inventory

	March 31,		December 31,
	2022		2021
	(Unaudited)
		(in thousands)
Raw materials	$	1,158	$	1,160
Work in process, including manufactured parts and components		1,426		1,020
Finished goods		309		345
	$	2,893	$	2,525

Schedule of reconciliation of shares used in calculation of basic and diluted earnings (loss) per common share

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

	Three Months Ended					Three Months Ended
	March 31, 2022					March 31, 2021
	Income(Loss)		Shares	Per Share		Income(Loss)		Shares	Per Share
	(Numerator)		(Denominator)	Amount		(Numerator)		(Denominator)	Amount
Basic Income Per Share:
Net Income	$	41,432	13,992,489	$	0.00	$	1,140,334	13,820,328	$	0.08
Effect of dilutive securities:
Convertible Notes		—	—		—		—	—		—
Accrued Interest on Convertible Notes		—	—		—		—	—		—
Warrants		—	—		—		—	—		—
Stock Options		—	594,035		—		—	278,923		—
Diluted Income Per Share:	$	41,432	14,586,524	$	0.00	$	1,140,334	14,099,251	$	0.08

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REVENUE (Tables)

3 Months Ended

Mar. 31, 2022

REVENUE

Schedule of disaggregation of revenue

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

	Three Months Ended
	March 31,
	2022		2021
Aerospace & Defense	$	847,293	$	1,176,330
Process Control & Metrology		1,403,133		1,077,376
Laser Systems		64,567		114,746
Scientific / R&D		122,103		411,096
Total	$	2,437,096	$	2,779,548

Schedule of net sales by timing of transfers of goods and services

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

	Three Months Ended
	March 31,
	2022		2021
Transfer at point in time	$	2,437,096	$	2,739,329
Transfer over time		—		40,219
Total net sales	$	2,437,096	$	2,779,548

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EQUITY COMPENSATION PROGRAM AND STOCK BASED COMPENSATION (Tables)

3 Months Ended

Mar. 31, 2022

EQUITY COMPENSATION PROGRAM AND STOCK BASED COMPENSATION

Schedule of Stock-based Compensation Included in Cost of Sales and Selling, General and Administrative Expense

	Three Months Ended
	March 31,
	2022		2021
Cost of sales	$	3,252	$	7,202
Selling, general and administrative		18,306		22,101
Total stock-based compensation expense	$	21,558	$	29,303

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

	Three Months Ended
	March 31,
	2022		2021
Expected Dividend yield	—	%	—	%
Expected Volatility	105	%	106	%
Risk-free interest rate	1.54	%	0.86	%
Expected term	10	years	10	years

Schedule of Share-based Compensation, Stock Options, Activity

The following table represents stock options granted, exercised and forfeited during the three months ended March 31, 2022:

		Weighted		Weighted
		Average		Average
		Exercise		Remaining	Aggregate
	Number of	Price per		Contractual	Intrinsic
Stock Options	Options	Option		Term (years)	Value
Outstanding January 1, 2022	1,152,667	$	0.60	7.40	$	107,573
Granted	200,000		1.20	—		—
Exercised	—		—	—		—
Expired/Forfeited	—		—	—		—
Outstanding March 31, 2022	1,352,667	$	0.69	7.38	$	970,105
Exercisable at March 31, 2022	1,011,832	$	0.59	5.95	$	854,550

Schedule of Share Based Compensation Arrangement By Share Based Payment Award Options Non Vested

The following table represents non-vested stock options granted, vested and forfeited for the three months ended March 31, 2022:

	Weighted-average
	Grant-date Fair Value
	Options	($)
Non-Vested - January 1, 2022	276,670	0.89
Granted	200,000	1.09
Vested	(135,835)	0.70
Forfeited	—	—
Non-Vested - March 31, 2022	340,835	0.89

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OTHER LONG-TERM NOTES (Tables)

3 Months Ended

Mar. 31, 2022

OTHER LONG-TERM NOTES

Schedule of Debt

	March 31,		December 31,
	2022		2021
	(Unaudited)
	(in thousands)
U.S. Small Business Administration term note payable in equal monthly installments of $1,922 and bearing an interest rate of 4.0% and expiring in July 2029	$	170	$	174
Long-term equipment financing in equal installments of $5,236 and bearing an interest rate of 6.1% and expiring in January 2027 (1)		262		—
Less current portion		(60)		(16)
Long-term debt, excluding current portion	$	372	$	158

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Inventories (Details) - USD ($)	Mar. 31, 2022	Dec. 31, 2021
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Raw materials	$ 1,158,000	$ 1,160,000
Work in process, including manufactured parts and components	1,426,000	1,020,000
Finished goods	309,000	345,000
Inventories, net	$ 2,892,823	$ 2,524,871

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Basic and diluted earnings (loss) per common share (Details) - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Income(Loss) (Numerator)
Net income (loss)	$ 41,432	$ 1,140,334
Convertible Notes	0	0
Accrued Interest on Convertible Notes	0	0
Warrants	0	0
Stock Options	0	0
Diluted Income (Loss) Per Share:
Net Income (Loss)	$ 41,432	$ 1,140,334
Shares (Denominator)
Weighted average shares outstanding - basic	13,992,489	13,820,328
Convertible Notes	0	0
Accrued Interest on Convertible Notes	0	0
Warrants	0	0
Stock Options	594,035	278,923
Diluted income (loss) per share:
Weighted average shares outstanding - diluted	14,586,524	14,099,251
Basic income (loss) per share:
Net income per common share - basic	$ 0.00	$ 0.08
Earnings per share diluted, conversion notes	0	0
Earnings per Share diluted, accrued interest on convertible notes	0	0
Earnings per share diluted, warrants	0	0
Earnings per share diluted, stock options	0	0
Diluted Income (Loss) Per Share:
Earnings Per Share, Diluted	$ 0.00	$ 0.08

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Inventory Reserves	$ 2,398,000		$ 2,480,000
Deferred Tax Assets, Valuation Allowance, Total	3,302,000
Income tax expenses	0	$ 0
Selling, General and Administrative Expenses
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Provision for Doubtful Accounts	$ 46,000		$ 90,000
Employee Stock Option
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	162,500	476,300
Warrant
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	1,875,000	1,875,000
Common Stock
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	2,500,000	2,500,000

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REVENUE - Disaggregation of Revenue (Details) - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Disaggregation of Revenue [Line Items]
Revenues	$ 2,437,096	$ 2,779,548
Aerospace & Defense
Disaggregation of Revenue [Line Items]
Revenues	847,293	1,176,330
Process Control & Metrology
Disaggregation of Revenue [Line Items]
Revenues	1,403,133	1,077,376
Laser Systems
Disaggregation of Revenue [Line Items]
Revenues	64,567	114,746
Scientific / R&D
Disaggregation of Revenue [Line Items]
Revenues	$ 122,103	$ 411,096

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REVENUE - Transfer of Goods and Services (Details) - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Disaggregation of Revenue [Line Items]
Revenues	$ 2,437,096	$ 2,779,548
Transferred at Point in Time
Disaggregation of Revenue [Line Items]
Revenues	2,437,096	2,739,329
Transferred over Time
Disaggregation of Revenue [Line Items]
Revenues	$ 0	$ 40,219

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REVENUE - Additional Information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Disaggregation of Revenue [Line Items]
Remaining revenue to be recognized from the long-term government contracts	$ 0	$ 0
Amount of performance obligation	$ 17,400,000
Percentage of remaining performance obligation	22.00%
Transferred over Time
Disaggregation of Revenue [Line Items]
Percentage of revenue from products or services	0.00%	1.50%
Transferred at Point in Time
Disaggregation of Revenue [Line Items]
Percentage of revenue from products or services	100.00%	98.50%

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EQUITY COMPENSATION PROGRAM AND STOCK BASED COMPENSATION (Details) - Employee Stock Option - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated Share-based Compensation Expense	$ 21,558
Cost of Sales
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated Share-based Compensation Expense	3,252	$ 7,202
Selling, General and Administrative
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated Share-based Compensation Expense	$ 18,306	$ 22,101

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EQUITY COMPENSATION PROGRAM AND STOCK BASED COMPENSATION - Weighted-average assumptions (Details)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
EQUITY COMPENSATION PROGRAM AND STOCK BASED COMPENSATION
Expected Dividend yield	0.00%	0.00%
Expected Volatility	105.00%	106.00%
Risk-free interest rate	1.54%	0.86%
Expected term	10 years	10 years

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EQUITY COMPENSATION PROGRAM AND STOCK BASED COMPENSATION - Stock Option Activity (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, Granted	200,000
Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options outstanding at beginning	1,152,667
Options, Granted	200,000
Options, Exercised	0
Option, Expired/Forfeited	0
Options outstanding at ending	1,352,667	1,152,667
Options, Exercisable at Ending	1,011,832
Weighted Average Exercise Price Per Options Outstanding at Beginning (in dollars per share)	$ 0.60
Weighted Average Exercise Price per Option, Granted	1.20
Weighted Average Exercise Price per Option, Exercised	0
Weighted Average Exercise Price per Option, Expired/Forfeited	0
Weighted Average Exercise Price Options Outstanding at Ending (in dollars per share)	0.69	$ 0.60
Weighted Average Exercise Price per Option, Exercisable at ending	$ 0.59
Weighted Average Remaining Contractual Term, Options Outstanding at Beginning	7 years 4 months 17 days	7 years 4 months 24 days
Weighted Average Remaining Contractual Term, Exercisable at Ending	5 years 11 months 12 days
Aggregate Intrinsic Value, Options Outstanding at Beginning (in dollars)	$ 970,105	$ 107,573
Aggregate Intrinsic Value, Options Exercisable at Ending	$ 854,550

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EQUITY COMPENSATION PROGRAM AND STOCK BASED COMPENSATION - Non-vested stock option activity (Details)	3 Months Ended
	Mar. 31, 2022 $ / shares shares
EQUITY COMPENSATION PROGRAM AND STOCK BASED COMPENSATION
Options - Non-vested | shares	276,670
Options - Granted | shares	200,000
Options - Vested | shares	(135,835)
Options - Forfeited | shares	0
Options - Non-vested | shares	340,835
Weighted-Average Grant-Date Fair Value - Non-vested at Ending balance (in dollars per share) | $ / shares	$ 0.89
Weighted-Average Grant-Date Fair Value - Granted (in dollars per share) | $ / shares	1.09
Weighted-Average Grant-Date Fair Value - Vested (in dollars per share) | $ / shares	0.70
Weighted-Average Grant-Date Fair Value - Forfeited (in dollars per share) | $ / shares	0
Weighted-Average Grant-Date Fair Value - Non-vested at Ending balance (in dollars per share) | $ / shares	$ 0.89

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EQUITY COMPENSATION PROGRAM AND STOCK BASED COMPENSATION - Additional Information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures, Total	200,000
Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated Share-based Compensation Expense	$ 21,558
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized	$ 299,000	$ 211,000
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Period for Recognition (in years)	1 year 6 months 14 days	1 year 6 months 25 days

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STOCKHOLDERS' EQUITY (Details)	1 Months Ended
	Mar. 31, 2022 USD ($) shares
STOCKHOLDERS' EQUITY
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period | shares	59,663
Cash Contributions | $	$ 76,133

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RELATED PARTY TRANSACTIONS (Details) - Subordinated convertible notes [Member]	Jul. 22, 2020 USD ($) item $ / shares shares
Related Party Transaction [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	6.00%
Common Stock
Related Party Transaction [Line Items]
Number of shares/warrants comprised in a unit (in shares)	1
Warrants To Purchase Common Stock Number Of Shares Per Warrant	0.75
Investment Warrants, Exercise Price | $ / shares	$ 1.35
Warrant
Related Party Transaction [Line Items]
Number of shares/warrants comprised in a unit (in shares)	1
Clarex
Related Party Transaction [Line Items]
Convertible Subordinated Debt | $	$ 1,500,000
Debt Instrument, Convertible, Number of Equity Instruments | item	1,500,000
Affiliate Of Clarex
Related Party Transaction [Line Items]
Convertible Subordinated Debt | $	$ 1,000,000
Debt Instrument, Convertible, Number of Equity Instruments | item	1,000,000

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OTHER LONG-TERM NOTES (Details) - USD ($)	Mar. 31, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Less current portion	$ (60,029)	$ (16,403)
Long-term debt, excluding current portion	372,000	158,000
Us Small Business Administration Note Payable
Debt Instrument [Line Items]
U.S. Small Business Administration term note payable in equal monthly installments of $1,922 and bearing an interest rate of 4.0% and expiring in July 2029.	170,000	$ 174,000
Long-term Equipment Financing
Debt Instrument [Line Items]
Long-term equipment financing in equal installments of $5,236 and bearing an interest rate of 6.1% and expiring in January 2027	$ 262,000

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OTHER LONG-TERM NOTES - Additional information (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
Us Small Business Administration Note Payable
Debt Instrument [Line Items]
Monthly installment payment	$ 1,922,000	$ 1,922,000
Fixed interest rate	4.00%	4.00%
Long-term Equipment Financing
Debt Instrument [Line Items]
Debt term	5 years
Debt, face amount	$ 270,000
Equal installment	$ 5,236,000	$ 5,236,000
Fixed interest rate	6.10%	6.10%

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PAYROLL PROTECTION PROGRAM (Details) - USD ($)	May 06, 2020	Jan. 19, 2021	May 04, 2020
Debt Instrument [Line Items]
PPP Loan and accrued interest forgiven		$ 980,000
PPP Loan
Debt Instrument [Line Items]
Proceeds from PPP Loan	$ 973,000
Debt Instrument, Interest Rate, Stated Percentage			1.00%

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LEASE AMENDMENT - Additional information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Jul. 08, 2019
LEASE AMENDMENT
Lease right-of-use, net	$ 50,654		$ 125,724	$ 800,000
Operating Lease, Payments		$ 100,000
Operating lease costs	$ 100,000	$ 100,000