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 March 31, 1999
-------------------------------------------------
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, 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 |_|
Common shares of stock outstanding as of May 1, 1999:
4,100,678 shares
<PAGE>
INRAD, Inc.
INDEX
Page Number
-----------
Part I. FINANCIAL INFORMATION..................................................1
Item 1. Financial Statements:
Consolidated Balance Sheets as of March 31, 1999,
(unaudited) and December 31, 1998..........................1
Consolidated Statements of Operations for the
Three Months Ended March 31, 1999 and 1998
(unaudited)................................................2
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1999 and 1998
(unaudited)................................................3
Notes to Consolidated Financial Statements.................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................5
Changes in Securities and Use of Proceeds..................9
Part II. OTHER INFORMATION.....................................................9
Item 6. Exhibits and Reports on Form 8-K...........................9
Signatures ...................................................................10
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INRAD, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998*
---- -----
Unaudited
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 418,890 $ 208,028
Accounts receivable, net 739,384 639,604
Inventories 1,294,631 1,433,081
Unbilled contract costs 185,087 125,096
Other current assets 72,053 64,626
----------- -----------
Total current assets 2,710,045 2,470,435
----------- -----------
Plant and equipment,
Plant and equipment at cost 5,309,154 5,216,544
Less: Accumulated depreciation
and amortization (4,671,860) (4,585,761)
----------- -----------
Total plant and equipment 637,294 630,783
Precious metals 286,156 282,396
Other assets 154,163 154,543
----------- -----------
Total assets $ 3,787,658 $ 3,538,157
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Note payable - Bank $ 70,000 $ 107,500
Current obligations under capital leases 5,936 8,007
Accounts payable and accrued liabilities 613,502 527,991
Advances from customers 87,040 30,887
Other current liabilities 32,400 40,400
----------- -----------
Total current liabilities 808,878 714,785
Secured Convertible Promissory Notes 250,000 250,000
Subordinated Convertible Notes 100,000 100,000
----------- -----------
Total liabilities 1,158,878 1,064,785
----------- -----------
Shareholders' equity:
Preferred Stock: $1,000 par value; 200 shares issued
and outstanding at March 31, 1999 and 0 shares
issued and outstanding at December 31, 1998 200,000 0
Common stock: $.01 par value; 4,100,678 shares
issued at March 31, 1999 and at December 31, 1998 41,007 41,007
Capital in excess of par value 8,237,718 8,237,718
Accumulated deficit (5,834,995) (5,790,403)
----------- -----------
2,643,730 2,488,322
Less - Common stock in treasury,
at cost (4,600 shares at March 31, 1999 and
at December 31, 1998) (14,950) (14,950)
----------- -----------
Total shareholders' equity 2,628,780 2,473,372
----------- -----------
Total liabilities and shareholders' equity $ 3,787,658 $ 3,538,157
=========== ===========
</TABLE>
* Derived from Audited Financial Statements
See Notes to Consolidated Financial Statements.
1
<PAGE>
INRAD, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended March 31
-----------------------------
1999 1998
---- ----
Revenues:
Product sales $ 1,415,620 $ 1,213,671
Contract R & D 249,857 165,663
----------- -----------
Total Revenue 1,665,477 1,379,334
----------- -----------
Cost and Expenses:
Cost of goods sold 1,047,558 922,592
Contract R & D expenses 262,742 175,136
Selling, general & administrative expenses 356,827 324,034
Internal R & D expenses 33,871 33,299
----------- -----------
Total Cost and Expenses 1,700,998 1,455,061
----------- -----------
Operating profit (loss) (35,521) (75,727)
Other income (expense):
Interest expense (9,736) (61,016)
Interest & other income, net 665 1,424
----------- -----------
Net income (loss) (44,592) (135,319)
Accumulated deficit, beginning of period (5,790,403) (5,158,635)
----------- -----------
Accumulated deficit, end of period $(5,834,995) $(5,293,954)
=========== ===========
Net loss per common share - basic and diluted (0.01) (0.06)
=========== ===========
Weighted average shares outstanding 4,100,678 2,109,271
=========== ===========
See Notes to Consolidated Financial Statements.
2
<PAGE>
INRAD, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three months Ended March 31
---------------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (44,592) $(135,319)
--------- ---------
Adjustments to reconcile net income
(loss) to cash provided by operating activities:
Depreciation and amortization 88,350 117,312
Changes in assets and liabilities:
Accounts receivable (99,780) (96,509)
Inventories 138,450 79,500
Unbilled contract costs (59,991) (106,948)
Other current assets (7,427) (12,815)
Precious metals (3,760) (4,921)
Other assets (1,870) (630)
Accounts payable and accrued liabilities 85,511 146,205
Advances from customers 56,153 11,681
Other current liabilities (8,000) (27,334)
--------- ---------
Total adjustments 187,636 105,541
--------- ---------
Net cash provided by (used in) operating activities 143,044 (29,778)
---------
Cash flows from investing activities:
Capital expenditures (92,611) (23,984)
--------- ---------
Net cash used in investing activities (92,611) (23,984)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of preferred stock 200,000 0
Principal payments of note payable - Bank (37,500) (30,000)
Principal payments of capital lease obligations (2,071) (7,142)
--------- ---------
Net cash provided by (used in) financing activities 160,429 (37,142)
--------- ---------
Net increase (decrease) in cash and cash equivalents 210,862 (90,904)
Cash and cash equivalents at beginning of period 208,028 209,142
--------- ---------
Cash and cash equivalents at end of period $ 418,890 $ 118,238
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
INRAD, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 -SUMMARY OF ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim consolidated financial statements of INRAD,
Inc. (the "Company") reflect all adjustments, which are of a normal recurring
nature, and disclosures which, in the opinion of management, are necessary for a
fair statement of results for the interim periods. It is suggested that these
consolidated financial statements be read in conjunction with the audited
consolidated financial statements as of December 31, 1998 and 1997 and for the
years then ended and notes thereto included in the Company's report on Form
10-K, filed with the Securities and Exchange Commission.
Inventory Valuation
Interim inventories as well as cost of goods sold are computed by using the
gross profit method of interim inventory valuation and applying an estimated
gross profit percentage based on the actual values for the preceding fiscal
year, unless the company believes that a different gross profit percentage may
more accurately reflect its current year's cost of goods sold and gross profit.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the Company's
financial statements or tax returns. Deferred tax assets and liabilities are
determined based on the difference between the financial statement carrying
amounts and the tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse. A
valuation allowance is established when deferred tax assets are not likely to be
realized.
Net Income (Loss) Per Share
Basic and diluted net income (loss) per share is computed using the weighted
average number of common shares outstanding. The potential dilutive effect of
securities which are common share equivalents, options, warrents, convertible
notes and convertilbe preferred stock, have been excluded from the diluted
computation because their effect is antidilutive.
NOTE 2 - INVENTORIES AND COST OF GOODS SOLD
For the three month period ended March 31, 1999, the Company used 74% as its
estimated cost of goods sold percentage. For the previous year, 1998, the actual
cost of goods sold percentage was 74.3%. The Company believes 74% better
approximates the expected 1999 annual cost of goods sold percentage based on
estimated profitability of actual sales through March 31, 1999 and the
anticipated annual level of product shipments and related costs.
4
<PAGE>
For the three month period ended March 31, 1998, the Company used 76% as its
estimated cost of goods sold percentage.
NOTE 3 -DEBT
Secured Convertible Promissory Note
Although by its terms the Note was due on July 8, 1997, it cannot be repaid
until the Chase Bank debt has been repaid in full. The Promissory note has been
classified as noncurrent in the accompanying balance sheet because the Note
holder has agreed not to demand payment prior to April 1, 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The following information contains forward-looking statements, including
statements with respect to the revenues to be realized from existing backlog
orders and ability to generate sufficient cash flow in the future. 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 Reform Act of 1995. Actual results may
vary from these forward-looking statements due to the following factors:
inability to maintain customer relationships and/or add new customers;
unforeseen overhead expenses that may adversely affect financial results or
other inability to operate with a positive cash flow. Readers are further
cautioned that the Company's financial results can vary from quarter to quarter,
and the financial results reported for the first three months may not
necessarily be indicative of future results. The foregoing is not intended to be
an exhaustive list of all factors which could cause actual results to differ
materially from those expressed in forward-looking statements made by the
Company. For more information about the Company, please review the Company's
most recent Form 10-K filed with the Securities & Exchange Commission.
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's unaudited consolidated financial statements presented elsewhere
herein. The discussion of results should not be construed to imply any
conclusion that such results will necessarily continue in the future.
Net Product Sales
Net product sales for the first quarter of 1999 increased $202,000, or 17% from
the comparable quarter in 1998. International shipments in the first three
months of 1999 were $488,000 (34% of total shipments) compared to $262,000 (22%)
for the first three months of 1998. Product
5
<PAGE>
sales during the first quarter of 1999 were greater than the prior year because
of increased orders in 1999 that we were able to ship during the first quarter,
primarily to our international clients.
The backlog of unfilled product orders was $1,733,000 at March 31, 1999,
compared with $1,426,000 at December 31, 1998 and $1,902,000 at March 31, 1998.
Cost of Goods Sold
For the three months period ended March 31, 1999, the Company used 74% as its
estimated cost of goods sold percentage. For the previous year, 1998, the actual
cost of goods sold percentage was 74.3%. The Company believes 74% better
approximates the expected 1999 annual cost of goods sold percentage based on
estimated profitability of actual sales through March 31, 1999 and the
anticipated annual level of product shipments and related costs.
For the three month period ended March 31, 1998, the Company used 76% as its
estimated cost of goods sold percentage.
Contract Research and Development
Contract research and development revenues were $250,000 for the three months
ended March 31, 1999, compared to $165,000 for the three months ended March 31,
1998. Related contract research and development expenditures, including
allocated indirect costs, for the quarter ended March 31, 1999 were $263,000
compared to $175,000 for the comparable 1998 quarter. Revenues increased from
1998 to 1999 due to a higher opening backlog of contracts. The Company expects
to continue to focus its future efforts on programs closely aligned with its
core business.
The Company's backlog of contract R&D was $1,101,000 at March 31, 1999, compared
with $1,110,000 at December 31, 1997 and $1,157,000 at March 31, 1998.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $33,000 or 10%, in the
first quarter of 1999. General and administrative expenses increased due to the
hiring of a new Chief Executive Officer and President, and selling expenses
increased due to additional commissions paid independent sales agents on
international sales.
Internal Research and Development Expenses
Research and development expenses for the quarter ended March 31, 1999 were
$34,000 compared to $33,000 for the quarter ended March 31, 1998. The Company is
focusing its internal Research and Development efforts in 1999 on a few new
products with short development cycles.
Interest Expense
Interest expense was $10,000 and $61,000 for the quarters ended March 31, 1999
and 1998, respectively. Interest expense is less in 1999 because on December 31,
1998 the Company converted $1,800,799 of notes payable and $441,789 of accrued
interest into 1,979,107 shares of common stock.
6
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
During the quarter ended March 31, 1997, the Company signed an agreement with
Chase Manhattan Bank (successor to Chemical Bank) amending the terms of its
credit facility. The new agreement requires monthly principal payments of
$10,000 for January 1997, and $7,500 from February 1997 until December 1997,
monthly principal payments of $10,000 from January 1998 until December 1998, and
monthly principal payments $12,500 from January 1999 until August 1999. A final
payment of $7,500 is due on September 1, 1999. All required payments to Chase
Manhattan Bank have been made on time.
In March 1999, a shareowner and debtholder of the Company agreed to purchase 500
shares of 10% convertible preferred stock at the price of $1,000 per share. Two
hundred shares were purchased for $200,000 in March 1999 and the remaining three
hundred shares will be purchased in June 1999 for $300,000. Dividends are
payable in common stock at the rate of $1.00 per share.
Capital expenditures, including internal labor and overhead charges, for the
three months ended March 31, 1999 and 1998 were $93,000 and $24,000,
respectively. Until the Company is generating satisfactory amounts of cash flow
from its operations, it is expected that future capital expenditures will be
kept to a minimum. Management believes that in the short term, this limitation
will not have a material effect on operations.
During the three month period ended March 31, 1999 and for each of the three
years in the period ended December 31, 1998, the Company had losses from
operations. Cash outflows during these periods have been funded on the basis of
borrowings from, and issuance of common and preferred stock and warrants to,
shareowners including the principal shareowner, as further described in the
Company's Annual Report on Form 10-K. The Company's liquidity is dependent upon
its ability to improve operating results and thereby generate adequate cash flow
from operations. It will also depend upon the continued willingness of a
Shareowner note holder to extend the due date of their note. Because of the
uncertainty relating to the Company's ability to improve operating results and
cash flows, there is substantial doubt about the Company's ability to continue
as a going concern.
Year 2000 Issue
The year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. Any computer
programs and hardware as well as software products and certain equipment and
machinery that are date sensitive may recognize a date using "00" as the Year
1900 rather than the Year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions or engage in normal
business activities for both the Company and its customers who rely on its
products.
The Company has divided the Year 2000 issue into two main areas: internal
information technology ("IT") and non-IT systems, including embedded technology
such as microprocessors;
7
<PAGE>
and external agents including critical suppliers, customers and other third
parties the Company utilizes for various processing functions.
The Company is evaluating new IT software systems to replace its non Y2K
compliant system. In the event we do not find a system that meets our
requirements, an upgrade that is Y2K compliant is available for our current
system. To date, based upon reviewing hardware, it has been determined that a
small amount of older computer equipment must be replaced, but the type and
amount are not significant and will be replaced in the ordinary course as
systems are upgraded. Financing has been arranged with a leasing company for the
Company to lease hardware and software.
The Company is in the process of assessing its Year 2000 exposure as it pertains
to non-IT systems, including manufacturing, research and development and key
relationships, such as vendors and customers. This includes the process of
identifying and prioritizing critical suppliers and customers and communicating
with them about their plans and progress in addressing the Year 2000 problem.
The Company also utilizes third-party vendors for processing data and payments,
e.g. payroll services, 401 (k) plan administration, check processing, medical
benefits processing, etc. The Company has initiated communications with these
vendors to determine the status of their systems. Should these vendors not be
compliant in a timely manner, the Company may be required to process
transactions manually or delay processing until such time as the vendors are
Year 2000 compliant. The review of non-IT systems and key third party
relationships is expected to be completed by the end of the second quarter of
1999. At this time the total cost to be Y2K compliant can not be estimated.
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third-party suppliers and customers,
the Company is unable to determine at this time whether the consequences of Year
2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition.
The future costs of the Company's Year 2000 efforts are expected to be funded
through future operating cash flows and the financing of hardware and software.
The requirements for the correction of Year 2000 issues and the date on which
the Company believes it will complete the Year 2000 modifications are based on
management's current best estimates, which were derived utilizing numerous
assumptions of future events including the continued availability of certain
resources, third-party modification plans and other factors. However, there can
be no guarantee that these estimates will be achieved and actual results could
differ materially from those anticipated. Specific factors that may cause such
material differences include, but are not limited to, the availability of
personnel trained in this area, the ability to locate and collect all relevant
computer data and similar uncertainties.
No contingency plans are developed to date. Contingency plans will be prepared
so that the Company's critical business processes can be expected to continue to
function on January 1, 2000 and beyond. The Company's contingency plans will be
structured to address both remediation of systems and their components and
overall business operating risk. These plans
8
<PAGE>
are intended to mitigate both internal risks as will a potential risks in the
supply chain of the Company's suppliers and customers.
Changes in Securities and Use of Proceeds
The Company sold 200 shares of its Series A 10% Convertible Preferred Stock for
$200,000 on March 25, 1999. There was one purchaser, an institution which was a
major shareholder of the Company prior to the purchase. The Series A Preferred
Stock is convertible into Common Stock of the Company at a rate of $1.00 per
share. The issuance of the Series A Preferred Stock was, and the issuance of the
underlying Common Stock, if converted, will be, exempt from registration under
Section 4(2) of the Securities Act of 1933, as amended, as not involving public
offering.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits:
10.25 Agreement with Clarex to purchase 500 shares of Preferred Stock.
10.26 Employment contract with Devaunshi Sampat.
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.
27. Financial Data Schedule.
(B) Reports on Form 8-K:
None.
9
<PAGE>
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, Inc.
By: /s/ Charles J. Lucy
-------------------------------------
Charles J. Lucy
President and Chief Executive Officer
By: /s/ James L. Greco
-------------------------------------
James L. Greco
Chief Financial Officer
(Chief Accounting Officer)
Date: May 12, 1999
10
Clarex Limited
P.O. Box N3016
Nassau, Bahamas
Dr. Warren Ruderman March 10,1999
INRAD, Inc.
181 Legrand Avenue
Northvale, NJ 07647
Dear Dr. Ruderman:
This letter is written to evidence our agreement to invest $500,000 in INRAD, in
the form of 500 newly offered shares of 10%, convertible preferred stock, with a
$1,000 par value. Dividends will be paid in shares of INRAD's common stock, at
the rate of $1.00 per share. The conversion into common stock will also be at
the rate of $1.00 per share.
This funding is to take place in two installments, the first on March 25, 1999
for $200,000 and the second on June 25, 1999 for the remaining $300,000.
By signing below, we also represent to the Company that: ( i ) we are able to
bear the economic risk of the investment in the Shares, ( ii ) we recognize and
agree that the Shares have not been registered under the Securities Act of 1933,
as amended ( the "Act"), ( iii) we recognize and agree that we will be required
to continue to bear the risk of investment in the Shares for an indefinite
period, ( iv ) we recognize and agree that such Shares must be held by us
indefinitely unless a subsequent disposition is registered under the Act or is
exempted from registration under all applicable federal and state securities
laws, ( v ) we recognize and agree that the Company will enter stop transfer
notations in its records with respect to the stock certificates representing the
shares, ( vi ) we have knowledge and experience with respect to the Company and
its business and in financial and business affairs generally so that we are
capable of evaluating the merits and risks of the prospective investment;
( vii ) the Shares are being acquired for our own account for investment
purposes and not with the view of resale or distribution thereof by us and
( viii ) we recognize and agree that a restrictive legend will be placed on the
certificates representing the Shares summarizing the restrictions on
transferability outlined above. At our request, the Company will make its best
efforts to register the Shares, only if it qualifies to use Securities and
Exchange Commission Form S3.
Please confirm your acceptance of the terms of this letter by signing below.
Very truly yours,
Clarex LTD
Agreed to as of the 10th day of March, 1999
Warren Ruderman
INRAD, Inc.
Contract of Employment 4/8/99
Devaunshi Sampat
1999
Position: Vice President, Sales & Marketing
Base Salary: $109,000
Incentive: 20,000 stock options, issued in March 1999, exercisable at $1.00 per
share and according to the INRAD stock option plan.
o Reporting relationship - This position will report to the President and
CEO
o 3 weeks vacation
Bonus Plan: As described below
Protection: If INRAD terminates you for reasons other than performance, your
salary and health benefits will continue for a period of nine months or whenever
you start another job, whichever comes first. This does not apply if you
voluntarily quit your position at INRAD. As a part of this agreement, you will
not be employed either as an employee or as a consultant by any company which is
a direct competitor of INRAD for a period of nine months following your leaving
INRAD, either voluntarily or involuntarily.
--------------------------------------------------------
Bonus Plan
The goal is to build a Sales Department and devise a strategy to be able to
increase bookings for 1999 to a level of $5.0M for domestic and international
combined. We have a forecast and budget which was finalized on March 4, 1999
which gives us a specific target and known financial resources to enable a sales
strategy to be carried out.
Several individual goals must be achieved to realize the overall goal. In order
of priority, these goals are as follows:
1. INRAD Web Site:
Revamp the INRAD web site to provide extensive product information in a
user-friendly fashion. The end of the second quarter of 1999 and
reasonable effort shall generate the outline of the web site and
commitment made to implement by end of year. Inrad agrees that this goal
requires you to lead and coordinate this effort and that a significant
portion of the contents needs to be made available within a reasonable
time frame to you once a collective decision has been reached as to the
required material.
2. Sales Department Personnel:
An additional salesperson is needed for the department. The type of person
to be hired and his/her duties is left to your discretion. Every effort
must be made to decide on the structure of the department and aggressively
recruit for this position. Our goal would be to have this person start
work during the fourth quarter; sooner is better and later is acceptable
if the recruiting efforts are made and yet we find it is not possible to
locate and hire a qualified candidate within the given time frame.
3. Sales Literature:
New literature is very important to the growth of sales. Specifically we
need new data sheets for Pockels cells, ZGP, and Barium Nitrate. Several
people must offer support in this effort, but you must spearhead this
effort and complete these marketing tools by the end of 1999.
4. Advertising:
This is a time of transition for advertising of INRAD products. We
recognize the need for design of new ads and also a new "look" for INRAD
which should be consistent in the ads and on the web site. The planning
and decision stage in this case requires as much effort as the
implementation of generating and placing ads. For the purpose of the bonus
plan, the minimum requirement is that an advertising plan be generated by
end of the second quarter. Development of ads will continue through the
third and fourth quarter.
The bonus plan shall be structured as follows:
<PAGE>
<TABLE>
<S> <C>
o For completion of the four items listed above in the time frame indicated -> 5% of base
o For meeting goal of $5.0M in bookings, domestic & international -> 7.5% of base
10,000 options
o For bookings, domestic & international over $5.0M -> 1.6% open ended
o
o For bookings, domestic & international of $5.5M bookings 10,000 options
</TABLE>
List of companies considered direct competitors by Inrad and as it applies to
the protection clause.
o Cleveland Crystals (G&H)
o Quantum Technology
o Casix
o Gsanger (Splinder & Hoyer)
o Crystal Associates
o Deltronics
o VLOC
o GWU
o CSK Super Optronics
Ms. Maria Murray Ms. Davaunshi Sampat
VP Sales and Marketing Manager: International Sales
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from The
Consolidated Balance Sheet and Consolidated Statement of Operations found on
pages two and three on the Company's 10-Q for the Year to Date, and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 418,890
<SECURITIES> 0
<RECEIVABLES> 746,384
<ALLOWANCES> 7,000
<INVENTORY> 1,294,631
<CURRENT-ASSETS> 2,710,045
<PP&E> 5,309,154
<DEPRECIATION> 4,671,860
<TOTAL-ASSETS> 3,787,658
<CURRENT-LIABILITIES> 808,878
<BONDS> 350,000
0
200,000
<COMMON> 41,007
<OTHER-SE> 2,387,773
<TOTAL-LIABILITY-AND-EQUITY> 3,787,658
<SALES> 1,665,477
<TOTAL-REVENUES> 1,665,477
<CGS> 1,310,300
<TOTAL-COSTS> 1,310,300
<OTHER-EXPENSES> 33,871
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,736
<INCOME-PRETAX> (44,592)
<INCOME-TAX> 0
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</TABLE>
