UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the quarterly period ended |
SEPTEMBER 30, 2014 |
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 |
|
(I.R.S. Employer |
or organization) |
|
Identification Number) |
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 formal
fiscal year, if changed since last report) |
Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes
x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data file required to be submitted and posted 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 and
post such files). Yes x
No ¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large
accelerated filer, accelerated filer and smaller reporting company” in Rule 12b-2 of the exchange Act. (Check one):
Large accelerated filer o |
|
Accelerated filer o |
|
Non-accelerated filer o |
|
Smaller reporting company x |
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
¨ No x
The number of shares of the registrant’s
common stock outstanding, $0.01 par value, as of November 11, 2014 was 12,349,493
INRAD OPTICS, INC. AND SUBSIDIARIES
INDEX
INRAD OPTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| |
September 30, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
(Unaudited) | | |
(Audited) | |
| |
| | | |
| | |
Assets | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 877,468 | | |
$ | 2,451,263 | |
Accounts receivable (net of allowance for doubtful accounts of $15,000 in 2014 and 2013) | |
| 1,439,436 | | |
| 1,236,958 | |
Inventories, net | |
| 2,737,755 | | |
| 3,129,855 | |
Other current assets | |
| 137,285 | | |
| 144,581 | |
Total current assets | |
| 5,191,944 | | |
| 6,962,657 | |
Plant and equipment: | |
| | | |
| | |
Plant and equipment, at cost | |
| 15,713,935 | | |
| 15,638,759 | |
Less: Accumulated depreciation and amortization | |
| (14,041,886 | ) | |
| (13,931,775 | ) |
Total plant and equipment | |
| 1,672,049 | | |
| 1,706,984 | |
Precious Metals | |
| 553,925 | | |
| 474,960 | |
Goodwill | |
| 311,572 | | |
| 311,572 | |
Intangible Assets, net | |
| 299,837 | | |
| 358,760 | |
Other Assets | |
| 33,122 | | |
| 33,122 | |
| |
| | | |
| | |
Total Assets | |
$ | 8,062,449 | | |
$ | 9,848,055 | |
| |
| | | |
| | |
Liabilities and Shareholders’ Equity | |
| | | |
| | |
Current Liabilities: | |
| | | |
| | |
Current portion of other long term notes | |
$ | 156,600 | | |
$ | 156,600 | |
Accounts payable and accrued liabilities | |
| 1,131,618 | | |
| 967,963 | |
Customer advances | |
| 170,643 | | |
| 146,784 | |
Total current liabilities | |
| 1,458,861 | | |
| 1,271,347 | |
| |
| | | |
| | |
Related Party Convertible Notes Payable | |
| 2,500,000 | | |
| 2,500,000 | |
| |
| | | |
| | |
Other Long Term Notes, net of current portion | |
| 596,054 | | |
| 712,868 | |
Total liabilities | |
| 4,554,915 | | |
| 4,484,215 | |
| |
| | | |
| | |
Commitments | |
| | | |
| | |
| |
| | | |
| | |
Shareholders’ Equity: | |
| | | |
| | |
Common stock: $.01 par value; 60,000,000 authorized shares; 12,354,093 shares issued at September 30, 2014 and 12,050,603 issued at December 31, 2013 | |
| 123,543 | | |
| 120,508 | |
Capital in excess of par value | |
| 18,431,225 | | |
| 18,293,782 | |
Accumulated deficit | |
| (15,032,284 | ) | |
| (13,035,500 | ) |
| |
| 3,522,484 | | |
| 5,378,790 | |
Less - Common stock in treasury, at cost (4,600 shares) | |
| (14,950 | ) | |
| (14,950 | ) |
Total shareholders’ equity | |
| 3,507,534 | | |
| 5,363,840 | |
| |
| | | |
| | |
Total Liabilities and Shareholders’ Equity | |
$ | 8,062,449 | | |
$ | 9,848,055 | |
See Notes to Condensed Consolidated Financial
Statements (Unaudited)
INRAD OPTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| |
Three Months Ended September 30, | | |
Nine Months Ended September 30, | |
| |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| |
| | |
| | |
| | |
| |
Total revenue | |
$ | 2,912,538 | | |
$ | 2,756,488 | | |
$ | 7,044,464 | | |
$ | 8,528,212 | |
| |
| | | |
| | | |
| | | |
| | |
Cost and expenses: | |
| | | |
| | | |
| | | |
| | |
Cost of goods sold | |
| 2,309,808 | | |
| 2,206,529 | | |
| 6,598,486 | | |
| 6,971,423 | |
Restructuring costs | |
| — | | |
| — | | |
| 120,616 | | |
| — | |
Selling, general and administrative expenses | |
| 744,815 | | |
| 743,190 | | |
| 2,348,501 | | |
| 2,506,662 | |
| |
| 3,054,623 | | |
| 2,949,719 | | |
| 9,067,603 | | |
| 9,478,085 | |
| |
| | | |
| | | |
| | | |
| | |
Loss from operations | |
| (142,085 | ) | |
| (193,231 | ) | |
| (2,023,139 | ) | |
| (949,873 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other expense: | |
| | | |
| | | |
| | | |
| | |
Interest expense—net | |
| (45,544 | ) | |
| (45,562 | ) | |
| (135,728 | ) | |
| (137,038 | ) |
Gain on sale of plant and equipment | |
| — | | |
| — | | |
| 65,075 | | |
| 31,000 | |
Gain on sale of precious metals | |
| 97,008 | | |
| — | | |
| 97,008 | | |
| — | |
| |
| 51,464 | | |
| (45,562 | ) | |
| 26,355 | | |
| (106,038 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss before income taxes | |
| (90,621 | ) | |
| (238,793 | ) | |
| (1,996,784 | ) | |
| (1,055,911 | ) |
| |
| | | |
| | | |
| | | |
| | |
Income tax (provision) benefit | |
| — | | |
| — | | |
| — | | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
Net loss | |
$ | (90,621 | ) | |
$ | (238,793 | ) | |
$ | (1,996,784 | ) | |
$ | (1,055,911 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss per common share—basic and diluted | |
$ | (0.01 | ) | |
$ | (0.02 | ) | |
$ | (0.16 | ) | |
$ | (0.09 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average shares outstanding—basic and diluted | |
| 12,349,490 | | |
| 12,046,003 | | |
| 12,188,408, | | |
| 11,956,712 | |
See Notes to Condensed Consolidated Financial
Statements (Unaudited)
INRAD OPTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
| |
Nine Months Ended September 30, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Cash flows from operating activities: | |
| | | |
| | |
Net (loss) | |
$ | (1,996,784 | ) | |
$ | (1,055,911 | ) |
| |
| | | |
| | |
Adjustments to reconcile net (loss) to net cash (used in) provided by operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 462,884 | | |
| 414,367 | |
401K common stock contribution | |
| 71,255 | | |
| 80,922 | |
Gain on sale of plant and equipment | |
| (65,075 | ) | |
| (31,000 | ) |
Gain on sale of precious metals | |
| (97,008 | ) | |
| — | |
Stock based compensation | |
| 69,223 | | |
| 106,819 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| (202,478 | ) | |
| 376,164 | |
Inventories, net | |
| 392,100 | | |
| 268,456 | |
Other current assets | |
| 7,296 | | |
| 28,627 | |
Accounts payable and accrued liabilities | |
| 163,655 | | |
| 90,877 | |
Customer advances | |
| 23,859 | | |
| (189,610 | ) |
Total adjustments and changes | |
| 825,711 | | |
| 1,145,622 | |
Net cash (used in) provided by operating activities | |
| (1,171,073 | ) | |
| 89,711 | |
| |
| | | |
| | |
Cash flows from investing activities: | |
| | | |
| | |
Capital expenditures | |
| (382,331 | ) | |
| (448,406 | ) |
Proceeds from sale of plant and equipment | |
| 78,380 | | |
| 31,000 | |
Proceeds from sale of precious metals | |
| 18,043 | | |
| — | |
Net cash (used in) investing activities | |
| (285,908 | ) | |
| (417,406 | ) |
| |
| | | |
| | |
Cash flows from financing activities: | |
| | | |
| | |
Principal payments on notes payable-other | |
| (116,814 | ) | |
| (111,759 | ) |
Net cash (used in) financing activities | |
| (116,814 | ) | |
| (111,759 | ) |
| |
| | | |
| | |
Net (decrease) in cash and cash equivalents | |
| (1,573,795 | ) | |
| (439,454 | ) |
| |
| | | |
| | |
Cash and cash equivalents at beginning of period | |
| 2,451,263 | | |
| 3,089,013 | |
| |
| | | |
| | |
Cash and cash equivalents at end of period | |
$ | 877,468 | | |
$ | 2,649,559 | |
| |
| | | |
| | |
Supplemental Disclosure of Cash Flow Information: | |
| | |
| |
Interest paid | |
$ | 101,000 | | |
$ | 144,000 | |
Income taxes paid | |
$ | 2,000 | | |
$ | 2,000 | |
| |
| | | |
| | |
Non-Cash Financing Activities: | |
| | |
| |
Exchange of precious metals | |
$ | 126,755 | | |
$ | — | |
See Notes to Condensed Consolidated Financial
Statements (Unaudited)
INRAD OPTICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
NOTE 1 -SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements include the accounts of Inrad Optics, Inc. and its subsidiaries (collectively, the “Company”).
All significant intercompany balances and transactions have been eliminated.
The condensed
consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S.
GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
In the opinion of management, all adjustments of a normal recurring nature considered necessary for a fair presentation have been
included. The results of operations of any interim period are not necessarily indicative of the results of operations to
be expected for the full fiscal year. For further information, refer to the consolidated financial statements and accompanying
footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.
In preparing these consolidated financial
statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the 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.
Inventories
Inventories are stated at the lower of
cost (first-in-first-out basis) or market. 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, in thousands:
| |
September 30, 2014 | | |
December 31,
2013 | |
| |
(Unaudited) | | |
| |
Raw materials | |
$ | 971 | | |
$ | 1,012 | |
Work in process, including manufactured parts and components | |
| 1,025 | | |
| 1,155 | |
Finished goods | |
| 742 | | |
| 963 | |
| |
$ | 2,738 | | |
$ | 3,130 | |
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 years in which the differences are
expected to reverse.
For the three and nine months ended September
30, 2014 and 2013 the Company did not record a current provision for either state or federal income tax due to the losses incurred
for both income tax and financial reporting purposes or the availability of net operating loss carry-forwards to offset against
federal and state income tax.
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 in the three-year period ended December 31, 2013 as well as
the nine months ended September 30, 2014. 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 September
30, 2014, the Company’s management concluded that it is more likely than not that the Company will not be able to realize
any portion of the benefit on the net deferred tax balance of $4,444,500 and therefore the Company continues to maintain a valuation
allowance for the full amount of the net deferred tax 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.
Net (Loss) Income per Common Share
Basic net (loss) income per common share
is computed by dividing net (loss) income by the weighted average number of common shares outstanding during the period. Diluted
net (loss) income per common share is computed by dividing net (loss) income by the weighted average number of common shares and
common stock equivalents outstanding, calculated on the treasury stock method for options, stock grants and warrants using the
average market prices during the period, including potential common shares issuable upon conversion of outstanding convertible
notes, except if the effect on the per share amounts is anti-dilutive.
For the three and nine months ended September
30, 2014, all common stock equivalents were excluded from the computation of diluted net loss per share because their effect is
anti-dilutive. This included 2,500,000 common shares and 1,875,000 warrants issuable upon conversion of outstanding related party
convertible notes in each respective period, in addition to 908,017 common stock options and grants, in each respective period.
For the three and nine months ended September
30, 2013, all common stock equivalents were excluded from the computation of diluted net loss per share because their effect is
anti-dilutive. This included 2,500,000 common shares and 1,875,000 warrants issuable upon conversion of outstanding related party
convertible notes in each respective period, in addition to 969,021 common stock options and grants, in each respective period.
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.
Recently Adopted Accounting Standards
In May 2014, the Financial Accounting Standards
Board ("FASB") issued Accounting Standard Update ("ASU") No. 2014-09, Revenue from Contracts with Customers
(Topic 606). This updated outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts
with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new guidance
is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15,
2016; early adoption is not permitted. Companies have the option of using either a full retrospective or a modified retrospective
approach to adopt the guidance. This update could impact the timing and amounts of revenue recognized. The Company is currently
evaluating the effect that implementation of this update will have on its consolidated financial position and results of operations
upon adoption.
In June 2014, the FASB issued Accounting
Standards Update No. 2014-12, "Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target
Could be Achieved after the Requisite Service Period" ("ASU 2014-12") which requires that a performance target that
affects vesting and that could be achieved after the requisite service period be treated as a performance condition. ASU 2014-12
is effective for annual and interim periods within the annual period beginning after December 15, 2015. The Company does not expect
the adoption of ASU 2014-12 to have a material impact on the Company’s financial position or results of operations.
In August 2014, the FASB issued ASU
No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance
on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue
as a going concern and to provide related footnote disclosures. ASU No. 2014-15 will become effective for annual periods
beginning after December 15, 2016 and early adoption is permitted. The Company does not expect the adoption of ASU No. 2014-15
to have a material impact on the Company’s financial position or results of operations.
NOTE 2- EQUITY COMPENSATION PROGRAM AND STOCK BASED COMPENSATION
The Company's results of operations for
the three months ended September 30, 2014 and 2013 include stock-based compensation expense for stock option grants totaling $11,260
and $30,324, respectively. Such amounts have been included in the accompanying Condensed Consolidated Statements of Operations
within cost of goods sold in the amount of $5,946 ($15,892 for 2013), and selling, general and administrative expenses in the amount
of $5,314 ($14,432 for 2013).
The Company's results of operations for
the nine months ended September 30, 2014 and 2013 include stock-based compensation expense for stock option grants totaling $68,011
and $103,587, respectively. Such amounts have been included in the accompanying Condensed Consolidated Statements of Operations
within cost of goods sold in the amount of $33,136 ($54,980 for 2013), and selling, general and administrative expenses in the
amount of $34,875 ($48,527 for 2013).
As of September 30, 2014 and 2013, there
were $49,919 and $117,908 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 .5 years and .75 years, respectively.
There were 103,000 and 80,000 stock options
granted during the nine months ended September 30, 2014 and 2013. The following range of weighted-average assumptions were used
to determine the fair value of stock option grants during the nine months ended September 30, 2014 and 2013:
| |
Nine Months Ended | |
| |
September 30, | |
| |
2014 | | |
2013 | |
Expected Dividend yield | |
| — | % | |
| — | % |
Expected Volatility | |
| 116.4 | % | |
| 98.1 - 110 | % |
Risk-free interest rate | |
| 1.9 | % | |
| 1.9 – 2.1 | % |
Expected term | |
| 10 years | | |
| 8 -10 years | |
The following table represents stock options
granted, exercised and forfeited during the nine month period ended September 30, 2014:
Stock Options | |
Number of
Options | | |
Weighted
Average Exercise Price per Option | | |
Weighted
Average Remaining Contractual
Term (years) | | |
Aggregate
Intrinsic Value | |
| |
| | |
| | |
| | |
| |
Outstanding at January 1, 2014 | |
| 979,021 | | |
$ | .96 | | |
| 5.7 | | |
$ | — | |
Granted | |
| 103,000 | | |
| .27 | | |
| | | |
| | |
Exercised | |
| — | | |
| — | | |
| | | |
| | |
Expired/Forfeited | |
| (174,004 | ) | |
| .77 | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Outstanding at September 30, 2014 | |
| 908,017 | | |
$ | .91 | | |
| 5.4 | | |
$ | — | |
| |
| | | |
| | | |
| | | |
| | |
Exercisable at September 30, 2014 | |
| 694,064 | | |
$ | 1.06 | | |
| 5.1 | | |
$ | — | |
The following table represents
non-vested stock options granted, vested and forfeited for the nine months ended September 30, 2014.
| |
Options | | |
Weighted-Average Grant-Date
Fair Value | |
Non-vested - January 1, 2014 | |
| 206,897 | | |
$ | 0.55 | |
Granted | |
| 103,000 | | |
$ | 0.26 | |
Vested | |
| (79,516 | ) | |
$ | 0.88 | |
Forfeited | |
| (16,428 | ) | |
$ | 0.59 | |
Non-vested – September 30, 2014 | |
| 213,953 | | |
$ | 0.38 | |
The total fair value of options vested
during the nine months ended September 30, 2014 and 2013 was $70,294 and $87,099, respectively.
| c) | Restricted Stock Unit Awards |
There were no grants of restricted stock
units granted under the 2010 Equity Compensation Program during the nine months ended September 30, 2014 and 2013.
Restricted stock units granted usually
vest over a three year period at the rate of one-third per year, contingent on continued employment or service during the vesting
period.
All of the restricted stock units last
granted were fully vested during the first quarter of 2014 and therefore there was no remaining expense to be recognized during
the three months ended September 30, 2014. The Company's results of operations for the three months ended September 30, 2013 include
stock-based compensation expense for restricted stock unit grants totaling $1,212 and such amounts have been included in the accompanying
Consolidated Statements of Operations within selling, general and administrative expenses.
The Company's results of operations for
the nine months ended September 30, 2014 and 2013 include stock-based compensation expense for restricted stock unit grants totaling
$1,212 and $3,636, respectively, and such amounts have been included in the accompanying Consolidated Statements of Operations
within selling, general and administrative expenses.
A summary of the Company’s non-vested
restricted stock units at September 30, 2014 is presented below:
| |
Restricted Stock Units | | |
Weighted-Average Grant-Date
Fair Value | |
Non-vested - January 1, 2014 | |
| 5,000 | | |
$ | 0.97 | |
Granted | |
| — | | |
| — | |
Vested | |
| (5,000 | ) | |
$ | 0.97 | |
Forfeited | |
| — | | |
| — | |
Non-vested – September 30, 2014 | |
| — | | |
| — | |
NOTE 3- STOCKHOLDERS’ EQUITY
For the nine months ended September 30,
2014, the Company issued 5,000 common shares on vesting of restricted stock unit awards. In April 2014, the Company issued an
additional 298,490 common shares to the Inrad Optics 401k plan as a match to employee contributions for the 2013 Plan year.
NOTE 4 – RELATED PARTY TRANSACTIONS
On July 29, 2014, 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, 2017 from April 1, 2015. 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, the expiration dates of the warrants were extended from April 1,
2018 to April 1, 2020. The Company is currently paying interest of $37,500 quarterly.
NOTE 5 – OTHER LONG TERM NOTES
On July 26, 2012, the Company entered into
a term loan agreement in the amount of $750,000 with Valley National Bank, Wayne, NJ. The loan is payable in equal monthly installments
over five years beginning in August 2012 and bears an interest rate of 4.35% annually. The loan is secured with a security interest
in new equipment, which the Company placed in service in 2013. In 2012, the Company made a down-payment of $500,000 on the equipment
and the balance of the purchase price of $325,000 was paid in 2013 when the equipment was placed in service. The full amount of
the asset was included in Machinery and Equipment at December 31, 2013.
The Company also has a note payable to
the U.S. Small Business Administration which bears interest at the rate of 4.0% and is due in 2032.
Other Long Term Notes consist of the following:
| |
September 30, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
(in thousands) | |
Term Note Payable, payable in equal monthly installments of $13,953 and bearing an interest rate of 4.35% and expiring in July 2017 | |
$ | 445 | | |
$ | 554 | |
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 April 2032. | |
$ | 307 | | |
$ | 315 | |
| |
| 752 | | |
| 869 | |
Less current portion | |
| (156 | ) | |
| (156 | ) |
Long-term debt, excluding current portion | |
$ | 596 | | |
$ | 713 | |
NOTE 6 – RESTRUCTURING COSTS
In November 2013, the Company announced
plans to move the operations of its Sarasota, FL metal optics facility to its Northvale, NJ optical production center and corporate
headquarters. The consolidation is part of a larger strategic effort to improve the Company's value proposition to its customers
as well as improve its financial results. The physical integration of all development and production in one location is intended
to enhance operating efficiencies and reduce overhead costs and centralize the Company's optical problem solving skills. This will
allow for beneficial cross-pollination of expertise, including leveraging the Florida metal optics facility's single point diamond
turning capability over a broader range of optical materials.
The decision also reflects the continued
uncertainty in U.S. defense funding. Much of the Company's metal optics business serves U.S. government installations and defense
prime contractors. The Company experienced a decrease in bookings from these customer groups in 2013 and through the nine months
ended September 30, 2014.
As of March 31, 2014, the Company completed
the transfer of the Sarasota operations to the Northvale facility and closed the Florida facility as scheduled. Through June 30,
2014, the Company incurred one-time charges of approximately $746,000, primarily associated with employee termination and relocation,
moving of equipment, preparation of the Northvale facility and other general costs associated with consolidation. No additional
costs were incurred during the three months ended September 30, 2014. Of the total, $313,000 of restructuring costs were expensed
in the fourth quarter of 2013 and approximately $121,000 were expensed in the six months ended June 30, 2014. Also included in
the total are capital expenditures for leasehold improvements associated with this project. In the six months ended June 30, 2014,
these expenditures were approximately $312,000 and have been included in Plant and Equipment in the Company’s Condensed Consolidated
Balance Sheets at September 30, 2014. Depreciation of these and associated capital expenditures began in the third quarter
of 2014. Accrued restructuring costs related to severance and other costs in the amount of $47,000 are expected to be paid through
the end of 2014 and are included in Accounts Payable and Accrued Liabilities in the Company’s Condensed Consolidated Balance
Sheets at September 30, 2014.
Overall annual reductions in operational
costs are expected to be in the range of $800,000 to $1,000,000 per year starting in the second quarter of 2014.
The following table summarizes restructuring
information by type of cost:
(In Thousands) | |
Termination and Relocation | | |
Northvale Facility Expenditures | | |
Moving and
Other Costs | | |
Total | |
| |
| | |
| | |
| | |
| |
Restructuring costs expected to be incurred | |
$ | 227 | | |
$ | 374 | | |
$ | 145 | | |
$ | 746 | |
| |
| | | |
| | | |
| | | |
| | |
Accrued balance December 31, 2013 | |
$ | 227 | | |
$ | — | | |
$ | 70 | | |
$ | 297 | |
Provisions | |
| — | | |
| 41 | | |
| 18 | | |
| 59 | |
Cash expenditures | |
| (25 | ) | |
| (41 | ) | |
| (58 | ) | |
| (124 | ) |
Accrued balance March 31, 2014 | |
$ | 202 | | |
$ | — | | |
$ | 30 | | |
$ | 232 | |
Provisions | |
| — | | |
| 5 | | |
| 57 | | |
| 62 | |
Cash expenditures | |
| (155 | ) | |
| (5 | ) | |
| (87 | ) | |
| (247 | ) |
Accrued balance June 30, 2014 | |
$ | 47 | | |
$ | — | | |
$ | — | | |
$ | 47 | |
Provisions | |
| — | | |
| — | | |
| — | | |
| — | |
Cash expenditures | |
| — | | |
| — | | |
| — | | |
| — | |
Accrued balance September 30, 2014 | |
$ | 47 | | |
$ | — | | |
$ | — | | |
$ | 47 | |
NOTE 7 – WORKFORCE REDUCTION
In the first quarter of 2013, the Company
instituted a plan to reduce its combined headcount by approximately 11%, in order to reduce costs and align its workforce with
current business requirements while ensuring the Company would continue to meet its customers’ needs. The reductions affected
both the Company’s Northvale, NJ and the Sarasota, FL operations. Annualized savings from the reductions are expected to
be approximately $700,000. Severance and other separation costs of $112,000 and $29,000 were expensed in the first and second quarters
of 2013, respectively, and offset payroll savings of approximately $45,000 and $175,000, respectively.
| ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS |
Caution Regarding Forward Looking
Statements
This Quarterly Report
contains forward-looking statements as that term is defined in the federal securities laws. The Company wishes to insure that any
forward-looking statements are accompanied by meaningful cautionary statements in order to comply with the terms of the safe harbor
provided by the Private Securities Litigation Reform Act of 1995. The events described in the forward-looking statements contained
in this Quarterly Report may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated
benefits or other consequences of the Company’s plans or strategies, projected or anticipated benefits of acquisitions made
by the Company, projections involving anticipated revenues, earnings, or other aspects of the Company’s operating results.
The words “may”, “will”, “expect”, “believe”, “anticipate”, “project”,
“plan”, “intend”, “estimate”, and “continue”, and their opposites and similar expressions
are intended to identify forward-looking statements. The Company cautions you that these statements are not guarantees of future
performance or events and are subject to a number of uncertainties, risks, and other influences, many of which are beyond the Company’s
control, that may influence the accuracy of the statements and the projections upon which the statements are based. Factors which
may affect the Company’s results include, but are not limited to, the risks and uncertainties discussed in Items 1A, 7 and
7A of the Company’s most recent Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the Securities
and Exchange Commission on March 31, 2014. 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 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, 2013. In preparing our 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. These include estimates used in evaluating goodwill and intangibles for impairment such as
market multiples used in determining the fair value of reporting units, discount rates applicable in determining net present
values of future cash flows, projections of future sales, earnings and cash flow and capital expenditures. It also includes
estimates about the amount and timing of future taxable income in determining the Company’s 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, 2013.
Results of Operations
Inrad Optics, Inc.’s business falls
into two main categories: Optical Components and Laser System Devices/Instrumentation.
The Optical Components category is focused
on custom optics manufacturing. The Company specializes in high-end precision components. It develops, manufactures and delivers
precision custom optics and thin film optical coating services through its Custom and Metal Optics operations. Glass, metal, and
crystal substrates are processed using modern manufacturing equipment, complex processes and techniques to manufacture components,
deposit optical thin films, and assemble sub-components used in advanced photonic systems. The majority of custom optical components
and optical coating services supplied are used in inspection, process control systems, defense and aerospace electro-optical systems,
laser system applications, industrial scanners, and medical system applications.
The Laser System Devices/Instrumentation
category includes the growth and fabrication of crystalline materials with electro-optic (EO) and non-linear optical properties
for use in both standard and custom products. This category also includes crystal based devices and associated
instrumentation. The majority of crystals, crystal components and laser devices manufactured are used in laser systems, defense
EO systems, medical lasers and R&D applications by engineers within corporations, universities and national laboratories.
The Company operates a manufacturing facility
in Northvale, New Jersey. As of March 31, 2014 the Company’s Florida facility has been closed and all manufacturing operations
have been relocated to the New Jersey facility.
Revenue
Sales for the three months ended September
30, 2014 were $2,913,000, an increase of 5.7%, from $2,756,000 for the three months ended September 30,
2013. Sales to the both the defense and the process control & metrology markets increased. This was partially offset
by a decrease in sales to laser and the university and national lab markets.
Despite the sales increase in the Company’s
third quarter, sales for the nine months ended September 30, 2014 decreased 17.4%, or $7,044,000 compared to $8,528,000 for the
nine months ended September 30, 2013. This was primarily due to sales decreases in the defense and the university and national
lab markets. The decline in sales to the defense market was mainly due to two large customers which were partially offset by an
increase in another large customer. The decrease in the university and national lab market was spread across a number of the Company’s
existing customers. An increase in shipments to customers in the laser systems and process control & metrology markets partially
offset the overall decline in sales
Sales of Optical Components decreased by
6.8% while sales of Laser Devices/Instrumentation products decreased by 40.5% for the nine months ended September 30, 2014 compared
with the prior year.
In the nine months ended September 30,
2014, the Company had one major customer representing more than 10% of total sales. In the nine months ended September 30, 2013,
no one customer represented more than 10% of total sales.
The Company’s top five customers
represented 44.4% of total sales in the nine month period ended September 30, 2014, compared to 35.0% in the same period in 2013. Three of the same top five customers were included in the top five in the corresponding period
last year.
Orders booked during the first nine months
of 2014 increased to $9.2 million compared to $7.4 million in the comparable period last year.
Order backlog increased to $6.5 million
at September 30, 2014, compared to $4.4 million at December 31, 2013 and $4.6 million at September 30, 2013.
Cost of Goods Sold
For the three months ended September 30,
2014, cost of goods sold was $2,310,000 compared to $2,207,000 in the same quarter in 2013 or an increase of $103,000. For the
nine months ended September 30, 2014, cost of goods sold decreased by $252,000 or 3.6% to $6,719,000, including restructuring costs,
compared to $6,971,000 in the same period in 2013. As a percentage of sales, cost of goods sold decreased slightly in the three months
ended September 30, 2014 compared to the same period in 2013 but increased in the nine months ended September 30, 2014 compared
to the same period in 2013. The decrease in the dollar amount of cost of goods sold is mainly the result of the decrease in sales
noted above although at a lower level than the sales decrease due to the relatively fixed nature of the Company’s manufacturing
overhead costs.
Manufacturing wages and salaries including
related fringe benefits increased by 6.1% during the three months ended September 30, 2014 compared to the same period last year
principally due to the increase in the sales during the period but remained unchanged as a percent of sales during the period.
During the nine months ended September 30, 2014 manufacturing wages and salaries including related fringe benefits decreased by
4.3% compared to the same period last year. The decrease in 2014 included the impact of reductions made in the first and second
quarters of 2013 related to the workforce reduction discussed in Note 7 to the Condensed Consolidated Financial Statements.
Cost of goods sold in the nine months ended
September 30, 2014 includes $121,000 of restructuring costs related to the relocation of the Florida operations as discussed in
Note 6 to the Condensed Consolidated Financial Statements. Cost of goods sold for the nine months ended September 30, 2013 includes
severance costs of $66,000 that were recorded in the first six months of the year, offset by associated payroll savings of $134,000,
during the same period in 2013.
Material costs for the three and nine months
ended September 30, 2014 decreased to 18.0% and 18.1% of sales, respectively, compared with 18.2% and 19.6% in the same period
in 2013.
Gross margin improved in the three months
ended September 30 2014 compared to the same period in 2013 but decreased for the nine months ended September 30, 2014 as a result
of the factors discussed above. Gross margin in the third quarter of 2014 was $603,000, including restructuring costs, or 20.7%
versus $550,000 or 20.0% in the same period in 2013. For the nine months ended September 30, 2014, gross margin was $325,000, including
restructuring costs, or 4.6% versus $1,557,000 or 18.3% in the same period in 2013
Selling, General and Administrative
Expenses
Selling, general and administrative expenses
(“SG&A” expenses) in the three and nine months ended September 30, 2014 amounted to $745,000 or 25.6% of sales
and $2,349,000 or 33.3% of sales, respectively. This compared to $743,000 or 27.0% of sales and $2,507,000 or 29.4% of sales, respectively,
for the same periods in 2013. For the nine months ended September 30, 2013, SG&A expenses included approximately $75,000 in
severance costs related to the workforce reduction discussed in Note 7 to the Condensed Consolidated Financial Statements, offset
by associated payroll savings of $85,000 during the same period in 2013.
Loss from Operations
The Company had an operating loss of $142,000
in the three months ended September 30, 2014 compared with an operating loss of $193,000 in the three months ended September 30,
2013. For the nine months ended September 30, 2014, the Company had an operating loss of $2,023,000 compared with an operating
loss of $950,000 in the same period last year. The operating losses in 2014 and 2013 primarily reflect the impact of the level
of sales on the Company’s relatively fixed cost structure in those periods. The operating losses for the nine months ended
September 30, 2014 include $121,000 of restructuring costs related to the relocation of the Florida operations as noted above.
The operating losses for the nine months ended September 30, 2013 include payroll savings net of the impact of severance costs
from the reduction in workforce of approximately $79,000.
Other Income and Expense
Interest expense for the three months ended
September 30, 2014 was $46,000 compared to $48,000 in the same period in 2013. Interest expense for the nine months ended September
30, 2014 was $139,000 compared to $144,000 in the same period in 2013.
In the first quarter of 2014 and 2013,
the Company sold surplus machinery and recorded a gain of $65,000 and $31,000, respectively.
In the third quarter of 2014, the Company
recorded a gain of $97,000 as part of a transaction which included the sale of a platinum crucible for $145,000 and the purchase
of a re-designed replacement crucible for $127,000 for use in the production of high-temperature crystals.
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 years in which the differences are
expected to reverse.
For the three and nine months ended September
30, 2014 and 2013, the Company did not record a current provision for either state or federal income tax due to the losses incurred
for both income tax and financial reporting purposes or the availability of net operating loss carry-forwards to offset against
federal and state income tax.
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, 2013 as well as
the nine months ended September 30, 2014. 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
September 30, 2014, the Company’s management concluded that it is more likely than not that the Company will not be able
to realize any portion of the benefit on the net deferred tax balance of $4,444,500. As a result, the Company maintains a valuation
allowance for the full amount of the net deferred tax 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.
Net Loss
For the three and nine months ended September
30, 2014, the Company had a net loss of $91,000 and $1,997,000, respectively, compared to a net loss of $239,000 and $1,056,000,
respectively, for the same periods in 2013.
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 operating losses, for payment of accrued and current interest on convertible debt, for servicing of long
term debt and for capital expenditures.
As of September 30, 2014 and December 31,
2013, the Company had cash and cash equivalents of $877,000 and $2,451,000, respectively. The decrease is primarily due to the
net loss for the nine months ended September 30, 2014, as well as restructuring costs associated with the consolidation of the
Company’s Florida operations in the Northvale, New Jersey facility during the same period.
On July 26, 2012, the Company entered into
a term loan agreement with Valley National Bank, Wayne, NJ, in the amount of $750,000. The loan is secured with a security interest
in new equipment acquired by the Company in the amount of $825,000 which enhances the Company’s thin film coating capabilities.
The loan is repayable in equal monthly installments over five years beginning in August 2012 and bears an interest rate of 4.35%
annually. The equipment was placed in service in 2013 and the full amount of the asset was included in Machinery and Equipment
at December 31, 2013.
We believe that existing cash resources
held by the Company and anticipated to be generated from future operating activities are sufficient to meet working capital requirements,
anticipated capital expenditures, debt servicing payments and other contractual obligations over the next twelve months.
On July 29, 2014, 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, 2017 from April 1, 2015. 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, the expiration dates of the warrants were extended from April 1,
2018 to April 1, 2020. The Company is currently paying interest of $37,500 quarterly.
The following table summarizes net cash
(used in) operating, investing and financing activities for the nine months ended September 30, 2014 and 2013:
| |
Nine Months Ended | |
| |
September 30, | |
| |
2014 | | |
2013 | |
| |
(In thousands) | |
Net cash (used in) provided by operating activities | |
$ | (1,171 | ) | |
$ | 90 | |
Net cash (used in) investing activities | |
| (286 | ) | |
| (417 | ) |
Net cash (used in) financing activities | |
| (117 | ) | |
| (112 | ) |
| |
| | | |
| | |
Net (decrease) in cash and cash equivalents | |
$ | (1,574 | ) | |
$ | (439 | ) |
Net cash used in operating activities was
$1,171,000 for the nine months ended September 30, 2014 compared to net cash provided by operations of $90,000 in the same period
last year. The increase in net cash used in operating activities in the first nine months of 2014 compared to 2013 resulted primarily
from the higher net loss, before non-cash deductions for depreciation and amortization and stock based compensation, generated
in the current period partially offset by a decrease in inventory and an increase in accounts payable, net of an increase in accounts
receivable in the period. .
Accounts receivables increased by $202,000
at September 30, 2014 compared to a decrease of $376,000 the same period last year. The increase was mainly a result of the increase
in sales volume in the three months ended September 30, 2014 compared to same period in the prior year and the timing of the collection
of balances.
Inventory balances decreased by $392,000
as of September 30, 2014 compared to a decrease of $268,000 for the comparable period in 2013 primarily attributable to the lower
sales volumes for the for the nine months ended September 30, 2014 and 2013, respectively.
Accounts payable and accrued liabilities
increased by $164,000 in the nine months ended September 30, 2014 compared to an increase of $91,000 in 2013 principally due to
the timing of certain non-vendor payments as the Company strives to optimize its use of cash.
Net cash used in investing activities was
$286,000 during the nine months ended September 30, 2014 compared to $417,000 last year. Capital expenditures for the nine months
ended September 30, 2014 and 2013 were $382,000 and $448,000, respectively. The expenditures in 2014 were primarily incurred to
refurbish the Northvale operating facility for the relocation of the metal optics operation from the former Florida location. The
expenditures in 2013 were primarily incurred to refurbish operating facilities and to purchase manufacturing equipment. In the
first six months of 2013, the Company paid the balance of the purchase price of $325,000 of the new equipment when the equipment
was placed in service and the full amount of the asset was included in Machinery and Equipment at December 31, 2013.
During the nine months ended September
30, 2014, the Company recorded a gain of $97,000 as part of a transaction which included the sale of a platinum crucible for $145,000
and the purchase of a re-designed replacement crucible for $127,000 for use in the production of high-temperature crystals. This
was included in Precious Metals on the Condensed Consolidated Balance Sheet as of September 30, 2014.
In addition, the Company sold surplus machinery
related to the consolidation of the Florida operation in Northvale, NJ, during the nine months ended September 30, 2014 for net
proceeds of $78,380. In the nine months ended September 30, 2013, the Company received net proceeds of $31,000 on the sale of surplus
equipment.
Net cash used in financing activities was
$117,000 and $112,000 during the nine months ended September 30, 2014 and 2013, respectively, for required principal payments made
on other long term notes.
Overall, the Company had a net decrease
in cash and cash equivalents of $1,574,000 and $439,000 in the nine months ended September 30, 2014 and 2013, respectively.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The Company is a smaller reporting company
and is 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, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange
Act Rule 13a-15(e)) as of September 30, 2014 (the “Evaluation Date”), and based on such evaluation 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.
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
ITEM 6. EXHIBITS
| 11. | An exhibit showing the computation of per-share earnings is omitted because the computation can
be clearly determined from the material contained in this Quarterly Report on Form 10-Q. |
| 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, William J. Foote, 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, William J. Foote, pursuant to Section
906 of the Sarbanes-Oxley Act of 2002. |
| 101 | The following financial information from Inrad Optics, Inc.’s Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 2014 formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated
Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Cash Flows, and
(iv) the Notes to the Condensed Consolidated Financial Statements. |
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/ William J. Foote |
|
|
|
William J. Foote |
|
|
|
Chief Financial Officer, |
|
|
|
Secretary and Treasurer |
|
Date: November 14, 2014
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: November 14, 2014 |
/s/ Amy Eskilson |
|
President and Chief Executive Officer |
A signed original of this written statement
required by Section 302 has been provided to Inrad Optics, Inc. and will be retained by Inrad Optics, Inc. and furnished to the
Securities Exchange Commission or its staff upon request.
Exhibit 31.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT
OF 2002
I, William J. Foote 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: November 14, 2014 |
/s/ William J. Foote |
|
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.
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 September 30, 2014 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: November 14, 2014
|
/s/ Amy Eskilson |
|
President and Chief Executive Officer |
This certification has been furnished solely
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and has not been filed as part of the Report or as a separate disclosure
document.
A signed original of this written statement
required by Section 906 has been provided to Inrad Optics, Inc. and will be retained by Inrad Optics, Inc. and furnished to the
Securities Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with the Quarterly Report
of Inrad Optics, Inc. on Form 10-Q for the period ended September 30, 2014 filed with the Securities and Exchange Commission (the
“Report”), I, William J. Foote, Chief Financial 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: November 14, 2014
|
/s/ William J. Foote |
|
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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