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  Photonic
  Products Group, Inc.

  181
  Legrand Avenue

  Northvale,
  New Jersey 07647 U.S.A.

  201-767-1910

  Daniel
  Lehrfeld

  201-767-9644
  fax

  President
  and CEO

  dlehrfeld@inrad.com

  www.inrad.com

September 12,
2005

VIA FAX: 202-772-9218 & MAIL

Mr. David
Burton

Staff
Accountant

Securities
and Exchange Commission

450
Fifth Street, N.W.

Washington,
DC 20549

Re:
Answers to Your Questions on Photonic Products Group, Inc. Form 10K
For 2004

Reference:
SEC File No. 0-11668

Dear
Mr. Burton,

I
have provided below the answers to the questions raised by your team in its
review. The format followed is re-statement of each question followed by the
answer to that question.

As
requested, we close this letter with a Company statement acknowledging
responsibility for its filings.

1. Review Questions and Answers

re: Note 1 – Significant Accounting Policies

-h. Acquired Goodwill and Intangible Assets, page F-8

1.               (Question): We noted
that you recorded $443,750 in intangibles relating to the acquisition of Laser
Optics, Inc. in 2003 and you recorded an additional $656,124 of intangible
assets in 2004, primarily relating to the acquisition of MRC Precision Metal
Optics, Inc.  Please respond to the
following:

•                  For each of the intangibles recorded in
connection with these acquisitions, tell us the amortization period used and
your basis for the estimated useful life.
Tell us why you believe these lives are appropriate.  Revise future filings to provide the
disclosures required by paragraph 52 of SFAS 141.

(Answer):
Both the $443,750 in intangibles relating to the acquisition of Laser
Optics in 2003 and the $656,124 in intangible assets in 2004, relating to the
acquisition of MRC Precision Optics, Inc. are being amortized over a 14
year life.

The intangible assets of both Laser Optics and MRC
Optics consist of non-contractual customer relationships built over their
decades long existence, trademarks as businesses under those names, including
their name recognition (ie, brand identity) in their respective fields within
the optical components industry, their completed technology including their
highly developed manufacturing and product technology and specialized process
details and expertise. These intangible assets are behind the capabilities of
each of these companies to deliver high performance optical components to their
customers that few competitors can achieve. For Laser Optics their completed
technology is in the field of spherical optics, special crystal optics,
infra-red optics, and optical coatings. For MRC their completed technology is
in the field of metal optics, beryllium optics, gold and nickel plated optics,
and diamond-turned optics.

Photonic Products Group, Inc. acquired these
companies placing value on these intangible assets as well as on physical
assets. Taken as a whole, these intangible assets are behind the capabilities
and reputation each of these companies as well-regarded suppliers of specialty
optical components within the Photonics industry. Relationships and
capabilities developed over many years are long lasting. Both MRC and Laser
Optics have had long standing business dealings with their customer base, and
are sole-source (i.e. exclusive) suppliers to customers in many instances.

The Company has established the estimated life of
the intangible assets at fourteen years. The estimated useful life was
determined based upon review of industry practices in estimating useful lives
for these intangible asset categories. We determined that Laser Optics and MRC
were typical of the many companies comprising the Photonics Industry and
therefore did not warrant any special treatment when determining the estimated
useful life of the intangible assets.

In the future, filings will meet the full
disclosures of paragraph 52 of SFAS 141 that include a schedule of
weighted average amortization by period, in total and by category, and a
disclosure that the goodwill is not subject to federal or local tax
regulations.

•                  (Question): Tell us why you did not record
any amortization in 2003 and only $32,425 of amortization in 2004.  Tell us why you did not record any
amortization in 2004 relating to the acquisition of MRC in 2004.

(Answer):
Both acquisitions were completed in the 4th quarter of their
respective years.    As such,
amortization expense relating to the Laser Optics acquisition in FY 2003 would
have been $2,600 and $9,700 related to the MRC acquisition in FY 2004.  The Company considered these amounts
immaterial.

re:
Note 9 – Related party transactions, page F-16

2.               (Question): We note that you issued a $1.7
million promissory note to Clarex in 2003.
In 2004, you issued 200,000 warrants to Clarex “for offering the 2003
$1.7 million secured promissory note”.
Please respond to the following:

•                  Clarify why you issued the 200,000 warrants
to Clarex nearly a year after the offering of the promissory note.

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•                  Tell us if there was an agreement in place at
the time the initial promissory note was issued for you to issue the 200,000
warrants.

(Answer): In June of 2003, the assignee of our
bank loans (originally held by Wachovia Bank) demanded immediate payment based
on technical (ie. not timely payment-related)
defaults.  We sought alternative
bank financing.  However, to relieve any
time pressure, Clarex Holdings, Ltd. (“Clarex”), provided us with a secured
bridge loan of $1.7 million at a rate of 6% simple interest.  The term was fixed at of 18 months, although
our mutual intent was that Clarex be repaid as soon as new bank financing was
arranged.  Valley National Bank of New
Jersey informally indicated that it would lend the Company $1.7 million at the
same 6% interest rate, but only if Clarex guaranteed the loan.  Clarex indicated a willingness to do so if
the Company provided it fair consideration for the guarantee.

Other than Valley, the
Company had not been able to secure alternative bank financing at acceptable
terms.  At its Board meeting in July 2003,
the directors of the Company discussed the appropriate consideration to be
given to Clarex for guaranteeing the proposed Valley Bank loan. The Board
authorized the officers to grant Clarex 200,000 warrants with an exercise price
of $0.33 per share (20% discount to the closing price of $0.41 per share), to
be issued upon the completion of the Valley National loan. These details, as
well as the loan details were disclosed in the Company’s Form 10Q for the
period ended June 30, 2003.

Thereafter, difficulties
arose in negotiating definitive loan terms with Valley   National.
Clarex agreed that it would allow the Company to keep its loan in place
for its full term (ie. not as a temporary bridge loan), but that it expected to
receive at least the same consideration as had been approved and offered by the
Board for the (now no longer applicable) loan guarantee, as the risks it was
undertaking were at least as great and its rewards less, as its cash was now
being tied up for 18 months.

The Company agreed with the
position taken by Clarex as to its entitlement to consideration, but neither
party took action to finalize such consideration, and the issue was on the “back
burner” for both parties for many months.
It was not until March of 2004 that the CFO of the Company
revisited the question of the pending 200,000 warrants to Clarex.  He then negotiated a more favorable deal for
the Company than that previously approved by the Board, as the exercise price
of the warrants was increased to $0.425 per share, representing an
approximately 9% discount to the closing price of the Company’s stock on March 30,
2004 of $0.46 per share. The warrants were then issued on that date.

•                  (Question): Tell us how you have accounted
for the 200,000 warrants that you issued in 2004 to this non-employee for
services.  Cite the accounting literature
you relied upon.

(Answer):  In
accordance with APB Opinion No. 14, Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants, we calculated the fair value of the
warrants utilizing the Black Scholes Option Pricing Model and accounted for the
cost as paid-in-capital.  Amortization
was taken over the life of the debt.

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3.               (Question): We note that you also issued an
additional 200,000 warrants to Clarex in 2004 as compensation for Clarex
extending the maturity date of the Note to December 2008.  We note the original maturity date of the
Note was December 2005.  Please tell
us how you accounted for the extension of the maturity date.  Discuss how you considered EITF 96-19 and
SFAS 140 in determining your accounting.
Finally, tell us how you have accounted for the 200,000 warrants you
issued to this non-employee as compensation for Clarex extending the maturity
date.  Cite the accounting literature you
relied upon.

(Answer): The sequence of events is as follows. In May 2004
the Company asked Clarex to extend the term of the note by an additional 18
months. The Company felt it would not have the resources on the original due
date to retire the loan, and that by having a longer term to the secured note,
the Company would be in a more favorable position to negotiate with new
investors for capital needed to implement the Company’s expansion plans. The
Company offered Clarex another 200,000 warrants, with an exercise price based
upon the then existing market price of the Company’s stock, for this eighteen
month extension. Clarex agreed, and the 200,000 warrants were issued for the 18
month extension at an exercise price of $1.08 per share, representing a 17%
discount to the closing market price of $1.30 per share. The loan term was
extended though July 2006

In December 2004, the Company approached Clarex
to request that the note be extended by an additional 30 months through December 2008.
The Company this time asked Clarex to waive any additional consideration, and it
agreed.

The company reviewed the SFAS 140 and determined
that the provisions of this pronouncement did not apply to this transaction.

EITF 96-19 addresses distinguishing between
replacement of loans with extensions of loans.
The events in question were extensions, not replacements for the
following reasons. No additional costs were recognized in FY 2004 upon
extension of the term of the note.  The
differences in the present value of the remaining cash flows under the terms of
the old and new debt instruments were immaterial and well below the 10%
threshold stipulated in EITF 96-19.

Unamortized warrant costs (of both the first 200,000
and the second 200,000 warrants) are being amortized over the term of the note
(which was first through July 2006, and then through December 31,
2008 when the loan was further extended).

The cost of the warrants issued for the extension of
the maturity date of the note was treated in accordance with APB No. 14,
Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants.
The fair value of the warrants was calculated utilizing the Black Scholes
Option Pricing Model, and the cost accounted for as paid-in-capital.  Amortization was taken over the life of the
debt which was extended to December 31, 2008 in FY 2004.

re: Note 15 – Special Charges, page F-20

4.               (Question): We note that $475,000, or $.09
per share, of inventory obsolescence charges in 2003 was recorded to special
charges.  Revise future filings to
clearly describe where the special charges would have otherwise been
recorded.  In addition, we note that you

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had additional inventory charges in 2004.  Tell us where these charges were recorded on
your 2004 statement of operations.

(Answer):  In
FY 2004 $392,000 of reserve adjustments were included as part of cost of goods
sold on the statement of operations.  We
did not consider this amount as special charges since these reserves resulted
from normal Company established procedures for determining obsolescence that
include aging criteria.

We will revise future filings to describe where any
special charges would have otherwise been recorded.

re: Note 16 – Acquisition, page F-20

MRC Precision Optics

5.               (Question): In connection with the
acquisition of MRC, you granted the former owner and president of MRC
consideration of up to $60,000 per year based on future earnings of MRC.  In your disclosures on the Forms 8-K and 8-K/A
dated October 19, 2004, it appears that you considered these to be
earn-out payments rather than compensation.
Provide us with your evaluation of EITF 95-8 to support your conclusion
that these contingent payments are not compensation for future services.

(Answer): For clarification, the earn-out provision
in the MRC purchase contract is based on cash flow above a threshold, not on
earnings.

EITF 95-8 defines several
factors to be utilized in assessing whether contingent pay outs are
attributable to purchase price or are to be treated as additional
earnings.  In our assessment of these
factors we have determined that the consideration of up to $60,000 per year,
payable to the seller, is earn-out and a future adjustment to purchase price.

EITF 95-8 lists 3 factors involving terms of
continuing employment.    The first
factor is examining possible linkage of continuing employment to contingent
consideration.  The earn-out agreement
has no stipulation that the seller must continue to be an employee in order to
receive the additional consideration, nor is the seller’s continued employment
guaranteed.  This is a strong indicator
that the contingent payments are additional purchase price.

Another factor that suggests that this consideration
be treated as purchase price, not compensation, is the level of compensation
paid to the seller while an employee.
The seller is at a compensation level commensurate with the position he
holds and is equal to the compensation earned by the seller of Laser Optics,
who is also an employee with a similar position in the Company, but has no
earn-out agreement.

EITF 95-8 looks at the length of the buy out
agreement relative to the duration of any employment contracts. The Company
determined that although each agreement has the same length, it was
coincidental.  The Employment Agreement
was a separate instrument to the Purchase Agreement. Also, unlike the
Employment Agreement, the death of the principal does not terminate any terms
in the Purchase Agreement, and the earn-out provisions are in the Purchase
Agreement..

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re: Laser Optics

6.               (Question): Included in the 2003 asset
purchase of Laser Optics was the acquisition of its catalog optics inventory,
which you recorded at fair value.  You
disclose in the last sentence on page F-22 that as a result of shift in
strategy, $312,000 of inventory was reclassified to goodwill.  Based on the information provided, it appears
that the inventory became obsolete due to changes that occurred subsequent to
the acquisition.  Please respond to the
following:

•                  Please clarify the timing and nature of the
events that caused the inventory to become obsolete.

(Answer):  The
assets of Laser Optics were acquired in December 2003 with the intent of
merging the operation with current PPGI operations for the production of
contract order custom made optics.  The
Company acquired Laser Optics for its ability to produce Spherical optics, and
for its Thin Film Coating capabilities that would enhance similar capabilities
at its Northvale custom optics operation.
At the time of the acquisition a portion of the purchase price was
allocated to the Laser Optic inventory that not only included made-to-order
optics but also included catalog optics.
Catalog optics, by definition, are not made to customer specifications
but are standard products and are used by a variety of customers in a variety
of applications in small quantities.
They are also differentia