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, 2012,2013, as filed with the Securities and Exchange Commission on April 1, 2013.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.

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, 2012.2013. In preparing our condensed consolidated financial statements, we made estimatesjudgments and judgmentsestimates 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, 2012.

Inrad Optics, Inc.’s business falls into two main categories: Optical Components and Laser System Devices and Devices/Instrumentation.

The Optical Components categorysegment of the business 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 Optics 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 and 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 the manufactured 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 facilitiesfacility in Northvale, New Jersey. As of March 31, 2014 the Company’s Florida facility has been closed and all manufacturing operations have been fully relocated to the New Jersey and Florida.

Sales for the three months ended September 30, 2013March 31, 2014 were $2,756,000,$1,904,000, a decrease of 5.1%,38.1% compared to $2,904,000with $3,077,000 for the three months ended September 30, 2012. Sales for the nine months ended September 30,March 31, 2013 were $8,528,000, a slight decrease from $8,625,000 for the nine months ended September 30, 2012. Salesprimarily due to decreases in the Optical Components category increased 6.1% for the nine months ended September 30, 2013 compared with the prior year. Sales of Laser Systems Devices and Instrumentation category decreased 11.1% over the same period.

In the first quarter of a few customers2014, the Company did not have sales to any customer representing more than 10% of the total sales versus one customer that recordedrepresented more than 10% of salesfor that period in 2013.There were no sales increases.

Loss from Operations

Interest expense for the three months ended September 30, 2013 decreasedMarch 31, 2014 was $47,000 compared to $48,000 compared to $50,000 infor the same period in 2012.2013. Interest expense for the nine months ended September 30, 2013 and 2012income was $144,000 and $132,000, respectively. The increase in the nine months period is mainly attributable to the addition of a term note with Valley National Bank in the third quarter of 2012.

In the first quarter of 2014 and 2013, the Company sold surplus machinery and recorded a gain of $31,000.

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,March 31, 2014 and 2013, and 2012, 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 recoverrealize 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, 20122013 as well as the ninethree months ended September 30, 2013.March 31, 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, 2013,March 31, 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 $3,432,000. As a result,$3,812,000 and therefore the Company maintainscontinues 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)

For the three and nine months ended September 30, 2013,March 31, 2014, the Company had a net loss of $239,000 and $1,056,000, respectively,$875,000 compared to a net loss of $280,000 and $762,000, respectively,$169,000 for the same periodsperiod in 2012.

The Company’s primary source of liquidity is cash and cash equivalents and on-going collection of our accounts receivable. The Company’s major use of cash in recentthe past two years has been for capital expenditures and for the payment of accruedrepayment and current interest on convertible debt, the servicing of long term debt and for capital expenditures.

As of September 30, 2013March 31, 2014 and December 31, 2012,2013, the Company had cash and cash equivalents of $2,650,000$1,996,000 and $3,089,000,$2,451,000, respectively.

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 will enhanceenhances 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. InDuring 2012, the Company made a down-payment of $500,000 on the equipment andwhich was included the payment inwith Other Assets in the consolidated balance sheet at March 31, 2013. The balance of the purchase price of $325,000 was paid in 2013 when the equipment was placed in service and the full amount of the asset was included in Machinery and Equipment at December 31, 2012. In March 2013, the Company made an installment payment in the amount of $242,500. During the second quarter of 2013, the installation of the equipment was completed and the final installment payment of $82,500 was made. The cost of the equipment including installment payments and associated installation costs were capitalized in the second quarter of 2013 in the amount of $897,000 with an additional $70,000 capitalized for leasehold improvements associated with the equipment.

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 12twelve months.

On July 31, 2012, 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, 2015 from April 1, 2013. 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 and expire on April 1, 2018. The Company paid current interest of $37,500 in each quarter during the ninethree months ended September 30, 2013March 31, 2014 and 2012.2013. The Company expects to make interest payments of $37,500 in the fourth quarterremaining quarters of 20132014 and in each quarter through the maturity date of the notes to satisfy the amounts of interest accruing in each quarter.

The following table summarizes net cash provided by (used in) operating, investing and financing activities for the ninethree months ended September 30, 2013March 31, 2014 and 2012:

Overall, the Company had a net decrease in cash and cash equivalents of $439,000$455,000 and $493,000 in the ninethree months ended September 30,March 31, 2014 and 2013, compared with a decrease of $153,000 in the corresponding period last year.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4.CONTROLS AND PROCEDURES