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Axcelis10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income. 10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income. 10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income. 10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income. 10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income. 10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income. 10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income. 10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income. 10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income. 10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income. 10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income. 10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income. 10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income. 10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income. 10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income. 10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income. 10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income. 10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income. 10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income. 10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income. 10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income. 10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income. 10K 1 f10k2020_rubicontech.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2020or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number 00133834RUBICON TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware364419301(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)900 East Green StreetBensenville, Illinois60106(Address of Principal Executive Offices)(Zip Code)Registrant’s Telephone Number, Including Area Code: (847) 2957000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $.001 per sharePreferred Shares Purchase RightsThe NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 ofthe Exchange Act.Large accelerated filer☐Accelerated filer☐Nonaccelerated filer☐Smaller reporting company☒Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the SarbanesOxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2020, there were 2,071,865 shares of common stock outstanding held by nonaffiliates of the registrant, with an aggregate market value of thecommon stock (based upon the closing price of these shares on the NASDAQ Capital Market) of approximately $16,844,262.The number of shares of the registrant’s common stock outstanding as of the close of business on February 28, 2020 was 2,422,255.Documents incorporated by reference:Portions of the Registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10K provided, that if such Proxy Statement is not filed with the Commission within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed no later than the end of such 120day period.TABLE OF CONTENTSItem of Form 10KPagePart I1.Business21A.Risk Factors51B.Unresolved Staff Comments142.Properties143.Legal Proceedings144.Mine Safety Disclosures14Part II5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities156.Selected Financial Data157.Management’s Discussion and Analysis of Financial Condition and Results of Operations167A.Quantitative and Qualitative Disclosure About Market Risk258.Consolidated Financial Statements and Supplementary Data259.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures269A.Controls and Procedures269B.Other Information26Part III10.Directors, Executive Officers and Corporate Governance2711.Executive Compensation2712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters2813.Certain Relationships and Related Transactions, and Director Independence2814.Principal Accountant Fees and Services28Part IV15.Exhibits and Consolidated Financial Statement Schedules29Signatures30Exhibit Index31iPART IAll statements, other than statements of historical facts, included in this Annual Report on Form 10K including statements regarding our estimates,expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans andobjectives of management for future operations may be “forwardlooking statements” within the meaning of the safe harbor provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. We have based these forwardlooking statements on our current expectations and projections about future events and financialtrends that we believe may affect our financial condition, results of operations, business strategy, shortterm and longterm business operations and objectives andfinancial needs. These forwardlooking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,”“estimate,” “expect,” “forecast,” “prospects,” “goals,” “potential,” “likely,” and the like, and/or futuretense or conditional constructions such as “will,” “may,”“could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends oroperating results also constitute forwardlooking statements.Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forwardlooking statements we may make. Before investing in our common stock, investors should be aware that theoccurrence of the risks, uncertainties and events described in the section entitled “Risk Factors” and elsewhere in this Annual Report could have a material adverseeffect on our business, results of operations and financial condition. These risks and uncertainties include the adoption of sapphire as a material in newapplications, our successful development and the market’s acceptance of new products; our ability to sell certain assets, including those in Malaysia andunderutilized assets in the U.S., and the prices we receive therefor; our ability to make effective acquisitions and successfully integrate newly acquired businessesinto existing operations; our ability to effectively utilize net operating loss carryforwards; dependence on key customers; our ability to secure new business andretain customers; changes in demand or the average selling prices of sapphire products; the failure to achieve the margins we expect, whether due to our ownoperations or changes in the market for our products; our ability to successfully qualify our products with customers and potential customers; potential disruptionsin our supply of electricity; changes in our product mix; the outcome of the testing of new products and processes or the testing of our existing products for newapplications; the failure of third parties performing services for us to do so successfully; our ability to protect our intellectual property rights; the competitiveenvironment; and the cost of compliance with environmental standards. Although we believe that the expectations reflected in the forwardlooking statements arereasonable, forwardlooking statements are inherently subject to known and unknown risks, including business, economic and other risks and uncertainties thatmay cause actual results to be materially different from those discussed in these forwardlooking statements. Readers are urged not to place undue reliance on theseforwardlooking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forwardlooking statements in order toreflect any event or circumstance that may arise after the date of this Annual Report, other than as may be required by applicable law or regulation. If one or more ofthese risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.You should read this Annual Report and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission(the “SEC”) as exhibits with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially differentfrom what we expect.Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc. and our consolidated subsidiaries.1ITEM 1.BUSINESS OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows, blanks, domes, tubes and rods.Historically, we have also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to focus on the optical and industrial sapphire markets and exit theLED market. Following this decision, we closed our Malaysia facility and scaled down and consolidated our remaining operations in the U.S. In the succeeding yearswe have completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. In December 2019 we entered into a purchase and sale agreement to sell our manufacturing facility located in Malaysia and it wascompleted in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology(Malaysia) SDN BHD. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock is listed on the NASDAQ Capital Marketunder the ticker symbol “RBCN.”SAPPHIRE INDUSTRY OVERVIEWSapphire is utilized in optical and industrial applications. It is used for windows and optics for aerospace, sensor, medical, semiconductor, instrumentation,electronics and laser applications due to its wideband transmission, superior strength, chemical and scratch resistance and high strengthtoweight ratio. Sapphire’sphysical and optical properties also make it very well suited for defense applications such as electrooptical and sensor suite windows for military fighter jets,helicopters, unmanned air vehicles and ships, forwardlooking infrared windows for commercial and business aircrafts, as well as missile domes, submarine windowsand components and transparent armor for military vehicles.2PRODUCTSWe believe the developing optical and industrial markets require largediameter sapphire products, highquality sapphire and ultrathin doubleside polishedwindows and wafers which may be beyond the capability of many sapphire suppliers. In addition, military and defense applications often require a U.S.basedsource for their parts. We believe we continue to have a reputation for producing the highest quality opticalgrade sapphire. We also have the ability to maintain thesame high quality in crystals of very large sizes, to support a strong and developing U.S. customer base, and to provide very high performance ultrathin doubleside polished sapphire products, which we believe positions us well in the optical, laser, and epitaxial growth markets.We provide optical and industrial sapphire products in various shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high performance applications, including defense andaerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.We believe we offer the industry’s largest sapphire windows and highest quality, ultrathin, doubleside polished windows and substrates. Our product linesinclude very thin, doubleside polished windows as thin as 300 microns for 6” optical diameter substrates, and also very largearea blanks and polished windows.We offer round Cplane sapphire windows up to 11” in diameter and Aplane windows up to 18” in diameter with UV grade windows up to 13.5” in diameter. We alsohave produced sapphire window blanks at 36” x 18” x 0.8” dimensions.RESEARCH AND DEVELOPMENTIn 2020 and 2019, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2021related to R&D.MANUFACTURINGThe process of growing crystal begins by heating the raw material, aluminum oxide, until it reaches an ideal temperature above its melting point. This idealtemperature is essential for our process because it allows us to produce highpurity crystals with very low defect rates. Following the heating, a seed rod is insertedin the melted material as the material is being cooled to crystallize into a boule. Following the growth process, each boule is rigorously inspected by using polarizedlighting and magnification to find imperfections, such as bubbles, dislocations and granular deposits within the crystal. We then drill the resulting boules intocylindrical cores using our custom highprecision crystal orientation equipment and proprietary processes. For some of our parts, the cores are then finishedthrough an outsourcing model using trusted partners.We are dedicated to quality assurance throughout our entire operation. We employ detailed material traceability from raw material to finished product. Ourquality system is certified as ISO9001:2000.All of our longlived assets are located in the United States.SALES AND MARKETINGWe market and sell our products through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated salesprofessionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials. Our sales staffworks with customers during all stages of the manufacturing process, from developing the precise composition of the parts through manufacturing and processingthe parts to the customers’ specifications.A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely withour customers to optimize our products for their production processes. In addition, we are able to develop longterm relationships with key customers by offeringproduct specification assistance, providing direct access to enable them to evaluate and audit our operations, delivering highquality products and providingsuperior customer service. We believe that maintaining close relationships with our customers’ senior management and providing technical support improvescustomer satisfaction.3CUSTOMERSOur principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to asmall number of customers. In 2020, our top four customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 55% of our revenueand in 2019, the top three customers accounted for approximately 58% of our revenue. Although we are attempting to diversify and expand our customer base, weexpect our sales to continue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from timeto time. No other customer accounted for 10% or more of our revenues during 2020 or 2019 other than those referred to above.INTELLECTUAL PROPERTYWe rely primarily upon a combination of knowhow, patents, trade secret laws and nondisclosure agreements with employees, customers and potentialcustomers to protect our intellectual property. However, we believe that factors such as the technological and innovative abilities of our personnel, the success ofour ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position.COMPETITIONThe markets for highquality sapphire products are very competitive and have been characterized by rapid technological change. The products we producemust meet certain demanding requirements to succeed in the marketplace. Although we are a wellestablished sapphire producer, we face significant competitionfrom other established providers of similar products as well as from new and potential entrants into our markets.We have several competitors that compete directly with us. We believe that the key competitive factors in our markets are:●consistently producing highquality products in the desired size, orientation and finish;●producing largeformat highquality crystal for certain applications;●providing an United States based source of sapphire for military applications; and●the financial stability of a company.We believe the developing optical and industrial markets require cost effective highquality sapphire, largediameter sapphire products and ultrathin doubleside polished windows and wafers, which we have the capabilities to provide while certain other sapphire producers may not. In addition, defense applications oftenrequire a U.S.based source for sapphire. We believe we continue to have a reputation for producing the highest quality sapphire in the market. We believe thispositions us well with competitive advantages in the markets for optical and industrial sapphire.ENVIRONMENTAL REGULATIONIn our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and locallaws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory andregulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from ourmanufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government orthird parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost ofcomplying with environmental regulation is not material.4EMPLOYEESAs of December 31, 2020, we had 18 fulltime employees. None of our employees are represented by a labor union. We consider our employee relations to begood.OTHER INFORMATIONYou may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10K, our Quarterly Reports on Form 10Q and ourCurrent Reports on Form 8K and any amendments to those forms) over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy anydocument we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1800SEC0330 for further information onthe public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SECwill be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Alternatively, if you would like a paper copy of any such SECreport (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of suchrequested document will be provided to you, free of charge. The information found on our website is not part of this or any other report filed with or furnished to theSEC.ITEM 1A.RISK FACTORSYou should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in thisAnnual Report on Form 10K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks describedbelow, however, are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial mayalso impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cashflows. Please refer to the discussion of “forwardlooking statements” on page one of this Annual Report on Form 10K in connection with your consideration ofthe risk factors and other important factors that may affect future results described below.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods and may incur significant losses in the future. These losses may have an adverse effect on our ability toattract new customers or retain existing customers. We have incurred net losses of $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2020, 2019, 2017 and2016, respectively. Although we recorded net income of $963,000 in 2018, there can be no assurance that we will achieve profitability in future periods.We are exploring, evaluating and have begun implementing certain strategic alternatives with a goal of providing greater value to our stockholders. There can beno assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternativewill yield additional value for stockholders.Our management and Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. Thesealternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling thebusiness, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potentialacquisitions or recapitalizations, in one or more transactions.There can be no assurance that our continued exploration of strategic alternatives will result in the identification of additional alternatives or that anytransaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management anddisruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could beadversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, willprovide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a numberof factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonableterms.5We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which mayadversely affect our business, financial condition and operating results.If we find appropriate opportunities and have adequate funding, we may acquire other businesses, product lines or technologies. However, if we acquire abusiness, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significantattention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in theassumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issueshares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangibleassets, any of which may adversely affect our business, financial condition or operating results.If we are unable to raise additional capital when needed, we may not be able to execute the acquisition of other businesses.We may require additional capital to fund operations, capital expenditures and or the acquisition of other businesses. We may finance future cash needsthrough public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we needthem on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of ouracquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, ifavailable, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may benecessary to relinquish some rights to our technologies or our new products, or grant licenses on terms that may not be favorable to us. We may seek to access thepublic or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.We believe our existing cash, cash equivalents and shortterm investments and interest thereon, will be sufficient to fund our projected operating requirementsfor at least the next twelve months. However, if our success in generating sufficient operating cash flow or our use of cash in the next twelve months were tosignificantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds availablemay raise concerns about our ability to continue to operate. Such concerns may limit our ability to obtain financing and some customers may not be willing to dobusiness with us.Rubicon Technology WorldwideWe rely on third parties for certain finishing steps for our products, including the slicing and polishing of our sapphire crystal.In order to reduce product costs and improve cash flow, we use third parties for certain finishing functions for our products, including the slicing and polishingof our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource thesefinishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in ourrelationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverseeffect on our business, results of operations, cash flow and financial condition. In addition, we do not control any of these third parties or the operation of theirfacilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encounteredby these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financialcondition and results of operations. In addition, their facilities may be vulnerable to damage or interruption from natural disasters, inclement weather conditions,power loss, acts of terrorism and similar events. A decision to close a facility without adequate notice as a result of these or other unanticipated problems at thefacility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause usto default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicingand polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.6Our gross margins could fluctuate as a result of changes in our product mix and other factors, which may adversely impact our operating results.We anticipate that our gross margins will fluctuate from period to period as a result of the mix of products that we sell in any given period. We are working toincrease sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful inimproving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adverselyimpacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may leadto a further downward shift in our product margins, leading to price erosion and lower revenues for us in the future.The markets in which we operate are very competitive, and many of our competitors and potential competitors are larger, more established and better capitalizedthan we are.The markets for selling highquality sapphire products are very competitive and have been characterized by rapid technological change. This competition couldresult in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely seriously harm our business, operating results and financial condition.Our business is subject to extensive regulation.Our pharmacists and pharmacy are required to be licensed by State Boards of Pharmacy. The pharmacy is also registered with the United States DrugEnforcement Administration. By virtue of these license and registration requirements, the entities owned by us are obligated to observe certain rules andregulations, and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration.Risk related to third party payors.Our revenues and profitability are affected by the continuing efforts of all thirdparty payors, including but not limited to HMOs, managed care organizations,PBMs and government programs (which are subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation ofreimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to existing legislation such as Medicare, Medicaid andother federal and state funded programs) to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services,increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these thirdparty payorsources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. While manufacturers haveincreased the price of drugs, payors have generally decreased reimbursement rates as a percentage of drug cost. We expect pricing pressures from thirdpartypayors to continue given the high and increasing costs of pharmaceutical drugs. Changes in the mix of pharmacy prescriptions covered by third party payors amongMedicare, Medicaid and other payor sources may also impact our revenues and profitability. There can be no assurance that we will continue to maintain the currentpayor, revenue or profitability mix.We are substantially dependent on a limited number of suppliers of pharmaceutical products to sell products to us on satisfactory terms. A disruption in ourrelationship with this supplier could have a material adverse effect on our business.We obtain a majority of our total merchandise, including over 90% of our pharmaceuticals, from two primary suppliers, Smith Drug and McKesson Corporationwith whom we rely on for brand name pharmaceuticals. Any significant disruptions in our relationship with either supplier, or deterioration in their financialcondition, could have a material adverse effect on us.Failure to maintain a sufficient credit profile to qualify for favorable pricing and payment terms with suppliers could increase the costs of our products.Our current agreements with our suppliers provides us with favorable pricing and credit terms. If we fail to meet certain minimum purchase commitments or areunable to make timely payments we may be required to purchase our pharmaceutical products on less favorable pricing and credit terms.7We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procureprescription drugs.New brand name drugs can result in increased drug utilization and associated sales, while the introduction of lower priced generic alternatives typically resultsin relatively lower sales, but relatively higher gross profit margins. Accordingly, a decrease in the number or magnitude of significant new brand name drugs orgenerics successfully introduced, or delays in their introduction, could materially and adversely affect our results of operations.In addition, if we experience an increase in the amounts we pay to procure pharmaceutical drugs, including generic drugs, it could have a material adverse effecton our results of operations. Our gross profit margins would be adversely affected to the extent we are not able to offset such cost increases. Any failure to fullyoffset any such increased prices and costs or to modify our activities to mitigate the impact could have a material adverse effect on our results of operations.Additionally, any future changes in drug prices could be significantly different than our projections. Legislative or regulatory policies in the U.S. designed to manage healthcare costs or alter healthcare financing practices or changes to government policies ingeneral may adversely impact our business and results of operations.Currently, there are numerous congressional, legislative and/or regulatory proposals which seek to amend and or replace the Affordable Care Act includingproposals to manage the cost of healthcare, including prescription drug cost. Such proposals may include changes in reimbursement rates, restrictions on rebatesand discounts, restrictions on access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls onprescription drugs, and other significant healthcare reform proposals, including their repeal or replacement. Further, more exacting regulatory policies andrequirements specific to the pharmacy sector may cause a rise in costs, labor, and time to meet all such requirements. We are unable to predict whether any suchpolicies or proposals will be enacted, or the specific terms thereof. Certain of these policies or proposals, if enacted, could have a material adverse impact on ourbusiness.Our business operations involve the substantial receipt and use of confidential health information concerning individuals. A failure to adequately protect any ofthis information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on ourbusiness.Most of our activities involve the receipt or use of personal health information (“PHI”) concerning individuals. There is substantial regulation at the federal andstate levels addressing the use, disclosure, and security of PHI. At the federal level, HIPAA and the regulations issued thereunder impose extensive requirementsgoverning the transmission, use, and disclosure of health information by all participants in health care delivery, including physicians, hospitals, insurers, and otherpayors. Many of these obligations were expanded under Health Information Technology for Economic and Clinical Health, passed as part of the American Recoveryand Reinvestment Act of 2009. Failure to comply with standards issued pursuant to federal or state statutes or regulations may result in criminal penalties and civilsanctions. In addition to regulating privacy of PHI, HIPAA includes several antifraud and abuse laws, extends criminal penalties to private health care benefitprograms and, in addition to Medicare and Medicaid, to other federal health care programs, and expands the Office of Inspector General’s authority to excludepersons and entities from participating in the Medicare and Medicaid programs. Further, future regulations and legislation that severely restrict or prohibit our use ofpatient identifiable or other information could limit our ability to use information critical to the operation of our business. If we violate a patient’s privacy or arefound to have violated any federal or state statute or regulation with regard to confidentiality or dissemination or use of PHI, we could be liable for significantdamages, fines, or penalties and suffer severe reputational harm, each of which could have a material adverse effect on our reputation, our business, our results ofoperations, and our future prospects.Some of our competitors and potential competitors are substantially larger and have greater financial, technical, marketing and other resources than we do.Given their capital resources, the large companies with which we compete, or may compete in the future, are in a better position to substantially increase theirmanufacturing capacity and research and development efforts or to withstand any significant reduction in orders by customers in our markets. Such largercompanies typically have broader product lines and market focus and thus are not as susceptible to downturns in a particular market. Some of our competitors alsoreceive government subsidies, which could create a competitive advantage. We would be at a competitive disadvantage if our competitors bring their products tomarket earlier, if their products are more technologically capable than ours, or if any of our competitors’ products or technologies becomes preferred in the industry.Moreover, we cannot assure you that existing or potential customers will not develop their own products, or acquire companies with products that are competitivewith our products. Any of these competitive threats could have a material adverse effect on our business, operating results or financial condition.8The average selling prices of sapphire products have historically been volatile and in recent years sapphire product prices have been increasingly depressed.Historically, our industry has experienced volatility in product demand and pricing. However, in the last five years, the sales prices for our sapphire productshave trended downward due to an oversupply of products in the market. In some countries, government programs support sapphire producers who wouldotherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to thedetriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average sellingprices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have asignificant impact on our profitability. Although we attempt to optimize our product mix, introduce new products, reduce manufacturing costs and pass along certainincreases in costs to our customers in order to lessen the effect of decreases in selling prices, we may not be able to successfully do so in a timely manner or at all,and our results of operations and business may be harmed.Our future operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results for particularperiods to fall below expectations.Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations are due to a number of factors, manyof which are beyond our control. In connection with the Board of Directors’ continuing review of alternatives with a goal of providing greater value to ourstockholders, on September 12, 2016, we announced the Board’s decision to limit our business focus to the optical and industrial sapphire markets and to exit theLED and mobile device markets. The optical and industrial sapphire markets are smaller markets than our historical undertakings and there is no assurance that wewill be able to successfully expand our optical and industrial sapphire business, or that such shift in focus will ultimately improve our profitability or operatingresults.We depend on a few customers for a major portion of our sales and our results of operations would be adversely impacted if they reduce their order volumes.Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. In2020 our top four customers accounted for, in the aggregate, approximately 55% of our revenue and in 2019 our top three customers accounted for approximately58% of our revenue. If we were to lose one of our major customers or have a major customer significantly reduce its volume of business with us, our revenues andprofitability would be materially reduced unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our majorcustomers, the number and identity of which may change from period to period.We generally sell our products on the basis of purchase orders. Thus, most of our customers could cease purchasing our products with little or no notice andwithout penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers tocancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own productofferings into which our products are incorporated, securing other sources for the products that we manufacture or developing such products internally.If we are unable to attract or retain qualified personnel, our business could be harmed.Our success depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, manufacturing,administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retainsufficiently qualified personnel. In particular, we may encounter difficulties in recruiting and retaining a sufficient number of qualified personnel. The inability toattract and retain necessary technical, managerial, manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customersand develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our seniormanagement for any reason could adversely affect our business, operating results and financial condition.9We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to designand produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for anyreason could adversely affect our business, operating results and financial condition.Our gross margins and profitability may be adversely affected by energy costs.Most of our power consumption takes place in our manufacturing facility in the United States. Electricity prices could increase due to overall changes to theprice of energy due to conditions in the Middle East, natural gas shortages in the U.S. and other economic conditions and uncertainties regarding the outcome andimplications of such events. Once our current purchase agreements expire, if electricity prices increase significantly, we may not be able to pass these price increasesthrough to our customers on a timely basis, if at all, which could adversely affect our gross margins and results of operations.The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly litigation.Other companies might allege that we are infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtainlicenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or knowhow possessed by us or todefend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operatingresults. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect ourintellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any suchlitigation where we are alleged to infringe the rights of others, we may be required to:●pay substantial damages;●seek licenses from others; or●change, or stop manufacturing or selling, some or all of our products.Any of these outcomes could have an adverse effect on our business, results of operations or financial condition.We are subject to numerous environmental laws and regulations, which could expose us to environmental liabilities, increase our manufacturing and relatedcompliance costs or otherwise adversely affect our business and operating results.In our manufacturing process, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, stateand local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage,handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials mayhave been or could be released into the environment at properties currently or previously operated by us, at other locations during the transport of the materials, orat properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become noncompliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanupcosts, fines and civil or criminal sanctions, thirdparty property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement ofexisting laws and regulations could give rise to additional compliance costs and liabilities.10RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.Our manufacturing, research and development, sales and marketing, and administrative activities are concentrated in one facility located in Bensenville, Illinois.Going forward, this will be RTW’s sole operating facility. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act ofterrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the manufacturing capacityand other operations of our Bensenville facility or such replication could take significant time and resources to accomplish. The disruption from such an event couldadversely affect or interrupt entirely our ability to conduct our business.We are dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a materialadverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to oursystems, networks, products and services.We rely on information technology networks and systems, including the Internet and cloud services, many of which are managed by third parties, to securelyprocess, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although wehave implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due tofailures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, naturaldisasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, andour disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results ofoperations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposingus to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threatspose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that our securitycontrols and safeguard measures taken to improve our cybersecurity protection will be sufficient to mitigate all potential risks to our systems, networks and data.Potential consequences of a cybersecurity attack include disruption to systems, corruption of data, unauthorized release of confidential or otherwise protectedinformation, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilitiesrelated to a cybersecurity attack.Our U.S. NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”)or if changes are made to the IRC.We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and taxliabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, ofsignificant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. Ifwe do not have sufficient federal and state income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOLcarryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability tosuccessfully identify and consummate suitable acquisitions or investment opportunities.Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain builtinlosses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right planto protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stockownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.Under the recently enacted Tax Cut and Jobs Act, U.S. NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changeswere made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operatingresults and cash flows.11The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adverselyaffected by the COVID19 pandemic.COVID19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures haveincluded restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelterinplace orders. The COVID19 pandemichas significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staffof full time employees in skilled technical, nontechnical and key management positions at both of its RTW and DDRX operations. If employees become infected bythe COVID19 virus we may not be able to maintain normal business operations for an extended period of time.The COVID19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact theCompany’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions toits manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide.Both the RTW and DDRX business are heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID19 pandemic may limit andrestrict our access to necessary products that are required to operate. New customer acquisitions for DDRX requires establishing and maintaining ongoingrelationships with health care facilities. The Covid19 pandemic protocols at health care facilities restricts access to these facilities which may impact DDRX ability togain access and attract new patients.The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevantauthorities. The full extent of the impact of the COVID19 pandemic on the Company’s operational and financial performance is currently uncertain and will dependon many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development andavailability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on theglobal economy and demand for consumer products. Additional future impacts on the Company may include, but are not limited to, material adverse effects on:demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategicplans; and the Company’s profitability and cost structure.To the extent the COVID19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have theeffect of heightening many of the other risks described in this Part I, Item 1A of this Form 10K.RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCKThe trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each ofwhich could adversely affect our stockholders’ value.Factors related to our Company and our business, as well as broad market and industry factors, may adversely affect the market price of our common stock,regardless of our actual operating performance. Such factors that could cause fluctuations in our stock price include, among other things:●changes in market valuations of other companies in our industry;●changes in financial guidance or estimates by us, by investors or by any financial analysts who might cover our stock or our industry;●our ability to meet the performance expectations of financial analysts or investors;●our ability to develop and market new and enhanced products on a timely basis;●credit conditions;●announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;●general market and economic conditions; and●the size of the public float of our stock.12Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in theirbest interests.A number of provisions in our certificate of incorporation and bylaws, as well as antitakeover provisions of Delaware law, may have the effect of delaying,deterring, preventing or rendering more difficult a change in control of Rubicon that our stockholders might consider in their best interests. These provisionsinclude:●a classified Board of Directors;●a tax benefits preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, whichmay have the effect of discouraging transactions involving an actual or potential change in our ownership;●granting to the Board of Directors sole power to set the number of directors and to fill any vacancy on the Board of Directors, whether such vacancyoccurs as a result of an increase in the number of directors or otherwise;●limitations on the ability of stockholders to remove directors;●the ability of our Board of Directors to designate and issue one or more series of preferred stock without stockholder approval, the terms of which may bedetermined at the sole discretion of the Board of Directors;●prohibition on stockholders from calling special meetings of stockholders;●prohibition on stockholders from acting by written consent; and●establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in atakeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stockif they are viewed as discouraging takeover attempts in the future.The foregoing provisions of our certificate of incorporation and bylaws may also make it difficult for stockholders to replace or remove our management. Theseprovisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the bestinterests of our stockholders.We are subject to litigation risks, including securities class action litigation, which may be costly to defend.All industries, including ours, are subject to legal claims, including securities litigation. When the market price of a stock declines significantly, due to factorssuch as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of ourmanagement and our resources in general. We have been subject to securities class action litigation in the past, as disclosed in our previous filings with the SEC.Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding (including by settlement) could have a materialeffect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities orother litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.13Our Board of Directors does not intend to declare or pay any dividends to our stockholders in the foreseeable future.The declaration, payment and amount of any future dividends will be made at the discretion of our Board of Directors and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considersrelevant. There is no plan to pay dividends in the foreseeable future, and if dividends are paid, there can be no assurance with respect to the amount of any suchdividend.ITEM 1B.UNRESOLVED STAFF COMMENTSDisclosure under this item is not required, as the registrant is a smaller reporting company.ITEM 2.PROPERTIESAll of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 squarefoot facility that we purchased inSeptember 2018.We own a parcel of land in Batavia, Illinois, which was acquired in 2012 for future expansion. This property is currently available for sale and being marketed.The Company completed the sale of its Malaysian facility in June 2020. In December 2020, Rubicon sold all of the outstanding shares of capital stock of itswholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”). The sole asset of RST was a vacant parcel of land in Penang, MalaysiaITEM 3.LEGAL PROCEEDINGSFrom time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Managementbelieves that there are no pending legal proceedings involving us or any of our subsidiaries that will, individually or in the aggregate, have a material adverse effecton our consolidated results of operations or financial condition.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.14PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket InformationOur common stock trades on the NASDAQ Capital Market under the symbol “RBCN”. The following table sets forth the high and low sales prices for ourcommon stock as reported on the NASDAQ for the periods indicated:HighLowFiscal year ended December 31, 2020First Quarter$9.16$7.15Second Quarter$9.00$7.25Third Quarter$8.85$7.75Fourth Quarter$10.00$8.39HighLowFiscal year ended December 31, 2019First Quarter$8.48$7.62Second Quarter$8.62$7.50Third Quarter$9.87$8.16Fourth Quarter$10.09$7.93HoldersAs of February 28, 2021, our common stock was held by approximately 15 stockholders of record and there were 2,422,255 shares of our common stockoutstanding.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth and development ofour business and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The declaration, payment and amount of any futuredividends will be made at the discretion of our Board of Directors.ITEM 6.SELECTED FINANCIAL DATADisclosure under this item is not required as the registrant is a smaller reporting company.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesIn November 2018, our Board of Directors authorized a program to repurchase up to $3 million of our common stock. As of July 2020, the Company used all ofthe original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time.There was no share repurchase activity during the quarter ended December 31, 2020.15ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and relatednotes appearing elsewhere in this Annual Report on Form 10K. This discussion and analysis contains forwardlooking statements that involve risks,uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actualresults to differ materially from the results described in or implied by the forwardlooking statements described in the following discussion and analysis.OVERVIEWRubicon Technology, Inc. (“Rubicon” or the “Company”) consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) and RubiconDTP LLC (“Direct Dose” or DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Wedesign, assemble and maintain our own proprietary crystal growth furnaces to grow highpurity, lowstress, ultralowdefectdensity sapphire crystals. We use ourproprietary crystal growth technology to produce highquality sapphire products to meet our customers’ exacting specifications. Sapphire is a desirable material forhighperformance applications due to its hardness and strength, transparency in the visible and infrared spectrum, thermal conductivity, thermal shock resistance,abrasion resistance, high melting point and chemical inertness. As a result, it is ideally suited for extreme environments in a range of industries where materialdurability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire producers in the market. Weprovide optical and industrial sapphire products in a variety of shapes and sizes, including round and rectangular windows and blanks, domes, tubes and rods.Historically, RTW has also provided sapphire products to the LED and mobile device markets, which are the largest markets for sapphire. However, givencompetitive pressures in those markets, in the fourth quarter of 2016 we announced our decision to limit our focus to the optical and industrial sapphire markets andexit the LED market. Following this decision, we closed our Malaysia facility, and scaled down and consolidated our remaining operations in the U.S. In 2018 and2019, we completed individual sales and held auctions for assets located in Malaysia and at each of our U.S. properties, resulting in the sale of certain of our excessequipment and consumable assets. The Company entered into an agreement for the sale of the Malaysia facility in December 2019. In June 2020, the Companycompleted the sale of its Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legalfees, transfer and other expenses. The Company recorded a gain on the disposal of the Malaysian facility of approximately $1.8 million. In December 2020, Rubiconsold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded again on the sale of $261,000. We are continuing to pursue the sale of our vacant parcel of land located in Batavia, Illinois. The timing on the sale of this real estate isdifficult to predict.We manage direct sales, grow and fabricate sapphire parts and ship from our owned facility located in Bensenville, Illinois.Our sapphire business operates in a very competitive market. Our ability to expand our optical and industrial business and the acceptance of new productofferings are difficult to predict. Our total sales backlog was approximately $747,000 and $1,625,000 as of December 31, 2020 and 2019, respectively.In addition, our current optical and industrial sapphire business serves smaller markets than our historical undertakings, therefore, we are actively evaluatingthe acquisition of profitable companies outside of the sapphire market to utilize our substantial NOL carryforwards.In May 2019, the Company established Direct Dose and acquired certain assets, hired employees and sublet a facility from a pharmacy that was in the processof liquidation. Direct Dose was launched as a startup pharmacy primarily to deliver medications and vitamins to patients being discharged from skilled nursingfacilities. As a result of the COVID19 pandemic, patient census at skilled nursing facilities plummeted and DDRX started to work with home health care agencies forcustomer acquisitions.Since RTW and Direct Dose serve smaller markets than our historical undertakings, we are actively evaluating the acquisition of profitable companies in order toutilize our substantial net operating loss (“NOL”) tax carryforwards.16Historically, we have earned, and believe that in the future we will continue to earn, a substantial portion of our revenue from a small number of customers. Forthe year ended December 31, 2020, we had four customers individually that accounted for approximately 21%, 13%, 11% and 10% of revenue. For the year endedDecember 31, 2019, we had three customers individually that accounted for approximately 31%, 15% and 11% of revenue. Our principal customers have been defensesubcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales tocontinue to be concentrated among a small number of customers. However, we also expect that our significant customers may change from time to time. No othercustomer accounted for 10% or more of our revenues during the years ended December 31, 2020 and 2019 other than those referred to above.We sell our products on a global basis and historically derived a significant portion of our revenue from customers outside of the U.S., with the majority of oursales to the Asian and European markets. Following the decision to limit our focus to the optical and industrial sapphire markets, a major source of our revenue isderived from the North American market. For the year ended December 31, 2020, the North American and other markets accounted for 90% and 10% of our revenue,respectively. For the year ended December 31, 2019, the North American and other markets accounted for 94% and 6% of our revenue, respectively. All our revenueand corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 – SegmentInformation of our Consolidated Financial Statements included in this Annual Report on Form 10K.Financial operationsRevenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varyingspecifications, such as crystal planar orientations and thicknesses. With the focus on smaller optical and industrial markets and the consolidation of our operationsin the U.S., we expect in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performanceobligation is satisfied, when the product is manufactured to the customer’s specification and based upon shipping terms, title, and control of the product and risk ofloss transfer to the customer. Delays in product orders or changes to the timing of shipments could cause our quarterly revenue to vary significantly. All of ourrevenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expectthis to continue in the future.Cost of goods sold. Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing related overhead such as utilities, depreciation,rent, provisions for excess and obsolete inventory reserves, idle plant charges, outsourcing costs, freight and warranties. We purchase materials and supplies tosupport current and future demand for our products. We are subject to variations in the cost of consumable assets from period to period because we do not havelongterm fixedprice agreements with our suppliers. We currently outsource some of our production processes and needs.Gross profit (loss). Our gross profit (loss) has been and will continue to be affected by a variety of factors, including average sales prices of our products,product mix, our ability to reduce manufacturing costs, idle plant charges and fluctuations in the costs of electricity, production supplies and other manufacturingoverhead costs.General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees infinance, information technology and administrative activities, charges for accounting, legal services, insurance and stockbased compensation.Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities,product samples, charges for participation in trade shows and travel.(Gain) loss on sale or disposal of assets. (Gain) loss on sale or disposal of assets represents the difference between the amount of proceeds from sale of ourproperty, equipment and consumable assets and their respective net book values. When the amount of proceeds exceeds the net book value of an underlying asset,we record this favorable variance as a gain on sale or disposal of assets. Alternatively, when the net book value of an asset exceeds the amount of proceedsrecovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.Other income (expense). Other income (expense) consists of interest income and gains and losses on investments and currency translation. 17Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporarydifferences between the book value and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities, using enacted tax rates in effect forthe year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as ofDecember 31, 2020, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negativeevidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with theaccounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. and Malaysia deferred tax assets in order tomeasure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the available evidence. Until an appropriatelevel of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. and Malaysia net deferred tax assets. Any U.S. and Malaysiatax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from the use of the NOLcarryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount of deferred tax assets that can berealized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.Stockbased compensation. The majority of our stockbased compensation relates primarily to our Board of Directors, executive and administrative personneland is accounted for as a G&A expense. For the years ended December 31, 2020 and 2019, our stockbased compensation expense was $199,000 and $523,000,respectively.RESULTS OF OPERATIONSThe following table sets forth our statements of operations for the periods indicated:Year ended December 31,20202019(in millions)Revenue$4.5$3.5Cost of goods sold3.32.4Gross profit (loss)1.21.1Operating expenses:General and administrative2.52.5Sales and marketing0.30.4(Gain) loss on sale or disposal of assets(2.1)(0.6)Total operating expenses0.72.3Income (loss) from operations0.5(1.2)Other (expense) income(1.6)0.1Income (loss) before income taxes(1.1)(1.1)Income tax expense——Net income (loss)$(1.1)$(1.1)18The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated: Year ended December 31,20202019Revenue100%100%Cost of goods sold7369Gross profit (loss)2731Operating expenses:General and administrative5671Sales and marketing711(Gain) loss on sale or disposal of assets(47)(17)Total operating expenses1665Income (loss) from operations11(34)Other income(35)2Income (loss) before income taxes(24)(32)Income tax expense——Net income (loss)(24)%(32)%Comparison of years ended December 31, 2020 and 2019Revenue. Revenue was $4.5 million for the year ended December 31, 2020, and $3.5 million for the year ended December 31, 2019, an increase of $940,000. Thisincrease was primarily the result of a $671,000 increase in sales from DDRX which had a full year of operations in 2020 compared to eight months in the prior year.Revenue from our optical and industrial sapphire business also increased in 2020 by $269,000 due to the timing of shipments.Gross profit (loss). Gross profit was $1.2 million for the year ended December 31, 2020 and $1.1 million for the year ended December 31, 2019, an increase of$158,000. There was an increase in gross profit of $131,000 primarily due to increase sales and the full year inclusion of Direct Dose in 2020 as compared to onlyoperating for eight months in 2019 and an increase of $27,000 in RTW gross profit resulting from a $345,000 higher gross profit due to increased RTW sales andlower idle plant expense, offset by $318,000 primarily resulting from a higher production scrap expense due to the usage of lower quality boules.General and administrative expenses. General and administrative expenses were $2.47 million and $2.55 million for the years ended December 31, 2020 and 2019respectively, a decrease of $78,000. This decrease was the result of the effects of the COVID19 pandemic and cost containment measures implemented by theCompany which lowered spending for salary and travel together with lower bad debt expense, caused the reduction of general and administrative expense at RTWby $107,000 which was offset by an increase in Direct Dose general and administrative expenses of $29,000 due to the inclusion of a full year in 2020 of suchexpenses.Sales and marketing expenses. Sales and marketing expenses were $325,000 and $361,000 for the years ended December 31, 2020 and 2019, respectively, adecrease of $36,000. The decrease in sales and marketing expenses was primarily attributable to a decrease in employee compensation costs of $19,000 on lowerheadcount and a decrease in travel and other costs related to sales and marketing of $17,000.(Gain) loss on sale or disposal of assets. In June 2020, the Company completed the sale of its Malaysian facility resulting in net proceeds of approximately $4.8million after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain on the disposal ofthe Malaysian facility of approximately $1.8 million. In December 2020, Rubicon sold all of the outstanding shares of capital stock of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN BHD for gross proceeds of approximately $775,000. The Company recorded a gain from such stock sale of $261,000.In 2019, the Company disposed of its remaining manufacturing equipment located at its Malaysian facility, resulting in a gain on disposal of $302,000, and soldother excess equipment located in the Company’s Bensenville facility for $76,000. In addition, the Company recorded a gain on sale or disposal of assets of $200,000,which was attributable to a partial reimbursement for a dispute related to the purchase of equipment in 2016 which was never delivered.19Longlived asset impairment charges. We did not record any additional asset impairment expenses for the years ended December 31, 2020 and December 31,2019. We will continue to assess our longlived assets to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage,marketplace and other factors used in determining the current fair value.Other income (expense). Other income (expense) was $(1,580,000) and $125,000 for the years ended December 31, 2020 and 2019, respectively, a change of$(1,705,,000). This decrease in 2020 of other income primarily resulted from the difference of realized and unrealized losses on investments of $1,488,000, lowerinterest income of $353,000, offset by an increase in gains on foreign currency translation of $136,000.Income tax (expense) benefit. We are subject to income taxes in the United States and Malaysia. On a quarterly basis, we assess the recoverability of deferredtax assets and the need for a valuation allowance. For the year ended December 31, 2020, a valuation allowance has been included in the 2020 forecasted effective taxrate. At December 31, 2020, we continue to be in a threeyear cumulative loss position; therefore, as of December 31, 2020, we maintained a full valuation allowanceon our United States and Malaysia net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowancegoing forward. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance witha corresponding impact to the provision for income taxes in the period in which such determination is made.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed us torecord provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment.We have completed our accounting for the tax effects of the enactment of the Act. The deemed inclusion from the repatriation tax was $5.0 million at the time thecalculation was finalized for the tax return. As we are in a full valuation allowance position (as described above), an equal benefit adjustment was recorded for theimpact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2020 and 2019 is based on an estimated combined statutoryeffective tax rate. For the year ended December 31, 2020 and 2019, we recorded a tax expense of $13,000 and $22,000, respectively, for an effective tax rate of 1.0% and2.0%, respectively. For the years ended December 31, 2020 and 2019, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. and Malaysia NOL valuation allowances, U.S. R&D credit, Malaysia foreigntax rate differential and Malaysia withholding taxes.At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.LIQUIDITY AND CAPITAL RESOURCESWe have historically funded our operations using a combination of issuances of common stock and cash generated from our operations.As of December 31, 2020, we had cash equivalents and shortterm investments totaling $25.9 million, including cash of $8.0 million held in deposits at majorbanks, $3.1 million invested in money market funds and $14.8 million of shortterm investments in U.S. Treasury securities.We plan to limit our capital expenditures primarily to only those required under existing obligations or as otherwise necessary to realize value from thedevelopment, commercialization or sale of products.20Cash provided from operating activities was $297,000 for the year ended December 31, 2020. The Company generated a net loss of $1,063,000, including noncash items of $105,000, and an increase in cash from net working capital of $1,255,000. The net working capital increase was primarily driven by a decrease inaccounts receivable related to a combination of increased collections and lower fourth quarter shipments. Additionally, lower prepaid expenses of $204,000, fromrefunded security deposits and purchases against a vendor credit partially offset by increased insurance premiums also contributed to increased working capital. Adecrease in accounts payable of $235,000 related to $400,000 payment on hold at the end of the prior year, also increased working capital.Cash used in operating activities was $1.2 million for the year ended December 31, 2019. During 2019, we had a net loss of $1.1, including noncash items of$300,000, and a decrease in cash from net working capital of $400,000. The net working capital cash decrease was primarily driven by an increase in the accountsreceivable of $300,000 and increased prepaid expenses and other assets of $380,000 resulting from the timing of insurance premiums versus prior year.Net cash provided by investing activities was $4.5 million for the year ended December 31, 2020. This increase in net cash was the result of the sale of theCompany’s Malaysian facility for net proceeds of approximately $4.8 million after the payment of consent fees, real estate taxes, brokerage and legal fees, transferand other expenses assets, the sale of our Malaysia subsidiary for net proceeds of $744,000, the receipt by the Company of $1.7 million from the sales ofinvestments, offset by the use of $2.8 million to purchase U.S. Treasury securities and marketable securities. Net cash used in investing activities was $570,000 for the year ended December 31, 2019, primarily due to the purchases of investments in U.S. Treasurysecurities and marketable securities of $1.6 million and the purchase of Rubicon DTP assets of $64,000. Partially offsetting these were the proceeds of the sale of theremaining idle equipment at our Malaysia manufacturing facility, the sale of other excess equipment located in the United States and a $200,000 payment received aspartial reimbursement for a dispute related to the purchase of equipment in 2016 totaling $764,000 and the proceeds from the sales of investment securities in theperiod of $304,000.Cash flows from financing activitiesNet cash used in financing activities was $2.4 million for the year ended December 31, 2020, driven by purchases of our treasury stock of $2.4 million and cashused to settle net equity awards of $48,000.Net cash used in financing activities was $730,000 for the year ended December 31, 2019, driven by purchases of our treasury stock of $536,000 and cash usedto settle net equity awards of $194,000.Future liquidity requirementsWe believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or lease of fixed assets will besufficient to meet our anticipated cash needs for at least the next twelve months from the date of filing of this report. However, if our ability to generate sufficientoperating cash flow or our use of cash in the next twelve months were to significantly adversely change, we may not have enough funds available to continueoperating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business planregarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertibledebt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptionsand judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and variousother assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company ofcurrent events and actions, actual results may differ from these estimates, assumptions and judgments.21We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimatesabout the effect of matters that are inherently uncertain, and that are among the most important of our accounting policies in the portrayal of our financial conditionand results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used inpreparation of our financial statements.Foreign currency translation and transactions.We have determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD (“RST”), which was sold in December 2020, is the U.S.dollar. RST’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated at historical exchange ratesand monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RST are included in determining netincome (loss) for the period. The results of operations are translated into U.S. dollars at the average exchange rates during the respective period. We record thesegains and losses in other income (expense).Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanour functional currency, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in the determination ofnet income (loss) for the period. We record these gains and losses in other income (expense).Revenue recognition.We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1, 2018. Werecognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture anddeliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of theproduct to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or noncashcomponents. There are no upfront costs to develop the production process. The performance obligation is satisfied at the point in time (single performanceobligation) when the product is manufactured to the customer’s specification, as performance does not create an asset with an alternative use to us. Accordingly,revenue is recognized when product is shipped, and control of the product, title and risk of loss transfer to a customer. We grant credit terms considering normalcollection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferredrevenue and included in Advance Payments in the Consolidated Balance Sheets.We do not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of our revenue is denominated in U.S. dollars.Inventory valuationWe value our inventory at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary courseof business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditionsexist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize thevalue of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ productspecifications. For the year ended December 31, 2020, we consumed inventory that had previously been reflected as excess or obsolete and recorded a reduction inthe inventory reserve of $44,000 and a reduction to cost of goods sold for the same amount. For the year ended December 31, 2019, we consumed inventory that hadpreviously been reflected as excess or obsolete and recorded a reduction in the inventory reserve of $107,000 and a reduction to cost of goods sold for the sameamount. In addition, in 2020 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventoryreserve and cost of goods sold of $21,000. In 2019 we sold inventory that was valued at the lower of cost or market resulting in a reduction in both the lower of costor market inventory reserve and cost of goods sold of $35,000. The excess and obsolete inventory reserve at December 31, 2020 was $7.91 million compared to $8.25million at December 31, 2019.22We did not record any additional writedowns of consumable inventories for the year ended December 31, 2020 and 2019.We did not record any additional adjustments of raw materials for the year ended December 31, 2020 and 2019, as we sold some of such raw materials at a priceexceeding its book value.Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. If our recognition of excess or obsolete inventory is,or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required.As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.We determine our normal operating capacity and record as an expense costs attributable to lower utilization of equipment and staff. For the year endedDecember 31, 2019 we determined that we were not operating at capacity and recorded costs associated with lower utilization of equipment and staff of $223,000. Forthe year ended December 31, 2020, we continued to reduce our costs attributable to lower utilization of equipment and staff due to consolidation of our operations inour Bensenville, Illinois, facility, and recorded $132,000 of such costs.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, toliquidate in order to support our current operations are classified as shortterm.We review our availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on the specificidentification method. We consider various factors in determining whether an impairment is otherthantemporary, including the severity and duration of theimpairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for anyanticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement ofOperations. As of December 31, 2020, and 2019, no impairment was recorded.Allowance for doubtful accountsWe estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk forcollection is assessed on a customerbycustomer basis considering our historical experience and expected future orders with the customer, changes in paymentpatterns and recent information we have about the current status of our accounts receivable balances. If we determine that a specific customer is a risk for collection,we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. If a receivable isdeemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based onthe customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remainedconsistent for all periods presented and with past collections experience.23Assets held for sale and longlived assetsWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, we perform an analysis toreview the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected futureoperations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.In the year ended December 31, 2019, we completed the sale of certain excess equipment for $490,000 in total consideration. The equipment had a total net bookvalue of $188,000 and we recorded a gain on disposal of $302,000.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million. In December 2020, the Company completed the sale of all of the outstanding shares of capitalstock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. The company recorded a gain on such stock sale of $261,000. We arecontinuing to pursue the sale of our vacant parcel of land in Batavia, Illinois. Although the timing on the sale of this real estate is difficult to predict, this propertywas classified as current assets held for sale at December 31, 2020 and 2019, as it is our intention to complete the sale of the Batavia, Illinois property within the nexttwelvemonth period.Stockbased compensationWe grant stockbased compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based uponthe fair value on the date of grant. We use the BlackScholes option pricing model to determine the fair value of stock options. The determination of the fair value ofstockbased payment awards on the date of grant using an optionpricing model is affected by assumptions regarding a number of complex and subjective variables.These variables include our expected stock volatility over the term of the awards, actual and projected employee stock option exercise behaviors, riskfree interestrates, forfeitures and expected dividends.The expected term represents the weightedaverage period that our stock options are expected to be outstanding and is based upon five years of historical data.We estimate the volatility of our common stock based on a fiveyear historical stock price. We base the riskfree interest rate that we use in the option pricing modelon U.S. Treasury zerocoupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in theforeseeable future and, therefore, use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant andrevise those estimates in subsequent periods if actual forfeitures differ from those estimates. The current forfeiture rate of 36.13% was based on our past history offorfeitures.All stock options are granted at an exercise price per share equal to the closing market price of our common stock on the last market trading day prior to the dateof grant. Therefore, there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date ofgrant.We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted in 2017 and 2018 to a key executive pursuant to anemployment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizesmultiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The dailyexpected stock price volatility is based on a fouryear historical volatility of our common stock. The daily expected dividend yield is based on annual expecteddividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches is calculated to haveits own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period, which is up to four years.24We allocate stockbased compensation costs using a straightline method which amortizes the fair value of each option on a straightline basis over the serviceperiod, but in no event less than the amount vested.All option grants are granted at an exercise price per share equal to the closing market price of our common stock on the day before the date of grant. Therefore,there is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant. Based on the fairvalue of the common stock on December 31, 2020, there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.For more information on stockbased compensation, see Note 7 – Stock Incentive Plans to our Consolidated Financial Statements included in this AnnualReport on Form 10K.Income tax valuation allowanceEvaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positiveand negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be establishedfor deferred tax assets when it is more likely than not (a probability level of more than 50%) that they will not be realized. In general, “realization” refers to theincremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that theunderlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuationallowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, therequired use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative lossposition for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard throughobjectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for futuregrowth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2020, a valuation allowance has been recorded against the net U.S.deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all the availableevidence. Any U.S. and Malaysia tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustmentfrom the use of the NOL carryforward asset which currently has a full valuation allowance. In the event that we change our determination as to the amount ofdeferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in whichsuch determination is made.Accounting for uncertainty in income taxesWe recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on thelargest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2020 and 2019, we had $1.1 million of unrecognized taxbenefits taken or expected to be taken in a tax return that have been recorded on our financial statements as an offset to the valuation allowance related to taxpositions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense. There were no interest or penalties related toincome taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards.OFFBALANCE SHEET ARRANGEMENTSNone.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKDisclosure under this item is not required as the registrant is a smaller reporting company.ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on thepages indicated in Item 15 of this Annual Report on Form 10K and are incorporated by reference herein.25ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.None.ITEM 9A.CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and Procedures.An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financialofficer (together, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)and 15d15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the year covered by this report. Disclosure controlsand procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our periodic reports filed with the SEC isrecorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated andcommunicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding requireddisclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were effective as of December 31, 2020.Management’s Report on Internal Control over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in Exchange Act Rules 13a15(f) and 15d15(f).The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financialreporting includes those policies and procedures that:i.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;ii.provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; andiii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the Consolidated Financial Statements.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, becauseof changes in conditions, the effectiveness of internal controls may vary over time.Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making thisassessment, management used the criteria set forth in 2013 Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of theTreadway Commission (COSO).Based on management’s assessment using those criteria, as of December 31, 2020, management concluded that the Company’s internal control over financialreporting was effective.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant torules of the SEC.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that our certifyingofficers concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.ITEM 9B.OTHER INFORMATIONNone.26PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe Information required by Items 401, 405, 407(d)(4) and 407(d)(5) of Regulation SK will be included under the captions “Proposal 1: Election of Directors,”“Executive Compensation – Executive Officers,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters –Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance – Committees of the Board of Directors and Meetings – Audit Committee” inour proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.We have adopted a Code of Ethics that applies to all of our employees, officers and directors. If you would like a copy our Code of Ethics, write to InvestorRelations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of the Code of Ethics will be provided to you, free of charge.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 402 of Regulation SK will be included under the captions “Executive Compensation” and “Director Compensation” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.27ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurities Authorized for Issuance under Equity Compensation PlansThe following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, andthe Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2020.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issuedupon exercise ofoutstanding options,warrants and rightsWeightedaverageexercise price ofoutstanding options,warrants and rightsNumber of securitiesremaining availablefor future issuancesunder the equitycompensation plans(excluding securitiesreflected in column(a))(a)(b)(c)Equity compensation plans approved by security holders(1)65,103$6.71296,105(1)The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016Stock Incentive Plan was approved by stockholders in June 2016.The information required by Item 403 of Regulation SK will be included under the caption “Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters” in our proxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxystatement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not laterthan the end of such 120day period.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 404 of Regulation SK will be included under the caption “Certain Relationships and Related Party Transactions” in our proxystatement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. The information required by Item 407(a) of Regulation SK will beincluded under the caption “Corporate Governance Director Independence” in our proxy statement for our 2021 Annual Meeting of Stockholders and isincorporated by reference herein. If such proxy statement is not filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10K, anamendment to this Form 10K shall be filed not later than the end of such 120day period.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item will be included under the caption “Ratification of Selection of Independent Registered Public Accounting Firm” in ourproxy statement for our 2021 Annual Meeting of Stockholders and is incorporated by reference herein. If such proxy statement is not filed with the SEC within120 days after the end of the fiscal year covered by this Form 10K, an amendment to this Form 10K shall be filed not later than the end of such 120day period.28PART IVITEM 15.EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES(a) Financial statements. The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10K.PageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8(b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears following the signature pageto this Annual Report on Form 10K and are incorporated by reference.(c) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of RegulationSX, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.29SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on March 22, 2021.Rubicon Technology, Inc.By/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerKNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy E. Brog and Kevin T.Lusardi, jointly and severally, his or her attorneyinfact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to thisAnnual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,hereby ratifying and confirming all that each of said attorneysinfact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities indicated on March 22, 2021.SignatureTitle/s/ Timothy E. Brog Director, President and Chief Executive OfficerTimothy E. Brog(Principal Executive Officer)/s/ Kevin T. LusardiChief Financial OfficerKevin T. Lusardi(Principal Financial and Accounting Officer)/s/ Michael E. Mikolajczyk Chairman of the Board of DirectorsMichael E. Mikolajczyk/s/ Susan Westphal DirectorSusan Westphal/s/ Jefferson Gramm DirectorJefferson Gramm30EXHIBIT INDEXThe Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10K.Exhibit No.DescriptionIncorporation by Reference3.1Eighth Amended and Restated Certificate of Incorporation of RubiconTechnology, Inc.Filed as Exhibit 3.1 to the registrant’s Registration Statement on Form S1/A, filed on November 1, 2007 (File No. 333145880)3.2Amendment No. 1 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on April 29, 2011 (File No. 133834)3.3Amendment No. 2 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 4, 2017 (File No. 133834)3.4Second Amended and Restated Bylaws of Rubicon Technology, Inc.Filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10Q,filed on May 10, 2016 (File No. 133834)3.5Certificate of Designations of Series A Junior Participating PreferredStock of Rubicon Technology, Inc. filed with the Secretary of State ofDelaware on December 18, 2017.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)3.6Amendment No. 3 to Eighth Amended and Restated Certificate ofIncorporation of Rubicon Technology, Inc.Filed as Exhibit 3.1 to the registrant’s Current Report on Form 8K, filedon May 15, 2018 (File No. 133834)4.1Specimen Common Stock CertificateFiled as Exhibit 4.1 to the registrant’s Registration Statement on Form S1/A, filed on November 13, 2007 (File No. 333145880)4.2Rights Agreement dated as of December 18, 2017, between RubiconTechnology, Inc. and American Stock Transfer & Trust Company, LLC,which includes the Form of Certificate of Designations of Series AJunior Participating Preferred Stock as Exhibit A, the Form of RightCertificate as Exhibit B and the Summary of Rights to Purchase PreferredShares as Exhibit C.Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2017 (File No. 133834)4.3Amendment No. 1 to the Rights Agreement, dated as of December 18,2020, between Rubicon Technology, Inc. and American StockTransfer & Trust Company, LLCFiled as Exhibit 4.1 to the registrant’s Current Report on Form 8K, filedon December 18, 2020 (File No. 133834)10.1*Rubicon Technology, Inc. 2007 Stock Incentive Plan, as amended andrestated, effective March 23, 2011Filed as Exhibit 10.2 to the registrant’s Annual Report on Form 10K,filed on March 13, 2014 (File No. 133834)10.2*Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Appendix A to the registrant’s Definitive Proxy Statement onSchedule 14A, filed on May 18, 2016 (File No. 133834)10.3(a)*Form of Notice of Stock Option Grant and Stock Option Agreementpursuant to Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(b)*Form of NonEmployee Director Restricted Stock Agreement pursuantto Rubicon Technology, Inc. 2016 Stock Incentive PlanFiled as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.3(c)*Form of Restricted Stock Unit Agreement pursuant to RubiconTechnology, Inc. 2016 Stock Incentive Plan (with timebased vesting)Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10Q,filed on August 9, 2016 (File No. 133834)10.4*Form of Indemnification Agreement for Directors and Executive OfficersFiled as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on May 8, 2015 (File No. 133834)10.5*Executive Employment Agreement by and between RubiconTechnology, Inc. and Timothy E. Brog, dated as of March 1, 2017Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 16, 2017 (File No. 133834)10.6*Amended and Restated Executive Employment Agreement by andbetween Rubicon Technology, Inc. and Timothy E. Brog, dated as ofMay 12, 2017Filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10Q,filed on May 12, 2017 (File No. 133834)10.7Stockholder’s Agreement dated as of November 16, 2017, by and amongRubicon Technology, Inc. and Bandera Partners LLC, Bandera MasterFund L.P., Gregory Bylinsky and Jefferson GrammFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon November 16, 2017 (File No. 133834)10.8 Asset Purchase Agreement, dated as of May 17, 2019, by and amongWellfount, Corporation, Rubicon DTP LLC and Rubicon Technology,Inc.Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10Q,filed on August 14, 2019 (File No. 133834)10.9Sale and Purchase Agreement, dated as of December 19, 2019, by andamong Rubicon Sapphire Technology (Malaysia) SDN. BHD., RubiconTechnology, Inc. and Computime (Malaysia) SDN. BHDFiled as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon December 19, 2019 (File No. 133834)10.10 Share Sale Agreement, dated December 9, 2020 between RubiconTechnology, Inc. and Kang Lan HiangFiled as Exhibit 10.1 to the Registrant’s Current Report on Form 8K,filed on December 9, 2020 (File No. 133834)10.11*Executive Employment Agreement by and between RubiconTechnology, Inc. and Kevin T. Lusardi, dated as of March 17, 2021Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8K, filedon March 22, 2021 (File No. 133834)3121.1**Subsidiaries of the Company23.1**Consent of Independent Registered Public Accounting Firm24.1**Power of Attorney (incorporated by reference to the signature page ofthis Annual Report on Form 10K)31.1**Certification of Chief Executive Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200231.2**Certification of Chief Financial Officer pursuant to Exchange Act Rules13a14(a) and 15d14(a), as adopted pursuant to Section 302 of theSarbanesOxley Act of 200232.1**Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the SarbanesOxley Act of 2002101.INS**XBRL Instance Document101.SCH**XBRL Taxonomy Extension Schema Document101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**XBRL Taxonomy Extension Label Linkbase Document101.PRE**XBRL Taxonomy Extension Presentation Document101.DEF**XBRL Taxonomy Extension Definition Linkbase Document*Management contract or compensatory plan or arrangement of the Company.**Submitted electronically with this Annual Report on Form 10K.32Rubicon Technology, Inc.INDEX TO FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance Sheets as of December 31, 2020 and 2019F3Consolidated Statements of Operations for each of the two years in the period ended December 31, 2020F4Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2020F5Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2020F6Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2020F7Notes to Consolidated Financial StatementsF8F1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Rubicon Technology, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Rubicon Technology, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the periodended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cashflows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate.The Company establishes inventory reserves when conditions exist to suggest inventory may be in excess of anticipated demand or is obsolete based on customerspecifications. The Company’s management evaluates the ability to realize the net carrying value of its inventory based on a combination of factors, includingforecasted sales, estimated current market value and changes in customers’ product specifications. Additionally, the Company reduces the carrying values of itsinventories for differences between the cost and the estimated net realizable value, which is determined based on an estimated selling price less estimated costs ofcompletion and disposal. Based on the likelihood of expected usage within the next operating cycle, generally 12 months, management makes a determination on theappropriate presentation of inventory as a current or noncurrent asset in the financial statements.We identified the valuation and presentation of inventory as a critical audit matter. Auditing management judgment regarding forecasted sales, estimated currentmarket value and anticipated customer product specifications, involved a high degree of subjectivity.The primary procedures we performed to address this critical audit matter included obtaining an understanding of management’s process and testing the estimatedinventory writedowns and expected consumption within one year from December 31, 2020 for presentation purposes. We evaluated the reasonableness ofmanagement’s forecasted consumption by comparing these forecasts to historical sales and inventory consumption, open orders, and performed a retrospectivereview of management’s estimates from the prior period./s/ Marcum LLPMarcum LLPWe have served as the Company’s auditor since 2017.Chicago, IllinoisMarch 22, 2021F2Rubicon Technology, Inc.Consolidated Balance SheetsAs ofDecember 31,20202019(in thousands, otherthan share data)AssetsCash and cash equivalents$11,130$8,709Restricted cash—171Shortterm investments14,74815,458Accounts receivable, net3861,053Inventories1,0731,710Other inventory supplies140140Prepaid expenses and other current assets284488Assets held for sale5293,957Total current assets28,29031,686Inventories, noncurrent468468Property and equipment, net2,4822,647Total assets$31,240$34,801Liabilities and stockholders’ equityAccounts payable$497$733Accrued payroll21153Accrued and other current liabilities201344Corporate income and franchise taxes307296Accrued real estate taxes71114Advance payments1816Total current liabilities1,3051,556Commitments and contingencies (see Note 10)Stockholders’ equityPreferred stock, $0.001 par value, 1,000,000 undesignated shares authorized, no shares issued or outstanding——Common stock, $0.001 par value 8,200,000 shares authorized; 2,971,283 and 2,955,253 shares issued; 2,422,255 and 2,702,171shares outstanding2929Additional paidin capital376,456376,306Treasury stock, at cost, 549,028 and 253,082 shares(15,147)(12,749)Accumulated other comprehensive loss—(1)Accumulated deficit(331,403)(330,340)Total stockholders’ equity29,93533,245Total liabilities and stockholders’ equity$31,240$34,801The accompanying notes are an integral part of these consolidated financial statements.F3Rubicon Technology, Inc.Consolidated Statements of OperationsYear ended December 31,20202019(in thousands, otherthan share data)Revenue$4,467$3,526Cost of goods sold3,2262,444Gross profit (loss)1,2411,082Operating expenses:General and administrative2,4702,548Sales and marketing325361(Gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Income (loss) from operations530(1,250)Other (expense) income:Interest income108460Realized gain (loss) on marketable securities(1,824)(165)Unrealized gain (loss) on marketable securities—(171)Realized gain (loss) on foreign currency translation1361Total other (expense) income(1,580)125Income (loss) before income taxes(1,050)(1,125)Income tax expense(13)(22)Net income (loss)$(1,063)$(1,147)Net income (loss) per common shareBasic$(0.43)$(0.42)Diluted$(0.43)$(0.42)Weighted average common shares outstanding used in computing net income (loss) per common shareBasic2,499,6902,707,811Diluted2,499,6902,707,811The accompanying notes are an integral part of these consolidated financial statements.F4Rubicon Technology, Inc.Consolidated Statements of Comprehensive Income (Loss)Year ended December 31,20202019(in thousands)Net income (loss)$(1,063)$(1,147)Other comprehensive income:Unrealized gain (loss) on investments, net of taxes1—Unrealized gain (loss) on currency translation—1Other comprehensive income (loss)11Comprehensive income (loss)$(1,062)$(1,146)The accompanying notes are an integral part of these consolidated financial statements.F5Rubicon Technology, Inc.Consolidated Statements of Stockholders’ EquityCommon stockTreasury stockStockholders’ equitySharesAmountSharesAmountAdditionalpaidincapitalAccumothercomp inc.AccumdeficitTotalstockholders’equity(in thousands other than share data)Balance at January 1, 20192,919,542$29(185,941)$(12,213)$375,979$(2)$(329,193)$34,600Stockbased compensation————508——508Restricted stock issued2,538———15——15Common stock issued, net of shareswithheld for employee taxes33,173———(196)——(196)Purchase of treasury stock, at cost——(67,141)(536)———(536)Unrealized gain on investments,net of tax—————1—1Net loss——————(1,147)(1,147)Balance at December 31, 20192,955,253$29(253,082)$(12,749)$376,306$(1)$(330,340)$33,245Stockbased compensation————168——168Restricted stock issued3,597———30——30Common stock issued, net of shareswithheld for employee taxes12,433———(48)——(48)Purchase of treasury stock, at cost——(295,946)(2,398)———(2,398)Unrealized gain on investments netof taxes—————1—1Net loss——————(1,063)(1,063)Balance at December 31, 20202,971,283$29(549,028)$(15,147)$376,456$—$(331,403)$29,935The accompanying notes are an integral part of these consolidated financial statements.F6Rubicon Technology, Inc.Consolidated Statements of Cash FlowsYear endedDecember 31,20202019(in thousands)Cash flows from operating activitiesNet income (loss)$(1,063)$(1,147)Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation and amortization167169Net (gain) loss on sale or disposal of assets and subsidiary(2,084)(577)Unrealized (gain) loss on equity investments—171Realized (gain) loss on equity investments1,824—Stockbased compensation198523Changes in operating assets and liabilities:Accounts receivable666(320)Inventories637(48)Other inventory supplies—42Prepaid expenses and other assets204(380)Accounts payable(236)332Accrued payroll15825Corporate income and franchise taxes9(7)Accrued real estate taxes(42)11Advance payments2(22)Accrued and other current liabilities(143)(2)Net provided by (cash used) in operating activities297(1,230)Cash flows from investing activitiesPurchases of assets(2)(64)Proceeds from sale or disposal of assets4,909765Proceeds from sale or disposal of subsidiary744—Purchase of investments(2,782)(1,575)Proceeds from sale of investments1,667304Net cash provided by (used in) provided by investing activities4,536(570)Cash flows from financing activitiesTaxes paid related to net share settlement of equity awards(48)(194)Purchases of treasury stock(2,399)(536)Net cash used in financing activities(2,447)(730)Net effect of currency translation(136)—Net increase (decrease) in cash, cash equivalents and restricted cash2,250(2,530)Cash, cash equivalents and restricted cash, beginning of year8,88011,410Cash, cash equivalents and restricted cash, end of year$11,130$8,880Supplemental disclosure of cash flow noneThe accompanying notes are an integral part of these consolidated financial statements.F7Rubicon Technology, Inc.Notes to Consolidated Financial Statements1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESDescription of businessRubicon Technology, Inc., a Delaware corporation (the “Company”), consists of two operating subsidiaries, Rubicon Technology Worldwide LLC (“RTW”) andRubicon DTP LLC (“Direct Dose” or “DDRX”).RTW is a vertically integrated, advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. RTWsells its products on a global basis to customers in North America, Europe and Asia. RTW maintains its operating facility in the Chicago metropolitan area.Direct Dose is a startup pharmacy primarily delivering medications and vitamins to patients being discharged from skilled nursing facilities. Direct Dosemaintains its operating facility in the Indianapolis metropolitan area.Principles of consolidationThe Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, RubiconDTP LLC, Rubicon Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon Technology Hong Kong Limited. In December 2020, theCompany sold all of the outstanding shares of capital stock of its wholly owned subsidiary Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompanytransactions and balances have been eliminated in consolidation.A summary of the Company’s significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements follows.Cash and cash equivalentsThe Company considers all unrestricted highly liquid investments immediately available to be cash equivalents. Cash equivalents primarily consist of timedeposits with banks, unsettled trades and brokerage money market accounts.Restricted cashA summary of the Company’s restricted cash at December 31, 2020 and 2019, is as follows:As ofDecember 31,20202019(in thousands)Fixed deposits—171$—$171Foreign currency translation and transactionsThe Company has determined that the functional currency of Rubicon Sapphire Technology (Malaysia) SDN BHD is the U.S. dollar. Rubicon SapphireTechnology (Malaysia) SDN BHD’s assets and liabilities are translated into U.S. dollars using the remeasurement method. Nonmonetary assets are translated athistorical exchange rates and monetary assets are translated at exchange rates existing at the respective balance sheet dates. Translation adjustments for RubiconSapphire Technology (Malaysia) SDN BHD are included in determining net income (loss) for the period. The results of operations are translated into U.S. dollars atthe average exchange rates during the respective period. The Company records these gains and losses in other income.F8Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanthe functional currency of the Company, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in thedetermination of net income (loss) for the period. The Company records these gains and losses in other income.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expenses), in the Consolidated Statements of Operations. Investments in which the Company has the ability and intent, ifnecessary, to liquidate in order to support the current operations are classified as shortterm.The Company reviews its availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on thespecific identification method. The Company considers various factors in determining whether an impairment is otherthantemporary, including the severity andduration of the impairment, changes in underlying credit ratings, forecasted recovery, its ability and intent to hold the investment for a period of time sufficient toallow for any anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When the Company concludesthat an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on theConsolidated Statements of Operations. As of December 31, 2020, and 2019, no impairment was recorded.Purchases of Equity Securities by the IssuerIn November 2018, the Company’s Board of Directors authorized a program to repurchase up to $3 million of its common stock. In July 2020, the Company usedall of the original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time. There can be no assurance as to the number of shares of common stock repurchased. The Company records treasurystock purchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock.Share repurchase activity during the year ended December 31, 2020, was as follows:PeriodsTotalnumber ofsharespurchasedAveragepricepaid pershareTotalnumber ofsharespurchasedas part ofpubliclyannouncedprogramApproximatedollar valueof sharesthat may yetbe purchasedunder theprogram(in thousands)January 1, 2020, to December 31, 2020295,946$8.10295,546$3,000Total295,946$3,000F9Accounts receivableThe majority of the Company’s accounts receivable are due from defense subcontractors, industrial manufacturers, fabricators and resellers. Credit is extendedbased on an evaluation of the customer’s financial condition. Accounts receivable are due based on contract terms and at stated amounts due from customers, netof an allowance for doubtful accounts. Losses from credit sales are provided for in the financial statements.Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number offactors, including the length of time a customer’s account is past due, the customer’s current ability to pay and the condition of the general economy and industryas a whole. The Company writes off accounts receivable when they are deemed uncollectible and such writeoffs, net of payments received, are recorded as areduction to the allowance.The following table shows the activity of the allowance for doubtful accounts:Year endedDecember 31,20202019(in thousands)Beginning balance$40$7Charges to costs and expenses(20)33Account writeoffs, less recoveries(17)—Ending balance$3$40InventoriesInventories are valued at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary course ofbusiness less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis, which includes materials, labor and overhead. The Company reduces the carrying value of itsinventories for differences between the cost and the estimated net realizable value, taking into account usage, expected demand, technological obsolescence andother relevant information.The Company establishes inventory reserves when conditions exist that suggest inventory may be in excess of anticipated demand or is obsolete based oncustomer specifications. The Company evaluates the ability to realize the value of its inventory based on a combination of factors, including forecasted sales,estimated current and future market value and changes in customers’ product specifications. The Company’s method of estimating excess and obsolete inventoryhas remained consistent for all periods presented. The Company also carries a lower of cost or market inventory reserve based on net realizable value using mostrecent sales prices to determine market value. As of December 31, 2020 and 2019, the balance of the lower of cost or market reserve was $51,000 and $72,000,respectively, representing a decrease of $21,000 resulting from sales of related reserved for inventory. In addition, in 2020 we sold inventory that was valued at thelower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $21,000. In 2019 we sold inventorythat was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $35,000.In 2019 and 2020, the Company used some of its previously written down twoinch diameter core material in production of optical and industrial sapphire wafersand did not record any additional adjustments for the years ended December 31, 2019 and December 31, 2020.The Company evaluates the amount of raw material needed for future production based on expected crystal growth production needed to meet anticipatedsales. The Company did not record any writedowns of its raw materials inventory for the years ended December 31, 2019 and December 31, 2020.F10Inventories are composed of the following:As ofDecember 31,20202019(in thousands)Raw materials$468$468Workinprocess614901Finished goods459809$1,541$2,178As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.Other inventory suppliesThe Company’s other inventory supplies include stock of consumable assets and spare parts used in the manufacturing process.Assets held for saleAn asset is considered to be held for sale when all of the following criteria are met: (i) management commits to a plan to sell the asset; (ii) it is unlikely that thedisposal plan will be significantly modified or discontinued; (iii) the asset is available for immediate sale in its present condition; (iv) actions required to complete thesale of the asset have been initiated; (v) sale of the asset is probable and the completed sale is expected to occur within one year; and (vi) the asset is actively beingmarketed for sale at a price that is reasonable given its current market value.A longlived asset classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. If the longlived asset is newlyacquired, the carrying amount of the longlived asset is established based on its fair value less cost to sell at the acquisition date. A longlived asset is notdepreciated or amortized while it is classified as held for sale.In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.F11Property and equipmentProperty and equipment consisted of the following:As ofDecember 31,20202019(in thousands)Machinery, equipment and tooling$3,343$3,341Buildings1,7111,711Information systems835835Land and land improvements594594Furniture and fixtures88Total cost6,4916,489Accumulated depreciation and amortization(4,009)(3,842)Property and equipment, net$2,482$2,647Property and equipment are carried at cost and depreciated over their estimated useful lives using the straightline method. The cost of maintenance and repairsis charged to expense as incurred. Significant renewals and improvements are capitalized. Depreciation expense associated with property and equipment was$167,000 and $169,000 for the years ended December 31, 2020 and 2019, respectively.The estimated useful lives are as follows:Asset descriptionLifeBuildings39 yearsMachinery, equipment and tooling310 yearsFurniture and fixtures7 yearsInformation systems3 yearsWarranty costThe Company’s sales terms include a warranty that its products will meet certain specifications. The Company records a current liability for the expected cost ofwarrantyrelated claims at the time of sale. The warranty reserve is included in accrued and other current liabilities on the Consolidated Balance Sheets.The following table presents changes in the Company’s product warranty liability:Year endedDecember 31,20202019(in thousands)Balance, beginning of period$4$8Charged to cost of sales1831Actual product warranty expenditures(20)(35)Balance, end of period$2$4The Company does not provide maintenance or other services and it does not have sales that involve bill & hold arrangements, multiple elements ordeliverables. However, the Company does provide product warranty for up to 90 days, for which the Company has accrued a warranty reserve of $2,000 and $4,000for the years ended December 31, 2020 and 2019, respectively.Fair value of financial instrumentsThe Company’s financial instruments consist primarily of cash and cash equivalents, shortterm investments, accounts receivable, and accounts payable. Thecarrying values of these assets and liabilities approximate their fair values due to the shortterm nature of these instruments at December 31, 2020 and 2019.F12Concentration of credit risks and other risks and uncertaintiesFinancial instruments that could potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, restrictedcash, shortterm investments and accounts receivable. At December 31, 2020 the Company had no deposits at foreign financial institutions and $1.6 million ondeposit at foreign financial institutions at December 31, 2019. As of December 31, 2020, the Company had $8 million on deposit at financial institutions in excess ofamounts insured by the FDIC. This compares to a $5.7 million as of December 31, 2019. The Company performs a periodic evaluation of these institutions for relativecredit standing. The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant risk of loss on thesebalances.The Company uses third parties for certain finishing functions for its products, including the slicing and polishing of its sapphire crystal inventory. These typesof services are only available from a limited number of third parties. The Company’s ability to successfully outsource these finishing functions will substantiallydepend on its ability to develop, maintain and expand its strategic relationship with these third parties. As a result, the Company may be unable to meet the demandfor its products, which could have a material adverse impact on the Company.Concentration of credit risk related to revenue and accounts receivable is discussed in Note 4.Revenue recognitionRevenues recognized include product sales and billings for costs and fees for government contracts.Product SalesThe Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1,2018. The Company recognizes revenue when performance obligations under a purchase order or signed quotation are satisfied. The Company’s business practicecommits the Company to manufacture and deliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement withthe customer includes specifications of the product to be delivered, price, expected ship date and payment terms. The Company’s agreements generally do notcontain variable, financing, rights of return or noncash components. There are no upfront costs to develop the production process. The performance obligation issatisfied at the point in time (single performance obligation) when the product is manufactured to the customer’s specification, as performance does not create anasset with an alternative use to the Company. Accordingly, the Company recognizes revenue when the product is shipped, and control of the product, title and riskof loss have been transferred to the customer. The Company grants credit terms considering normal collection risk. If there is doubt about collection, full prepaymentfor the order is required. Any payments received prior to shipment are recorded as deferred revenue and included in Advance Payments in the Consolidated BalanceSheets. The Company does not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of the Company’s revenue is denominated in U.S. dollars.Shipping and handling costsThe Company records costs incurred in connection with shipping and handling of products as cost of goods sold. Amounts billed to customers in connectionwith these costs are included in revenue and are not material for any of the periods presented in the accompanying financial statements.Sales taxThe Company collects and remits sales taxes on products sold to customers and reports such amounts under the net method in its Consolidated Statements ofOperations and records a liability until remitted to the respective tax authority.F13Stockbased compensationThe Company requires all sharebased payments to employees, including grants of employee stock options, to be measured at fair value and expensed in theConsolidated Statements of Operations over the service period (generally the vesting period) of the grant. Expense is recognized in the Consolidated Statements ofOperations for these sharebased payments. The Company uses Black Scholes option pricing model in order to determine the fair value of stock option grants.Accounting for uncertainty in income taxesThe Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by thetaxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured basedon the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and/or penalties related to incometax matters in income tax expense. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years endedDecember 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.Income taxesDeferred tax assets and liabilities are provided for temporary differences between financial reporting and income tax bases of assets and liabilities, and aremeasured using the enacted tax rates and laws expected to be in effect when the differences will reverse. Deferred income taxes also arise from the future benefits ofNOL carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Full valuationallowances on net deferred tax assets are maintained until an appropriate level of profitability that generates taxable income is deemed sustainable or until a taxstrategy is developed that would enable the Company to conclude that it is more likely than not that a portion of the deferred tax assets will be realizable. Based onan evaluation in accordance with the accounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. andMalaysia deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all theavailable evidence.Use of estimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at thedate of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.Other comprehensive lossComprehensive loss is defined as the change in equity of a business enterprise from transactions and other events from nonowner sources. Comprehensiveloss includes net loss and other nonowner changes in equity that bypass the statement of operations and are reported in a separate component of equity.Net income (loss) per common shareBasic net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of common shares outstanding duringthe period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of diluted common sharesoutstanding during the period. Diluted shares outstanding are calculated by adding to the weightedaverage shares (a) any outstanding stock options based on thetreasury stock method and (b) restricted stock units (“RSU”).F14Diluted net income per share was the same as basic net income per share for the year ended December 31, 2020, because the effects of potentially dilutivesecurities did not have a material impact on the calculation of diluted net income per share. The Company had outstanding options exercisable into 18,250 shares ofthe Company’s common stock that would have had an antidilutive effect at December 31, 2020.Diluted net loss per common share was the same as basic net loss per common share for the year ended December 31, 2020, because the effects of potentiallydilutive securities were antidilutive.New accounting pronouncements adoptedThe Company has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significantimpact the Company’s consolidated financial statements and related disclosures. 2. SEGMENT INFORMATIONThe Company has determined that it operates in two segments, the sapphire and pharmacy business.Revenue is attributed by geographic region based on shipto location of the Company’s customers. The following table summarizes revenue by geographicregion:Year ended December 31,20202019(in thousands)North America$4,039$3,324Asia406185Other2217Total revenue$4,467$3,526The following table summarizes sales by product type:Year ended December 31,20202019(in thousands)Optical$3,611$3,338Core69Rubicon DTP850179Total revenue$4,467$3,526The following table summarizes assets by geographic region:As ofDecember 31,20202019(in thousands)United States$31,240$29,703Malaysia—5,094Other—4Total assets$31,240$34,801 The total assets of Rubicon DTP were not material to the total assets of the Company as stated on the consolidated balance sheets, as of December 31, 2020and 2019.Rubicon DTP accounted for approximately $340,000 and $447,000 of the Company’s loss for the year ended December 31, 2020 and 2019, respectively. F153. INVESTMENTSThe Company invests available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, commonstock, equity related securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains andlosses recorded in accumulated other comprehensive income/(loss). Investments in equity securities are reported at fair value, with both realized and unrealizedgains and losses recorded as unrealized gain/(loss) on investments and realized gain on investments, in other income/(expense), in the Consolidated Statements ofOperations. Investments in which the Company has the ability and intent, if necessary, to liquidate are classified as shortterm.The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2020:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,748$—$—$14,748Marketable securities————Total shortterm investments$14,748$—$—$14,748The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2019:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,668$—$—$14,668Marketable securities961(171)790Total shortterm investments$15,629$—$(171)$15,458The Company values its investments at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in theprincipal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniquesused to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchybased on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are thefollowing:●Level 1—Quoted prices in active markets for identical assets or liabilities.●Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices inmarkets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assetsor liabilities.●Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.The Company’s fixed income availableforsale securities consist of U.S. Treasury securities, highquality investment grade commercial paper, FDIC guaranteedcertificates of deposit, common stock, equity related securities and corporate notes. The Company values these securities based on pricing from pricing vendors,who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly(Level 2 inputs) in determining fair value. The valuation techniques used to measure the fair value of the Company’s financial instruments having Level 2 inputswere derived from nonbinding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricingmodels, such as discounted cash flow techniques.F16The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2020:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,136$—$—$3,136Investments:Availableforsales securities—current:U.S. Treasury securities—14,748—14,748Total$3,136$14,748$—$17,884The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2019:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,759$—$—$3,759Investments:Availableforsales securities—current:U.S. Treasury securities—14,668—14,668790790Total$4,549$14,668$—$19,217There are no terms or conditions restricting the Company from redeeming any of its investments.In addition to the debt securities noted above, the Company had approximately $8.0 million and $4.9 million of time deposits included in cash and cashequivalents as of December 31, 2020 and 2019, respectively.4. SIGNIFICANT CUSTOMERSFor the year ended December 31, 2020, the Company had four customers that accounted for approximately 21%, 13%, 11% and 10% of its revenue. For the yearended December 31, 2019, the Company had three customers that accounted for approximately 31%, 15% and 12% of its revenue.Customers individually representing more than 10% of trade receivables accounted for approximately 44% and 77% of accounts receivable as of December 31,2020 and 2019, respectively. 5. ASSETS HELD FOR SALE AND LONGLIVED ASSETSWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, the Company performs ananalysis to review the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expectedfuture operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.F17In connection with the Company’s decision in 2016 to limit its focus to the optical and industrial sapphire markets and exit the LED market, the Companydeveloped a plan to close its Malaysia facility, scale down and consolidate remaining operations in the U.S. and sell additional assets that would not be needed. TheCompany evaluated its U.S. and Malaysia asset portfolios to identify assets needed for its current business strategy and excess assets that were no longer needed.The Company determined it had excess machinery, equipment and facilities. Excess U.S. and Malaysia assets were evaluated based on assuming an orderlyliquidation plan, which considers economic obsolescence and sales of comparable equipment, as it is the Company’s intention to sell these assets. Additionally, theCompany evaluated its U.S. assets continuing to be used in operations using a cost and market approach to determine the current fair value. In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.6. STOCKHOLDERS’ EQUITYCommon stockAt the Company’s annual meeting of stockholders held on May 3, 2017, the Company’s stockholders approved amendments to the Company’s Eighth Amendedand Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”) to (i) effect a reverse stock split of the Company’s common stock; and (ii)decrease the Company’s authorized number of shares of common stock to three times the number of shares of the Company’s common stock outstandingimmediately following the reverse stock split. On May 3, 2017, following the annual meeting, the Company filed with the Secretary of State of the State of Delaware aCertificate of Amendment to (a) implement the reverse stock split at a ratio of 1for10; and (b) to reduce the number of authorized shares of common stock from40,000,000 to 8,200,000, consequently reducing the number of total authorized shares from 45,000,000 to 13,200,000. With the completion of the reverse stock split,the Company’s shares began trading above the required $1.00 per share closing bid price, as required by the Listing Qualifications Department of NASDAQ. Theshare information has been retroactively reflected for the effects of this reverse stock split for all periods presented.Preferred stockAt the Company’s annual meeting of stockholders held on May 10, 2018, the Company’s stockholders approved an amendment to the Certificate ofIncorporation to decrease the Company’s authorized number of shares of preferred stock from 5,000,000 shares to 1,000,000 shares. The Company filed with theSecretary of State of the State of Delaware a Certificate of Amendment to decrease the authorized number of preferred shares, consequently reducing the number oftotal authorized shares from 13,200,000 to 9,200,000.Common shares reservedAs of December 31, 2020, the Company had reserved 65,103 shares of common stock for issuance upon the exercise of outstanding common stock options andvesting of RSUs. Also 301,105 shares of the Company’s common stock were reserved for future grants of stock options and RSUs (or other similar equityinstruments) under the Rubicon Technology, Inc. 2016 Stock Incentive Plan (the “2016 Plan”) as of December 31, 2020.F187. STOCKHOLDER RIGHTS AGREEMENT On December 18, 2017, the Company entered into a Section 382 Rights Agreement with American Stock Transfer & Trust Company, LLC, as Rights Agent (the“Rights Agreement”) in an effort to protect stockholder value by attempting to diminish the risk that the Company’s ability to use its net NOLs to reduce potentialfuture federal income tax obligations may become substantially limited. The Company’s ability to utilize its NOLs may be substantially limited if the Companyexperiences an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”). The Rights Agreement isintended to act as a deterrent to any person acquiring beneficial ownership of 4.9% or more of the Company’s outstanding common stock without the approval ofthe Company’s Board of Directors (the “Board”).The Board authorized the issuance of one Right for each outstanding share of common stock, par value $0.001 per share, of the Company, payable tostockholders of record date of the close of business on January 2, 2018. One Right will also be issued together with each share of the Company’s common stockissued after January 2, 2018 but before the Distribution Date (as defined below) and, in certain circumstances, after the Distribution Date. Subject to the terms,provisions and conditions of the Rights Agreement, if the Rights become exercisable, each Right would initially represent the right to purchase from the Companyone onethousandth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company (the “Series A Preferred Stock”) for apurchase price of $40.00. If issued, each onethousandth of a share of Series A Preferred Stock would give the stockholder approximately the same dividend, votingand liquidation rights as does one share of common stock. However, prior to exercise, a Right does not give its holder any rights as a stockholder of the Company,including, without limitation, any dividend, voting or liquidation rights.The Rights will not be exercisable until the earlier of (i) ten business days after a public announcement that a person has become an “Acquiring Person” byacquiring beneficial ownership of 4.9% or more of outstanding common stock (or, in the case of a person that had beneficial ownership of 4.9% or more of theoutstanding common stock as of the close of business on December 18, 2017, by obtaining beneficial ownership of any additional shares of common stockrepresenting 0.5% or more of the shares of common stock then outstanding (other than pursuant to a dividend or distribution paid or made by the Company on theoutstanding shares of the common stock or pursuant to a split or subdivision of the outstanding shares of common stock) at a time such person still beneficiallyowns 4.9% or more of the outstanding common stock), and (ii) ten business days (or such later date as may be specified by the Board prior to such time as anyperson becomes an Acquiring Person) after the commencement of a tender or exchange offer by or on behalf of a person that, if completed, would result in suchperson becoming an Acquiring Person (the “Distribution Date”).Until the Distribution Date, common stock certificates or the ownership statements issued with respect to uncertificated shares of common stock will evidencethe Rights. Any transfer of shares of common stock prior to the Distribution Date will also constitute a transfer of the associated Rights. After the Distribution Date,separate rights certificates will be issued and the Rights may be transferred other than in connection with the transfer of the underlying shares of common stockunless and until the Board has determined to effect an exchange pursuant to the Rights Agreement (as described below).In the event that a person becomes an Acquiring Person, each holder of a Right, other than Rights that are or, under certain circumstances, were beneficiallyowned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right and payment of the purchaseprice, a number of shares of the Company’s common stock (or, in certain circumstances, cash, property or other securities of the Company) having a market valueequal to two times the purchase price. However, Rights are subject to redemption and exchange at the option of the Company.In the event that, at any time following a person becoming an Acquiring Person, (i) the Company engages in a merger or other business combination transactionin which the Company is not the surviving corporation; (ii) the Company engages in a merger or other business combination transaction in which the Company isthe surviving corporation and the common stock is changed or exchanged; or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold ortransferred, each holder of a Right (except Rights which have previously been voided) shall thereafter have the right to receive, upon exercise of the Right, commonstock of the acquiring company having a value equal to two times the purchase price.F19At any time until the earlier of December 18, 2023, and ten calendar days following the first date of public announcement that a person has become an AcquiringPerson or that discloses information which reveals the existence of an Acquiring Person or such earlier date as a majority of the Board becomes aware of theexistence of an Acquiring Person, the Board may redeem the Rights in whole, but not in part, at a price of $0.001 per Right (the “Redemption Price”). The redemptionof the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon anyredemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.At any time after a person becomes an Acquiring Person, the Board may, at its option, exchange the Rights (other than Rights that have become void), in wholeor in part, at an exchange ratio of one share of common stock, or a fractional share of Series A Preferred Stock (or of a share of a similar class or series of theCompany’s preferred stock having similar rights, preferences and privileges) of equivalent value, per Right (subject to adjustment). Immediately upon an exchange ofany Rights, the right to exercise such Rights will terminate and the only right of the holders of Rights will be to receive the number of shares of common stock (orfractional share of Series A Preferred Stock or of a share of a similar class or series of the Company’s preferred stock having similar rights, preferences andprivileges) equal to the number of such Rights held by such holder multiplied by the exchange ratio.Each one onethousandth of a share of Series A Preferred Stock, if issued: (i) will be nonredeemable and junior to any other series of preferred stock theCompany may issue (unless otherwise provided in the terms of such other series), (ii) will entitle holders to preferential cumulative quarterly dividends in an amountper share of Series A Preferred Stock equal to the greater of (a) $1 or (b) 1,000 times the aggregate the dividends, if any, declared on one share of the Company’scommon stock, (iii) will entitle holders upon liquidation (voluntary or otherwise) to receive $1,000 per share of Series A Preferred Stock plus an amount equal toaccrued and unpaid dividends and distributions thereon, whether or not declared, (iv) will have the same voting power as one share of common stock, and (v) willentitle holders to a per share payment equal to the payment made on one share of the Company’s common stock, if shares of the common stock are exchanged viamerger, consolidation, or a similar transaction. Because of the nature of the Series A Preferred Stock’s dividend, liquidation and voting rights, the value of a Unit ofSeries A Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of common stock.The Rights and the Rights Agreement will expire on the earliest of (i) December 18, 2023, (ii) the time at which the Rights are redeemed pursuant to the RightsAgreement, (iii) the time at which the Rights are exchanged in full pursuant to the Rights Agreement, (iv) the date that the Board determines that the RightsAgreement is no longer necessary for the preservation of material valuable Tax Benefits, (v) the beginning of a taxable year of the Company to which the Boarddetermines that no NOL tax benefits may be carried forward, and (vi) a determination by the Board, prior to the time any Person becomes an Acquiring Person, thatthe Rights Agreement and the Rights are no longer in the best interests of the Company and its stockholders.The Board may adjust the purchase price, the number of shares of Series A Preferred Stock or other securities or assets issuable and the number of outstandingRights to prevent dilution that may occur as a result of certain events, including among others, a stock dividend, a stock split or a reclassification of the Series APreferred Stock or common stock. With certain exceptions, no adjustments to the purchase price will be required until cumulative adjustments amount to at least 1%of the purchase price.For so long as the Rights are redeemable, the Board may supplement or amend any provision of the Rights Agreement in any respect without the approval ofthe holders of the Rights. From and after the time the Rights are no longer redeemable, the Board may supplement or amend the Rights Agreement only to cure anambiguity, to alter time period provisions, to correct inconsistent provisions, or to make any additional changes to the Rights Agreement which the Company maydeem necessary or desirable, but only to the extent that those changes do not impair or adversely affect any Rights holder (other than an Acquiring Person or anyAffiliate or Associate of an Acquiring Person or certain of their transferees) and do not result in the Rights again becoming redeemable or the Rights Agreementagain becoming amendable other than in accordance with this sentence.In connection with the adoption of the Rights Agreement and authorization and declaration of the dividend of the Rights, on December 18, 2017, the Companyfiled the Certificate of Designation with the Secretary of State of the State of Delaware. The Certificate of Designation became effective on December 18, 2017.F208. STOCK INCENTIVE PLANSIn August 2007, the Company adopted the Rubicon Technology Inc. 2007 Stock Incentive Plan, which was amended and restated effective in March 2011 (the“2007 Plan”), and which allowed for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, RSUs, performanceawards and bonus shares. The maximum number of shares that could be awarded under the 2007 Plan was 440,769 shares. Options granted under the 2007 Planentitle the holder to purchase shares of the Company’s common stock at the specified option exercise price, which could not be less than the fair market value of thecommon stock on the grant date. On June 24, 2016, the 2007 Plan terminated with the adoption of the Rubicon Technology, Inc. 2016 Stock Incentive Plan, (the “2016Plan”). Any existing awards under the 2007 Plan remain outstanding in accordance with their current terms under the 2007 Plan. In June 2016, the Company’sstockholders approved adoption of the 2016 Plan effective as of March 17, 2016, which allows for the grant of incentive stock options, nonstatutory stock options,stock appreciation rights, restricted stock, RSUs, performance awards and bonus shares. The Compensation Committee of the Board administers the 2016 Plan. Thecommittee determines the type of award to be granted, the fair value, the number of shares covered by the award, and the time when the award vests and may beexercised.Pursuant to the 2016 Plan, 222,980 shares of the Company’s common stock plus any shares subject to outstanding awards under the 2007 Plan thatsubsequently expire unexercised, are forfeited without the delivery of shares or are settled in cash, will be available for issuance under the 2016 Plan. The 2016 Planwill automatically terminate on March 17, 2026, unless the Company terminates it sooner.The following table summarizes the activity of the stock incentive and equity plans:Sharesavailablefor grantNumber ofoptionsoutstandingWeightedaverageoptionexercise priceNumber ofrestrictedstock sharesissuedNumber ofRSUsoutstandingOutstanding at January 1, 2019295,06769,08312.1099,57050,176Granted(60,925)1,000——9,925Exercised/issued—(5,000)——(6,098)Canceled/forfeited42,244(42,244)11.35——Outstanding at December 31, 2019276,38622,83913.4899,57054,003Granted(20,877)———3,597Exercised/issued—(2,250)——(3,597)Canceled/forfeited40,596(489)202.56—(9,000)Outstanding at December 31, 2020296,10520,100$9.7199,57045,003There were no option grants made during 2020. At December 31, 2020, the exercise prices of outstanding options were as follows:Exercise priceNumber ofoptionsoutstandingAverageremainingcontractual life(years)Number ofoptionsexercisable$6.10 $8.3418,2505.7518,250$44.101,8503.941,85020,1004.7320,100F21The aggregate grant date fair value of the options that became vested in the years ended 2020 and 2019 was $30,000 and $77,000, respectively.The following table summarizes the activity of nonvested options:NonvestedoptionsWeightedaverage optionexercisepriceNonvested at January 1, 201921,992$6.86Granted1,0008.34Vested(10,878)7.07Cancelled(7,248)7.25Nonvested at December 31, 20194,8666.10Granted——Vested(4,866)6.10Cancelled——Nonvested at December 31, 2020—$—The Company’s aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of theCompany’s common stock. Based on the fair value of the common stock at December 31, 2020 there was $52,000 of intrinsic value arising from 18,250 stock optionsexercisable or outstanding.The Company used historical stock prices as the basis for its volatility assumptions. The assumed riskfree rates were based on U.S. Treasury rates in effect atthe time of grant with a term consistent with the expected option lives. The expected term for the year ended December 31, 2020, is based upon the Company’smedian average life of its options. The forfeiture rate is based on the past history of forfeited options. The expense is being allocated using the straightline method.For the years ended December 31, 2020 and 2019, the Company recorded $14,000 and $24,000, respectively, of stock option compensation expense. As ofDecember 31, 2020, all outstanding options awarded have been fully vested.For the year ended December 31, 2020, there were no options granted.The following table summarizes the award vesting terms for the RSUs granted in 2019:Number of RSUsTarget price925$7.95The following table summarizes the award vesting terms for the RSUs granted in 2018:Number of restricted stock unitsTarget price902$11.0015,000$12.5015,000$14.00F22The RSUs vest in the amounts set forth below on the first date the 15trading day average closing price of the Company’s common stock equals or exceeds thecorresponding target price for the common stock before May 12, 2021. At the time the negotiation of the terms of the employment agreement began, the closing priceof the common stock was $5.50. On the date of grant, the closing price of the common stock was $6.30. During the twelve months ended December 31, 2017, the firstthree tranches of the grant vested. No additional tranches vested during the years ended December 31, 2020, 2019 and 2018.The Company used Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted because the awards vest based uponachievement of market price targets. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the marketcondition stipulated in the award and calculates the fair value of each RSU. The Company used the following assumptions in determining the fair value of the RSUs:GrantedJanuary2018March2017Daily expected stock price volatility4.2806%4.4237%Daily expected mean return on equity(0.2575)%(0.2226)%Daily expected dividend yield0.0%0.0%Average daily riskfree interest rate0.0078%0.0063%The daily expected stock price volatility is based on a fouryear historical volatility of the Company’s common stock. The daily expected dividend yield is basedon annual expected dividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches iscalculated to have its own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period which is upto four years. The RSUs granted in January 2018 and March 2017 had a grant date fair value of $209,000 and $323,000, respectively. There were no grants with marketprice targets issued in the years ended December 31, 2020 and 2019. A summary of the Company’s RSUs is as follows:RSUsoutstandingWeightedaverageprice attime of grantAggregateintrinsicvalueNonvested RSUs as of January 1, 201950,176$6.31Granted9,9258.32Vested(6,098)7.40Cancelled——Nonvested RSUs as of December 31, 201954,0036.56Granted3,5978.34Vested(3,597)8.34Cancelled(9,000)8.36Nonvested RSUs at December 31, 202045,003$6.20$278,961The fair value of each RSU is the market price on the date of grant and is being recorded as compensation expense ratably over the vesting terms or theexpected achievement of market price targets based on the Monte Carlo simulation model. For the years ended December 31, 2020 and 2019, the Company recorded$38,000 and $7,000 of RSU expense, respectively. The RSUs are forfeited by a participant upon termination for any reason, and there is no proportionate or partialvesting in the periods between the vesting dates. As of December 31, 2020, there was no unrecognized compensation cost related to the nonvested RSUs.For the year ended December 31, 2020 the Company recorded no compensation related to restricted stock compared to $14,000 in the prior year. During the year ended December 31, 2020 the Company awarded approximately 17,000 shares to an officer of the Company with a fair value of $146,000.F239. INCOME TAXESOn December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed theCompany to record provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date ofenactment. The Company has completed its accounting for the tax effects of enactment of the Act. The deemed inclusion from the repatriation tax increased from$3.9 million at the time of provision to $5.0 million at the time the calculation was finalized for the tax return. The increase of the inclusion related primarily to therefinement of Malaysia earnings and profits. As the Company is in a full valuation allowance position, an equal benefit adjustment was recorded for the impact ofthe increase of the deemed repatriation tax.Components of income before income taxes and the income tax provision are as follows:Income (loss) before income taxesYear endedDecember 31,20202019(in thousands)U.S.$(3,060)$(1,142)Foreign2,01817Total$(1,050)$(1,125)Income taxesYear endedDecember 31,20202019(in thousands)CurrentU.S.$—$—State——Foreign1322Total current income tax expense1322DeferredU.S.——State——Foreign——Total deferred income tax expense (benefit)——Total income tax expense (benefit)$13$22The reconciliation of income tax computed at the federal statutory rate to income before taxes is as follows:Year endedDecember 31,20202019U.S. federal statutory rate(21.0)%(21.0)%State taxes net of federal benefit(18.2)(7.6)Foreign rate differential and transactional tax5.90.1Tax credits——Valuation allowance33.328.5Other12.01.0%2.0%F24Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amount of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred income taxes are as follows at December 31:20202019(in thousands)Deferred tax assets:Allowance for doubtful accounts$1$11Inventory reserves3,0963,185Consumables excess reserve167169Accrued liabilities8152Warrant interest expense195196Stock compensation expense789789State net operating loss14,47615,010Net operating loss carryforward41,10540,437Tax credits710740Depreciation1,0001,329Valuation allowance(61,556)(61,869)Total deferred tax assets6449Deferred tax liability:Prepaid expenses(64)(49)Net deferred tax liability$—$—In February 2018, the FASB issued ASU No. 201802 (“ASU 201802), Income StatementReporting Comprehensive Income (Topic 220): Reclassification ofCertain Tax Effects from Accumulated Comprehensive Income. The new guidance allows companies to reclassify stranded tax effects resulting from the Tax Act,from accumulated other comprehensive income to retained earnings. The guidance also requires certain new disclosures regardless of the election. Early adoption ispermitted. The Company’s adoption of ASU 201802 did not have a material impact on its consolidated financial statements.The Company adopted the guidance in ASU No. 201517, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which requires that alldeferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent in the balance sheet. As a result, each jurisdiction has onenet noncurrent deferred tax asset or liability. The new guidance does not change the existing requirement that only permits offsetting within a jurisdiction.Companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The change inaccounting principle did not have an impact on the Company’s results of operations, cash flows or stockholders’ equity. At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.The Company completed an analysis of the utilization of NOLs subject to limits based upon certain ownership changes as of December 31, 2020. The results ofthis analysis indicated no ownership change limiting the utilization of net operating losses and tax credits.F25The Company prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, orexpected to be taken, in a tax return. At December 31, 2020 and 2019, the Company had $1.1 million of unrecognized tax benefits taken or expected to be taken in a taxreturn that have been recorded on the Company’s financial statements as an offset to the valuation allowance related to tax positions taken in 2012. It is notreasonably possible that the amount will change in the next twelve months. There were no material changes to prior year or current year positions taken during theyear ended December 31, 2020.There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company files income tax returns in the United States federal jurisdiction and in a state jurisdiction. During 2009, the Company began foreign operations inMalaysia and is subject to local income taxes in that jurisdiction. The Company’s Malaysia tax returns for the periods ended December 31, 2010 through 2012 havebeen audited by the Malaysia Inland Revenue Board with no changes made to the taxable income for those years. All other tax years in Malaysia are open toexamination by tax authorities.The Company’s federal tax returns for the periods ended December 31, 2010, 2008 and 2007 have been audited by the Internal Revenue Service (IRS) with nochanges made to the Company’s taxable losses for those years. The Company’s state tax returns for the periods ended December 31, 2009 through 2012 have beenaudited by the Illinois Department of Revenue with no changes made to the Company’s taxable losses for those years. Due to the existence of NOL carryforwards,tax years ended December 31, 2001 through 2006, 2008, 2009 and 2011 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOLcarryforwards at the State level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 areopen to examination by the Malaysia Inland Revenue Board.Due to the closing of the Rubicon Malaysia operations, the Company no longer considers the undistributed earnings of Rubicon Malaysia to be indefinitelyreinvested. Upon liquidation of Rubicon Malaysia, it is anticipated any cash left after the liquidation will be brought back to the U.S. via a payment of principaltowards the intercompany loan. A withholding tax may be payable to the Malaysian government on the interest portion of the loan. At December 31, 2020 and 2019,the Company accrued the withholding tax on the interest balance of the loan in the amount of $13,000 and $22,000, respectively, which represents the incremental tax.10. COMMITMENTS AND CONTINGENCIESCOVID19 PandemicIn March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID19) as a pandemic. The full impact of the COVID19outbreak is unknown and cannot be reasonably estimated. The magnitude and duration of the COVID19 outbreak, as well as other factors, could result in a materialimpact to the Company’s financial statements in future reporting periods.Operating LeasesThe Company adopted ASU 201602 in the first quarter of the fiscal year ending December 31, 2019. The adoption of ASU 201602 did not have a material impacton the Company’s consolidated financial statements, as the Company does not have any material lease agreements Rubicon DTP leases a building for itsmanufacturing and offices, however such lease was not considered material to the Company’s financial statements.Direct Dose’s net rent expense under operating leases in 2020 and 2019 amounted to $34,200 and $25,900, respectively. As of December 31, 2020, Direct Dose’soperating lease for its facility was monthtomonth. On January 6, 2021, Direct Dose entered into a one year lease for an aggregate commitment of approximately$35,500.LitigationFrom time to time, the Company experiences routine litigation in the ordinary course of its business.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.11. BENEFIT PLANThe Company sponsors a 401(k) savings plan (the “Plan”). Employees are eligible to participate in the Plan upon reaching 18 years of age. Employees makecontributions to the Plan through payroll deferrals. Employer matching contributions are discretionary. There were no employer matching contributions for the yearsended December 31, 2020 and 2019.12. SUBSEQUENT EVENTSNone.F26EX21.1 2 f10k2020ex211_rubicon.htm SUBSIDIARIES OF THE COMPANYExhibit 21.1Rubicon Technologies, Inc.Subsidiaries of the CompanyName of subsidiaryState (or other jurisdiction of incorporation)Rubicon Technology Worldwide LLCIllinoisRubicon Technology BP LLCDelawareRubicon DTP LLCDelawareEX23.1 3 f10k2020ex231_rubicon.htm CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMExhibit 23.1INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENTWe consent to the incorporation by reference in the Registration Statements of Rubicon Technology, Inc. on Form S3 (File No. 333167272), as amended (File No.333192536) and on Forms S8 (File No. 333147552, File No. 333180211 and File No. 333213025) of our report dated March 22, 2021 with respect to our audits of theconsolidated financial statements of Rubicon Technology, Inc. and Subsidiaries as of December 31, 2020 and 2019 and for each of the two years in the period endedDecember 31, 2020, which report is included in this Annual Report on Form 10K of Rubicon Technology, Inc. and Subsidiaries for the year ended December 31, 2020./s/ Marcum LLPMarcum LLPChicago, IllinoisMarch 22, 2021EX31.1 4 f10k2020ex311_rubicon.htm CERTIFICATIONExhibit 31.1CertificationsCertification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Timothy E. Brog, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerEX31.2 5 f10k2020ex312_rubicon.htm CERTIFICATIONExhibit 31.2Certification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Kevin T. Lusardi, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerEX32.1 6 f10k2020ex321_rubicon.htm CERTIFICATIONExhibit 32.1Certification Pursuant to Section 906 of The SarbanesOxley Act of 2002,18 U.S.C. Section 1350In connection with the Annual Report of Rubicon Technology, Inc. (the “Company”) on Form 10K for the year ended December 31, 2020, as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Timothy E. Brog, President and Chief Executive Officer of the Company, and I, Kevin T.Lusardi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the SarbanesOxley Act of 2002,that, to my knowledge:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerDate: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerA signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnishedto the Securities and Exchange Commission or its staff upon request. F8Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanthe functional currency of the Company, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in thedetermination of net income (loss) for the period. The Company records these gains and losses in other income.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expenses), in the Consolidated Statements of Operations. Investments in which the Company has the ability and intent, ifnecessary, to liquidate in order to support the current operations are classified as shortterm.The Company reviews its availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on thespecific identification method. The Company considers various factors in determining whether an impairment is otherthantemporary, including the severity andduration of the impairment, changes in underlying credit ratings, forecasted recovery, its ability and intent to hold the investment for a period of time sufficient toallow for any anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When the Company concludesthat an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on theConsolidated Statements of Operations. As of December 31, 2020, and 2019, no impairment was recorded.Purchases of Equity Securities by the IssuerIn November 2018, the Company’s Board of Directors authorized a program to repurchase up to $3 million of its common stock. In July 2020, the Company usedall of the original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time. There can be no assurance as to the number of shares of common stock repurchased. The Company records treasurystock purchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock.Share repurchase activity during the year ended December 31, 2020, was as follows:PeriodsTotalnumber ofsharespurchasedAveragepricepaid pershareTotalnumber ofsharespurchasedas part ofpubliclyannouncedprogramApproximatedollar valueof sharesthat may yetbe purchasedunder theprogram(in thousands)January 1, 2020, to December 31, 2020295,946$8.10295,546$3,000Total295,946$3,000F9Accounts receivableThe majority of the Company’s accounts receivable are due from defense subcontractors, industrial manufacturers, fabricators and resellers. Credit is extendedbased on an evaluation of the customer’s financial condition. Accounts receivable are due based on contract terms and at stated amounts due from customers, netof an allowance for doubtful accounts. Losses from credit sales are provided for in the financial statements.Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number offactors, including the length of time a customer’s account is past due, the customer’s current ability to pay and the condition of the general economy and industryas a whole. The Company writes off accounts receivable when they are deemed uncollectible and such writeoffs, net of payments received, are recorded as areduction to the allowance.The following table shows the activity of the allowance for doubtful accounts:Year endedDecember 31,20202019(in thousands)Beginning balance$40$7Charges to costs and expenses(20)33Account writeoffs, less recoveries(17)—Ending balance$3$40InventoriesInventories are valued at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary course ofbusiness less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis, which includes materials, labor and overhead. The Company reduces the carrying value of itsinventories for differences between the cost and the estimated net realizable value, taking into account usage, expected demand, technological obsolescence andother relevant information.The Company establishes inventory reserves when conditions exist that suggest inventory may be in excess of anticipated demand or is obsolete based oncustomer specifications. The Company evaluates the ability to realize the value of its inventory based on a combination of factors, including forecasted sales,estimated current and future market value and changes in customers’ product specifications. The Company’s method of estimating excess and obsolete inventoryhas remained consistent for all periods presented. The Company also carries a lower of cost or market inventory reserve based on net realizable value using mostrecent sales prices to determine market value. As of December 31, 2020 and 2019, the balance of the lower of cost or market reserve was $51,000 and $72,000,respectively, representing a decrease of $21,000 resulting from sales of related reserved for inventory. In addition, in 2020 we sold inventory that was valued at thelower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $21,000. In 2019 we sold inventorythat was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $35,000.In 2019 and 2020, the Company used some of its previously written down twoinch diameter core material in production of optical and industrial sapphire wafersand did not record any additional adjustments for the years ended December 31, 2019 and December 31, 2020.The Company evaluates the amount of raw material needed for future production based on expected crystal growth production needed to meet anticipatedsales. The Company did not record any writedowns of its raw materials inventory for the years ended December 31, 2019 and December 31, 2020.F10Inventories are composed of the following:As ofDecember 31,20202019(in thousands)Raw materials$468$468Workinprocess614901Finished goods459809$1,541$2,178As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.Other inventory suppliesThe Company’s other inventory supplies include stock of consumable assets and spare parts used in the manufacturing process.Assets held for saleAn asset is considered to be held for sale when all of the following criteria are met: (i) management commits to a plan to sell the asset; (ii) it is unlikely that thedisposal plan will be significantly modified or discontinued; (iii) the asset is available for immediate sale in its present condition; (iv) actions required to complete thesale of the asset have been initiated; (v) sale of the asset is probable and the completed sale is expected to occur within one year; and (vi) the asset is actively beingmarketed for sale at a price that is reasonable given its current market value.A longlived asset classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. If the longlived asset is newlyacquired, the carrying amount of the longlived asset is established based on its fair value less cost to sell at the acquisition date. A longlived asset is notdepreciated or amortized while it is classified as held for sale.In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.F11Property and equipmentProperty and equipment consisted of the following:As ofDecember 31,20202019(in thousands)Machinery, equipment and tooling$3,343$3,341Buildings1,7111,711Information systems835835Land and land improvements594594Furniture and fixtures88Total cost6,4916,489Accumulated depreciation and amortization(4,009)(3,842)Property and equipment, net$2,482$2,647Property and equipment are carried at cost and depreciated over their estimated useful lives using the straightline method. The cost of maintenance and repairsis charged to expense as incurred. Significant renewals and improvements are capitalized. Depreciation expense associated with property and equipment was$167,000 and $169,000 for the years ended December 31, 2020 and 2019, respectively.The estimated useful lives are as follows:Asset descriptionLifeBuildings39 yearsMachinery, equipment and tooling310 yearsFurniture and fixtures7 yearsInformation systems3 yearsWarranty costThe Company’s sales terms include a warranty that its products will meet certain specifications. The Company records a current liability for the expected cost ofwarrantyrelated claims at the time of sale. The warranty reserve is included in accrued and other current liabilities on the Consolidated Balance Sheets.The following table presents changes in the Company’s product warranty liability:Year endedDecember 31,20202019(in thousands)Balance, beginning of period$4$8Charged to cost of sales1831Actual product warranty expenditures(20)(35)Balance, end of period$2$4The Company does not provide maintenance or other services and it does not have sales that involve bill & hold arrangements, multiple elements ordeliverables. However, the Company does provide product warranty for up to 90 days, for which the Company has accrued a warranty reserve of $2,000 and $4,000for the years ended December 31, 2020 and 2019, respectively.Fair value of financial instrumentsThe Company’s financial instruments consist primarily of cash and cash equivalents, shortterm investments, accounts receivable, and accounts payable. Thecarrying values of these assets and liabilities approximate their fair values due to the shortterm nature of these instruments at December 31, 2020 and 2019.F12Concentration of credit risks and other risks and uncertaintiesFinancial instruments that could potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, restrictedcash, shortterm investments and accounts receivable. At December 31, 2020 the Company had no deposits at foreign financial institutions and $1.6 million ondeposit at foreign financial institutions at December 31, 2019. As of December 31, 2020, the Company had $8 million on deposit at financial institutions in excess ofamounts insured by the FDIC. This compares to a $5.7 million as of December 31, 2019. The Company performs a periodic evaluation of these institutions for relativecredit standing. The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant risk of loss on thesebalances.The Company uses third parties for certain finishing functions for its products, including the slicing and polishing of its sapphire crystal inventory. These typesof services are only available from a limited number of third parties. The Company’s ability to successfully outsource these finishing functions will substantiallydepend on its ability to develop, maintain and expand its strategic relationship with these third parties. As a result, the Company may be unable to meet the demandfor its products, which could have a material adverse impact on the Company.Concentration of credit risk related to revenue and accounts receivable is discussed in Note 4.Revenue recognitionRevenues recognized include product sales and billings for costs and fees for government contracts.Product SalesThe Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1,2018. The Company recognizes revenue when performance obligations under a purchase order or signed quotation are satisfied. The Company’s business practicecommits the Company to manufacture and deliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement withthe customer includes specifications of the product to be delivered, price, expected ship date and payment terms. The Company’s agreements generally do notcontain variable, financing, rights of return or noncash components. There are no upfront costs to develop the production process. The performance obligation issatisfied at the point in time (single performance obligation) when the product is manufactured to the customer’s specification, as performance does not create anasset with an alternative use to the Company. Accordingly, the Company recognizes revenue when the product is shipped, and control of the product, title and riskof loss have been transferred to the customer. The Company grants credit terms considering normal collection risk. If there is doubt about collection, full prepaymentfor the order is required. Any payments received prior to shipment are recorded as deferred revenue and included in Advance Payments in the Consolidated BalanceSheets. The Company does not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of the Company’s revenue is denominated in U.S. dollars.Shipping and handling costsThe Company records costs incurred in connection with shipping and handling of products as cost of goods sold. Amounts billed to customers in connectionwith these costs are included in revenue and are not material for any of the periods presented in the accompanying financial statements.Sales taxThe Company collects and remits sales taxes on products sold to customers and reports such amounts under the net method in its Consolidated Statements ofOperations and records a liability until remitted to the respective tax authority.F13Stockbased compensationThe Company requires all sharebased payments to employees, including grants of employee stock options, to be measured at fair value and expensed in theConsolidated Statements of Operations over the service period (generally the vesting period) of the grant. Expense is recognized in the Consolidated Statements ofOperations for these sharebased payments. The Company uses Black Scholes option pricing model in order to determine the fair value of stock option grants.Accounting for uncertainty in income taxesThe Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by thetaxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured basedon the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and/or penalties related to incometax matters in income tax expense. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years endedDecember 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.Income taxesDeferred tax assets and liabilities are provided for temporary differences between financial reporting and income tax bases of assets and liabilities, and aremeasured using the enacted tax rates and laws expected to be in effect when the differences will reverse. Deferred income taxes also arise from the future benefits ofNOL carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Full valuationallowances on net deferred tax assets are maintained until an appropriate level of profitability that generates taxable income is deemed sustainable or until a taxstrategy is developed that would enable the Company to conclude that it is more likely than not that a portion of the deferred tax assets will be realizable. Based onan evaluation in accordance with the accounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. andMalaysia deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all theavailable evidence.Use of estimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at thedate of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.Other comprehensive lossComprehensive loss is defined as the change in equity of a business enterprise from transactions and other events from nonowner sources. Comprehensiveloss includes net loss and other nonowner changes in equity that bypass the statement of operations and are reported in a separate component of equity.Net income (loss) per common shareBasic net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of common shares outstanding duringthe period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of diluted common sharesoutstanding during the period. Diluted shares outstanding are calculated by adding to the weightedaverage shares (a) any outstanding stock options based on thetreasury stock method and (b) restricted stock units (“RSU”).F14Diluted net income per share was the same as basic net income per share for the year ended December 31, 2020, because the effects of potentially dilutivesecurities did not have a material impact on the calculation of diluted net income per share. The Company had outstanding options exercisable into 18,250 shares ofthe Company’s common stock that would have had an antidilutive effect at December 31, 2020.Diluted net loss per common share was the same as basic net loss per common share for the year ended December 31, 2020, because the effects of potentiallydilutive securities were antidilutive.New accounting pronouncements adoptedThe Company has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significantimpact the Company’s consolidated financial statements and related disclosures. 2. SEGMENT INFORMATIONThe Company has determined that it operates in two segments, the sapphire and pharmacy business.Revenue is attributed by geographic region based on shipto location of the Company’s customers. The following table summarizes revenue by geographicregion:Year ended December 31,20202019(in thousands)North America$4,039$3,324Asia406185Other2217Total revenue$4,467$3,526The following table summarizes sales by product type:Year ended December 31,20202019(in thousands)Optical$3,611$3,338Core69Rubicon DTP850179Total revenue$4,467$3,526The following table summarizes assets by geographic region:As ofDecember 31,20202019(in thousands)United States$31,240$29,703Malaysia—5,094Other—4Total assets$31,240$34,801 The total assets of Rubicon DTP were not material to the total assets of the Company as stated on the consolidated balance sheets, as of December 31, 2020and 2019.Rubicon DTP accounted for approximately $340,000 and $447,000 of the Company’s loss for the year ended December 31, 2020 and 2019, respectively. F153. INVESTMENTSThe Company invests available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, commonstock, equity related securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains andlosses recorded in accumulated other comprehensive income/(loss). Investments in equity securities are reported at fair value, with both realized and unrealizedgains and losses recorded as unrealized gain/(loss) on investments and realized gain on investments, in other income/(expense), in the Consolidated Statements ofOperations. Investments in which the Company has the ability and intent, if necessary, to liquidate are classified as shortterm.The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2020:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,748$—$—$14,748Marketable securities————Total shortterm investments$14,748$—$—$14,748The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2019:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,668$—$—$14,668Marketable securities961(171)790Total shortterm investments$15,629$—$(171)$15,458The Company values its investments at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in theprincipal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniquesused to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchybased on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are thefollowing:●Level 1—Quoted prices in active markets for identical assets or liabilities.●Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices inmarkets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assetsor liabilities.●Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.The Company’s fixed income availableforsale securities consist of U.S. Treasury securities, highquality investment grade commercial paper, FDIC guaranteedcertificates of deposit, common stock, equity related securities and corporate notes. The Company values these securities based on pricing from pricing vendors,who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly(Level 2 inputs) in determining fair value. The valuation techniques used to measure the fair value of the Company’s financial instruments having Level 2 inputswere derived from nonbinding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricingmodels, such as discounted cash flow techniques.F16The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2020:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,136$—$—$3,136Investments:Availableforsales securities—current:U.S. Treasury securities—14,748—14,748Total$3,136$14,748$—$17,884The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2019:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,759$—$—$3,759Investments:Availableforsales securities—current:U.S. Treasury securities—14,668—14,668790790Total$4,549$14,668$—$19,217There are no terms or conditions restricting the Company from redeeming any of its investments.In addition to the debt securities noted above, the Company had approximately $8.0 million and $4.9 million of time deposits included in cash and cashequivalents as of December 31, 2020 and 2019, respectively.4. SIGNIFICANT CUSTOMERSFor the year ended December 31, 2020, the Company had four customers that accounted for approximately 21%, 13%, 11% and 10% of its revenue. For the yearended December 31, 2019, the Company had three customers that accounted for approximately 31%, 15% and 12% of its revenue.Customers individually representing more than 10% of trade receivables accounted for approximately 44% and 77% of accounts receivable as of December 31,2020 and 2019, respectively. 5. ASSETS HELD FOR SALE AND LONGLIVED ASSETSWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, the Company performs ananalysis to review the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expectedfuture operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.F17In connection with the Company’s decision in 2016 to limit its focus to the optical and industrial sapphire markets and exit the LED market, the Companydeveloped a plan to close its Malaysia facility, scale down and consolidate remaining operations in the U.S. and sell additional assets that would not be needed. TheCompany evaluated its U.S. and Malaysia asset portfolios to identify assets needed for its current business strategy and excess assets that were no longer needed.The Company determined it had excess machinery, equipment and facilities. Excess U.S. and Malaysia assets were evaluated based on assuming an orderlyliquidation plan, which considers economic obsolescence and sales of comparable equipment, as it is the Company’s intention to sell these assets. Additionally, theCompany evaluated its U.S. assets continuing to be used in operations using a cost and market approach to determine the current fair value. In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.6. STOCKHOLDERS’ EQUITYCommon stockAt the Company’s annual meeting of stockholders held on May 3, 2017, the Company’s stockholders approved amendments to the Company’s Eighth Amendedand Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”) to (i) effect a reverse stock split of the Company’s common stock; and (ii)decrease the Company’s authorized number of shares of common stock to three times the number of shares of the Company’s common stock outstandingimmediately following the reverse stock split. On May 3, 2017, following the annual meeting, the Company filed with the Secretary of State of the State of Delaware aCertificate of Amendment to (a) implement the reverse stock split at a ratio of 1for10; and (b) to reduce the number of authorized shares of common stock from40,000,000 to 8,200,000, consequently reducing the number of total authorized shares from 45,000,000 to 13,200,000. With the completion of the reverse stock split,the Company’s shares began trading above the required $1.00 per share closing bid price, as required by the Listing Qualifications Department of NASDAQ. Theshare information has been retroactively reflected for the effects of this reverse stock split for all periods presented.Preferred stockAt the Company’s annual meeting of stockholders held on May 10, 2018, the Company’s stockholders approved an amendment to the Certificate ofIncorporation to decrease the Company’s authorized number of shares of preferred stock from 5,000,000 shares to 1,000,000 shares. The Company filed with theSecretary of State of the State of Delaware a Certificate of Amendment to decrease the authorized number of preferred shares, consequently reducing the number oftotal authorized shares from 13,200,000 to 9,200,000.Common shares reservedAs of December 31, 2020, the Company had reserved 65,103 shares of common stock for issuance upon the exercise of outstanding common stock options andvesting of RSUs. Also 301,105 shares of the Company’s common stock were reserved for future grants of stock options and RSUs (or other similar equityinstruments) under the Rubicon Technology, Inc. 2016 Stock Incentive Plan (the “2016 Plan”) as of December 31, 2020.F187. STOCKHOLDER RIGHTS AGREEMENT On December 18, 2017, the Company entered into a Section 382 Rights Agreement with American Stock Transfer & Trust Company, LLC, as Rights Agent (the“Rights Agreement”) in an effort to protect stockholder value by attempting to diminish the risk that the Company’s ability to use its net NOLs to reduce potentialfuture federal income tax obligations may become substantially limited. The Company’s ability to utilize its NOLs may be substantially limited if the Companyexperiences an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”). The Rights Agreement isintended to act as a deterrent to any person acquiring beneficial ownership of 4.9% or more of the Company’s outstanding common stock without the approval ofthe Company’s Board of Directors (the “Board”).The Board authorized the issuance of one Right for each outstanding share of common stock, par value $0.001 per share, of the Company, payable tostockholders of record date of the close of business on January 2, 2018. One Right will also be issued together with each share of the Company’s common stockissued after January 2, 2018 but before the Distribution Date (as defined below) and, in certain circumstances, after the Distribution Date. Subject to the terms,provisions and conditions of the Rights Agreement, if the Rights become exercisable, each Right would initially represent the right to purchase from the Companyone onethousandth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company (the “Series A Preferred Stock”) for apurchase price of $40.00. If issued, each onethousandth of a share of Series A Preferred Stock would give the stockholder approximately the same dividend, votingand liquidation rights as does one share of common stock. However, prior to exercise, a Right does not give its holder any rights as a stockholder of the Company,including, without limitation, any dividend, voting or liquidation rights.The Rights will not be exercisable until the earlier of (i) ten business days after a public announcement that a person has become an “Acquiring Person” byacquiring beneficial ownership of 4.9% or more of outstanding common stock (or, in the case of a person that had beneficial ownership of 4.9% or more of theoutstanding common stock as of the close of business on December 18, 2017, by obtaining beneficial ownership of any additional shares of common stockrepresenting 0.5% or more of the shares of common stock then outstanding (other than pursuant to a dividend or distribution paid or made by the Company on theoutstanding shares of the common stock or pursuant to a split or subdivision of the outstanding shares of common stock) at a time such person still beneficiallyowns 4.9% or more of the outstanding common stock), and (ii) ten business days (or such later date as may be specified by the Board prior to such time as anyperson becomes an Acquiring Person) after the commencement of a tender or exchange offer by or on behalf of a person that, if completed, would result in suchperson becoming an Acquiring Person (the “Distribution Date”).Until the Distribution Date, common stock certificates or the ownership statements issued with respect to uncertificated shares of common stock will evidencethe Rights. Any transfer of shares of common stock prior to the Distribution Date will also constitute a transfer of the associated Rights. After the Distribution Date,separate rights certificates will be issued and the Rights may be transferred other than in connection with the transfer of the underlying shares of common stockunless and until the Board has determined to effect an exchange pursuant to the Rights Agreement (as described below).In the event that a person becomes an Acquiring Person, each holder of a Right, other than Rights that are or, under certain circumstances, were beneficiallyowned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right and payment of the purchaseprice, a number of shares of the Company’s common stock (or, in certain circumstances, cash, property or other securities of the Company) having a market valueequal to two times the purchase price. However, Rights are subject to redemption and exchange at the option of the Company.In the event that, at any time following a person becoming an Acquiring Person, (i) the Company engages in a merger or other business combination transactionin which the Company is not the surviving corporation; (ii) the Company engages in a merger or other business combination transaction in which the Company isthe surviving corporation and the common stock is changed or exchanged; or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold ortransferred, each holder of a Right (except Rights which have previously been voided) shall thereafter have the right to receive, upon exercise of the Right, commonstock of the acquiring company having a value equal to two times the purchase price.F19At any time until the earlier of December 18, 2023, and ten calendar days following the first date of public announcement that a person has become an AcquiringPerson or that discloses information which reveals the existence of an Acquiring Person or such earlier date as a majority of the Board becomes aware of theexistence of an Acquiring Person, the Board may redeem the Rights in whole, but not in part, at a price of $0.001 per Right (the “Redemption Price”). The redemptionof the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon anyredemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.At any time after a person becomes an Acquiring Person, the Board may, at its option, exchange the Rights (other than Rights that have become void), in wholeor in part, at an exchange ratio of one share of common stock, or a fractional share of Series A Preferred Stock (or of a share of a similar class or series of theCompany’s preferred stock having similar rights, preferences and privileges) of equivalent value, per Right (subject to adjustment). Immediately upon an exchange ofany Rights, the right to exercise such Rights will terminate and the only right of the holders of Rights will be to receive the number of shares of common stock (orfractional share of Series A Preferred Stock or of a share of a similar class or series of the Company’s preferred stock having similar rights, preferences andprivileges) equal to the number of such Rights held by such holder multiplied by the exchange ratio.Each one onethousandth of a share of Series A Preferred Stock, if issued: (i) will be nonredeemable and junior to any other series of preferred stock theCompany may issue (unless otherwise provided in the terms of such other series), (ii) will entitle holders to preferential cumulative quarterly dividends in an amountper share of Series A Preferred Stock equal to the greater of (a) $1 or (b) 1,000 times the aggregate the dividends, if any, declared on one share of the Company’scommon stock, (iii) will entitle holders upon liquidation (voluntary or otherwise) to receive $1,000 per share of Series A Preferred Stock plus an amount equal toaccrued and unpaid dividends and distributions thereon, whether or not declared, (iv) will have the same voting power as one share of common stock, and (v) willentitle holders to a per share payment equal to the payment made on one share of the Company’s common stock, if shares of the common stock are exchanged viamerger, consolidation, or a similar transaction. Because of the nature of the Series A Preferred Stock’s dividend, liquidation and voting rights, the value of a Unit ofSeries A Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of common stock.The Rights and the Rights Agreement will expire on the earliest of (i) December 18, 2023, (ii) the time at which the Rights are redeemed pursuant to the RightsAgreement, (iii) the time at which the Rights are exchanged in full pursuant to the Rights Agreement, (iv) the date that the Board determines that the RightsAgreement is no longer necessary for the preservation of material valuable Tax Benefits, (v) the beginning of a taxable year of the Company to which the Boarddetermines that no NOL tax benefits may be carried forward, and (vi) a determination by the Board, prior to the time any Person becomes an Acquiring Person, thatthe Rights Agreement and the Rights are no longer in the best interests of the Company and its stockholders.The Board may adjust the purchase price, the number of shares of Series A Preferred Stock or other securities or assets issuable and the number of outstandingRights to prevent dilution that may occur as a result of certain events, including among others, a stock dividend, a stock split or a reclassification of the Series APreferred Stock or common stock. With certain exceptions, no adjustments to the purchase price will be required until cumulative adjustments amount to at least 1%of the purchase price.For so long as the Rights are redeemable, the Board may supplement or amend any provision of the Rights Agreement in any respect without the approval ofthe holders of the Rights. From and after the time the Rights are no longer redeemable, the Board may supplement or amend the Rights Agreement only to cure anambiguity, to alter time period provisions, to correct inconsistent provisions, or to make any additional changes to the Rights Agreement which the Company maydeem necessary or desirable, but only to the extent that those changes do not impair or adversely affect any Rights holder (other than an Acquiring Person or anyAffiliate or Associate of an Acquiring Person or certain of their transferees) and do not result in the Rights again becoming redeemable or the Rights Agreementagain becoming amendable other than in accordance with this sentence.In connection with the adoption of the Rights Agreement and authorization and declaration of the dividend of the Rights, on December 18, 2017, the Companyfiled the Certificate of Designation with the Secretary of State of the State of Delaware. The Certificate of Designation became effective on December 18, 2017.F208. STOCK INCENTIVE PLANSIn August 2007, the Company adopted the Rubicon Technology Inc. 2007 Stock Incentive Plan, which was amended and restated effective in March 2011 (the“2007 Plan”), and which allowed for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, RSUs, performanceawards and bonus shares. The maximum number of shares that could be awarded under the 2007 Plan was 440,769 shares. Options granted under the 2007 Planentitle the holder to purchase shares of the Company’s common stock at the specified option exercise price, which could not be less than the fair market value of thecommon stock on the grant date. On June 24, 2016, the 2007 Plan terminated with the adoption of the Rubicon Technology, Inc. 2016 Stock Incentive Plan, (the “2016Plan”). Any existing awards under the 2007 Plan remain outstanding in accordance with their current terms under the 2007 Plan. In June 2016, the Company’sstockholders approved adoption of the 2016 Plan effective as of March 17, 2016, which allows for the grant of incentive stock options, nonstatutory stock options,stock appreciation rights, restricted stock, RSUs, performance awards and bonus shares. The Compensation Committee of the Board administers the 2016 Plan. Thecommittee determines the type of award to be granted, the fair value, the number of shares covered by the award, and the time when the award vests and may beexercised.Pursuant to the 2016 Plan, 222,980 shares of the Company’s common stock plus any shares subject to outstanding awards under the 2007 Plan thatsubsequently expire unexercised, are forfeited without the delivery of shares or are settled in cash, will be available for issuance under the 2016 Plan. The 2016 Planwill automatically terminate on March 17, 2026, unless the Company terminates it sooner.The following table summarizes the activity of the stock incentive and equity plans:Sharesavailablefor grantNumber ofoptionsoutstandingWeightedaverageoptionexercise priceNumber ofrestrictedstock sharesissuedNumber ofRSUsoutstandingOutstanding at January 1, 2019295,06769,08312.1099,57050,176Granted(60,925)1,000——9,925Exercised/issued—(5,000)——(6,098)Canceled/forfeited42,244(42,244)11.35——Outstanding at December 31, 2019276,38622,83913.4899,57054,003Granted(20,877)———3,597Exercised/issued—(2,250)——(3,597)Canceled/forfeited40,596(489)202.56—(9,000)Outstanding at December 31, 2020296,10520,100$9.7199,57045,003There were no option grants made during 2020. At December 31, 2020, the exercise prices of outstanding options were as follows:Exercise priceNumber ofoptionsoutstandingAverageremainingcontractual life(years)Number ofoptionsexercisable$6.10 $8.3418,2505.7518,250$44.101,8503.941,85020,1004.7320,100F21The aggregate grant date fair value of the options that became vested in the years ended 2020 and 2019 was $30,000 and $77,000, respectively.The following table summarizes the activity of nonvested options:NonvestedoptionsWeightedaverage optionexercisepriceNonvested at January 1, 201921,992$6.86Granted1,0008.34Vested(10,878)7.07Cancelled(7,248)7.25Nonvested at December 31, 20194,8666.10Granted——Vested(4,866)6.10Cancelled——Nonvested at December 31, 2020—$—The Company’s aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of theCompany’s common stock. Based on the fair value of the common stock at December 31, 2020 there was $52,000 of intrinsic value arising from 18,250 stock optionsexercisable or outstanding.The Company used historical stock prices as the basis for its volatility assumptions. The assumed riskfree rates were based on U.S. Treasury rates in effect atthe time of grant with a term consistent with the expected option lives. The expected term for the year ended December 31, 2020, is based upon the Company’smedian average life of its options. The forfeiture rate is based on the past history of forfeited options. The expense is being allocated using the straightline method.For the years ended December 31, 2020 and 2019, the Company recorded $14,000 and $24,000, respectively, of stock option compensation expense. As ofDecember 31, 2020, all outstanding options awarded have been fully vested.For the year ended December 31, 2020, there were no options granted.The following table summarizes the award vesting terms for the RSUs granted in 2019:Number of RSUsTarget price925$7.95The following table summarizes the award vesting terms for the RSUs granted in 2018:Number of restricted stock unitsTarget price902$11.0015,000$12.5015,000$14.00F22The RSUs vest in the amounts set forth below on the first date the 15trading day average closing price of the Company’s common stock equals or exceeds thecorresponding target price for the common stock before May 12, 2021. At the time the negotiation of the terms of the employment agreement began, the closing priceof the common stock was $5.50. On the date of grant, the closing price of the common stock was $6.30. During the twelve months ended December 31, 2017, the firstthree tranches of the grant vested. No additional tranches vested during the years ended December 31, 2020, 2019 and 2018.The Company used Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted because the awards vest based uponachievement of market price targets. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the marketcondition stipulated in the award and calculates the fair value of each RSU. The Company used the following assumptions in determining the fair value of the RSUs:GrantedJanuary2018March2017Daily expected stock price volatility4.2806%4.4237%Daily expected mean return on equity(0.2575)%(0.2226)%Daily expected dividend yield0.0%0.0%Average daily riskfree interest rate0.0078%0.0063%The daily expected stock price volatility is based on a fouryear historical volatility of the Company’s common stock. The daily expected dividend yield is basedon annual expected dividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches iscalculated to have its own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period which is upto four years. The RSUs granted in January 2018 and March 2017 had a grant date fair value of $209,000 and $323,000, respectively. There were no grants with marketprice targets issued in the years ended December 31, 2020 and 2019. A summary of the Company’s RSUs is as follows:RSUsoutstandingWeightedaverageprice attime of grantAggregateintrinsicvalueNonvested RSUs as of January 1, 201950,176$6.31Granted9,9258.32Vested(6,098)7.40Cancelled——Nonvested RSUs as of December 31, 201954,0036.56Granted3,5978.34Vested(3,597)8.34Cancelled(9,000)8.36Nonvested RSUs at December 31, 202045,003$6.20$278,961The fair value of each RSU is the market price on the date of grant and is being recorded as compensation expense ratably over the vesting terms or theexpected achievement of market price targets based on the Monte Carlo simulation model. For the years ended December 31, 2020 and 2019, the Company recorded$38,000 and $7,000 of RSU expense, respectively. The RSUs are forfeited by a participant upon termination for any reason, and there is no proportionate or partialvesting in the periods between the vesting dates. As of December 31, 2020, there was no unrecognized compensation cost related to the nonvested RSUs.For the year ended December 31, 2020 the Company recorded no compensation related to restricted stock compared to $14,000 in the prior year. During the year ended December 31, 2020 the Company awarded approximately 17,000 shares to an officer of the Company with a fair value of $146,000.F239. INCOME TAXESOn December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed theCompany to record provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date ofenactment. The Company has completed its accounting for the tax effects of enactment of the Act. The deemed inclusion from the repatriation tax increased from$3.9 million at the time of provision to $5.0 million at the time the calculation was finalized for the tax return. The increase of the inclusion related primarily to therefinement of Malaysia earnings and profits. As the Company is in a full valuation allowance position, an equal benefit adjustment was recorded for the impact ofthe increase of the deemed repatriation tax.Components of income before income taxes and the income tax provision are as follows:Income (loss) before income taxesYear endedDecember 31,20202019(in thousands)U.S.$(3,060)$(1,142)Foreign2,01817Total$(1,050)$(1,125)Income taxesYear endedDecember 31,20202019(in thousands)CurrentU.S.$—$—State——Foreign1322Total current income tax expense1322DeferredU.S.——State——Foreign——Total deferred income tax expense (benefit)——Total income tax expense (benefit)$13$22The reconciliation of income tax computed at the federal statutory rate to income before taxes is as follows:Year endedDecember 31,20202019U.S. federal statutory rate(21.0)%(21.0)%State taxes net of federal benefit(18.2)(7.6)Foreign rate differential and transactional tax5.90.1Tax credits——Valuation allowance33.328.5Other12.01.0%2.0%F24Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amount of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred income taxes are as follows at December 31:20202019(in thousands)Deferred tax assets:Allowance for doubtful accounts$1$11Inventory reserves3,0963,185Consumables excess reserve167169Accrued liabilities8152Warrant interest expense195196Stock compensation expense789789State net operating loss14,47615,010Net operating loss carryforward41,10540,437Tax credits710740Depreciation1,0001,329Valuation allowance(61,556)(61,869)Total deferred tax assets6449Deferred tax liability:Prepaid expenses(64)(49)Net deferred tax liability$—$—In February 2018, the FASB issued ASU No. 201802 (“ASU 201802), Income StatementReporting Comprehensive Income (Topic 220): Reclassification ofCertain Tax Effects from Accumulated Comprehensive Income. The new guidance allows companies to reclassify stranded tax effects resulting from the Tax Act,from accumulated other comprehensive income to retained earnings. The guidance also requires certain new disclosures regardless of the election. Early adoption ispermitted. The Company’s adoption of ASU 201802 did not have a material impact on its consolidated financial statements.The Company adopted the guidance in ASU No. 201517, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which requires that alldeferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent in the balance sheet. As a result, each jurisdiction has onenet noncurrent deferred tax asset or liability. The new guidance does not change the existing requirement that only permits offsetting within a jurisdiction.Companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The change inaccounting principle did not have an impact on the Company’s results of operations, cash flows or stockholders’ equity. At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.The Company completed an analysis of the utilization of NOLs subject to limits based upon certain ownership changes as of December 31, 2020. The results ofthis analysis indicated no ownership change limiting the utilization of net operating losses and tax credits.F25The Company prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, orexpected to be taken, in a tax return. At December 31, 2020 and 2019, the Company had $1.1 million of unrecognized tax benefits taken or expected to be taken in a taxreturn that have been recorded on the Company’s financial statements as an offset to the valuation allowance related to tax positions taken in 2012. It is notreasonably possible that the amount will change in the next twelve months. There were no material changes to prior year or current year positions taken during theyear ended December 31, 2020.There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company files income tax returns in the United States federal jurisdiction and in a state jurisdiction. During 2009, the Company began foreign operations inMalaysia and is subject to local income taxes in that jurisdiction. The Company’s Malaysia tax returns for the periods ended December 31, 2010 through 2012 havebeen audited by the Malaysia Inland Revenue Board with no changes made to the taxable income for those years. All other tax years in Malaysia are open toexamination by tax authorities.The Company’s federal tax returns for the periods ended December 31, 2010, 2008 and 2007 have been audited by the Internal Revenue Service (IRS) with nochanges made to the Company’s taxable losses for those years. The Company’s state tax returns for the periods ended December 31, 2009 through 2012 have beenaudited by the Illinois Department of Revenue with no changes made to the Company’s taxable losses for those years. Due to the existence of NOL carryforwards,tax years ended December 31, 2001 through 2006, 2008, 2009 and 2011 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOLcarryforwards at the State level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 areopen to examination by the Malaysia Inland Revenue Board.Due to the closing of the Rubicon Malaysia operations, the Company no longer considers the undistributed earnings of Rubicon Malaysia to be indefinitelyreinvested. Upon liquidation of Rubicon Malaysia, it is anticipated any cash left after the liquidation will be brought back to the U.S. via a payment of principaltowards the intercompany loan. A withholding tax may be payable to the Malaysian government on the interest portion of the loan. At December 31, 2020 and 2019,the Company accrued the withholding tax on the interest balance of the loan in the amount of $13,000 and $22,000, respectively, which represents the incremental tax.10. COMMITMENTS AND CONTINGENCIESCOVID19 PandemicIn March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID19) as a pandemic. The full impact of the COVID19outbreak is unknown and cannot be reasonably estimated. The magnitude and duration of the COVID19 outbreak, as well as other factors, could result in a materialimpact to the Company’s financial statements in future reporting periods.Operating LeasesThe Company adopted ASU 201602 in the first quarter of the fiscal year ending December 31, 2019. The adoption of ASU 201602 did not have a material impacton the Company’s consolidated financial statements, as the Company does not have any material lease agreements Rubicon DTP leases a building for itsmanufacturing and offices, however such lease was not considered material to the Company’s financial statements.Direct Dose’s net rent expense under operating leases in 2020 and 2019 amounted to $34,200 and $25,900, respectively. As of December 31, 2020, Direct Dose’soperating lease for its facility was monthtomonth. On January 6, 2021, Direct Dose entered into a one year lease for an aggregate commitment of approximately$35,500.LitigationFrom time to time, the Company experiences routine litigation in the ordinary course of its business.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.11. BENEFIT PLANThe Company sponsors a 401(k) savings plan (the “Plan”). Employees are eligible to participate in the Plan upon reaching 18 years of age. Employees makecontributions to the Plan through payroll deferrals. Employer matching contributions are discretionary. There were no employer matching contributions for the yearsended December 31, 2020 and 2019.12. SUBSEQUENT EVENTSNone.F26EX21.1 2 f10k2020ex211_rubicon.htm SUBSIDIARIES OF THE COMPANYExhibit 21.1Rubicon Technologies, Inc.Subsidiaries of the CompanyName of subsidiaryState (or other jurisdiction of incorporation)Rubicon Technology Worldwide LLCIllinoisRubicon Technology BP LLCDelawareRubicon DTP LLCDelawareEX23.1 3 f10k2020ex231_rubicon.htm CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMExhibit 23.1INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENTWe consent to the incorporation by reference in the Registration Statements of Rubicon Technology, Inc. on Form S3 (File No. 333167272), as amended (File No.333192536) and on Forms S8 (File No. 333147552, File No. 333180211 and File No. 333213025) of our report dated March 22, 2021 with respect to our audits of theconsolidated financial statements of Rubicon Technology, Inc. and Subsidiaries as of December 31, 2020 and 2019 and for each of the two years in the period endedDecember 31, 2020, which report is included in this Annual Report on Form 10K of Rubicon Technology, Inc. and Subsidiaries for the year ended December 31, 2020./s/ Marcum LLPMarcum LLPChicago, IllinoisMarch 22, 2021EX31.1 4 f10k2020ex311_rubicon.htm CERTIFICATIONExhibit 31.1CertificationsCertification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Timothy E. Brog, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerEX31.2 5 f10k2020ex312_rubicon.htm CERTIFICATIONExhibit 31.2Certification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Kevin T. Lusardi, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerEX32.1 6 f10k2020ex321_rubicon.htm CERTIFICATIONExhibit 32.1Certification Pursuant to Section 906 of The SarbanesOxley Act of 2002,18 U.S.C. Section 1350In connection with the Annual Report of Rubicon Technology, Inc. (the “Company”) on Form 10K for the year ended December 31, 2020, as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Timothy E. Brog, President and Chief Executive Officer of the Company, and I, Kevin T.Lusardi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the SarbanesOxley Act of 2002,that, to my knowledge:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerDate: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerA signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnishedto the Securities and Exchange Commission or its staff upon request. F8Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanthe functional currency of the Company, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in thedetermination of net income (loss) for the period. The Company records these gains and losses in other income.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expenses), in the Consolidated Statements of Operations. Investments in which the Company has the ability and intent, ifnecessary, to liquidate in order to support the current operations are classified as shortterm.The Company reviews its availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on thespecific identification method. The Company considers various factors in determining whether an impairment is otherthantemporary, including the severity andduration of the impairment, changes in underlying credit ratings, forecasted recovery, its ability and intent to hold the investment for a period of time sufficient toallow for any anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When the Company concludesthat an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on theConsolidated Statements of Operations. As of December 31, 2020, and 2019, no impairment was recorded.Purchases of Equity Securities by the IssuerIn November 2018, the Company’s Board of Directors authorized a program to repurchase up to $3 million of its common stock. In July 2020, the Company usedall of the original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time. There can be no assurance as to the number of shares of common stock repurchased. The Company records treasurystock purchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock.Share repurchase activity during the year ended December 31, 2020, was as follows:PeriodsTotalnumber ofsharespurchasedAveragepricepaid pershareTotalnumber ofsharespurchasedas part ofpubliclyannouncedprogramApproximatedollar valueof sharesthat may yetbe purchasedunder theprogram(in thousands)January 1, 2020, to December 31, 2020295,946$8.10295,546$3,000Total295,946$3,000F9Accounts receivableThe majority of the Company’s accounts receivable are due from defense subcontractors, industrial manufacturers, fabricators and resellers. Credit is extendedbased on an evaluation of the customer’s financial condition. Accounts receivable are due based on contract terms and at stated amounts due from customers, netof an allowance for doubtful accounts. Losses from credit sales are provided for in the financial statements.Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number offactors, including the length of time a customer’s account is past due, the customer’s current ability to pay and the condition of the general economy and industryas a whole. The Company writes off accounts receivable when they are deemed uncollectible and such writeoffs, net of payments received, are recorded as areduction to the allowance.The following table shows the activity of the allowance for doubtful accounts:Year endedDecember 31,20202019(in thousands)Beginning balance$40$7Charges to costs and expenses(20)33Account writeoffs, less recoveries(17)—Ending balance$3$40InventoriesInventories are valued at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary course ofbusiness less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis, which includes materials, labor and overhead. The Company reduces the carrying value of itsinventories for differences between the cost and the estimated net realizable value, taking into account usage, expected demand, technological obsolescence andother relevant information.The Company establishes inventory reserves when conditions exist that suggest inventory may be in excess of anticipated demand or is obsolete based oncustomer specifications. The Company evaluates the ability to realize the value of its inventory based on a combination of factors, including forecasted sales,estimated current and future market value and changes in customers’ product specifications. The Company’s method of estimating excess and obsolete inventoryhas remained consistent for all periods presented. The Company also carries a lower of cost or market inventory reserve based on net realizable value using mostrecent sales prices to determine market value. As of December 31, 2020 and 2019, the balance of the lower of cost or market reserve was $51,000 and $72,000,respectively, representing a decrease of $21,000 resulting from sales of related reserved for inventory. In addition, in 2020 we sold inventory that was valued at thelower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $21,000. In 2019 we sold inventorythat was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $35,000.In 2019 and 2020, the Company used some of its previously written down twoinch diameter core material in production of optical and industrial sapphire wafersand did not record any additional adjustments for the years ended December 31, 2019 and December 31, 2020.The Company evaluates the amount of raw material needed for future production based on expected crystal growth production needed to meet anticipatedsales. The Company did not record any writedowns of its raw materials inventory for the years ended December 31, 2019 and December 31, 2020.F10Inventories are composed of the following:As ofDecember 31,20202019(in thousands)Raw materials$468$468Workinprocess614901Finished goods459809$1,541$2,178As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.Other inventory suppliesThe Company’s other inventory supplies include stock of consumable assets and spare parts used in the manufacturing process.Assets held for saleAn asset is considered to be held for sale when all of the following criteria are met: (i) management commits to a plan to sell the asset; (ii) it is unlikely that thedisposal plan will be significantly modified or discontinued; (iii) the asset is available for immediate sale in its present condition; (iv) actions required to complete thesale of the asset have been initiated; (v) sale of the asset is probable and the completed sale is expected to occur within one year; and (vi) the asset is actively beingmarketed for sale at a price that is reasonable given its current market value.A longlived asset classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. If the longlived asset is newlyacquired, the carrying amount of the longlived asset is established based on its fair value less cost to sell at the acquisition date. A longlived asset is notdepreciated or amortized while it is classified as held for sale.In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.F11Property and equipmentProperty and equipment consisted of the following:As ofDecember 31,20202019(in thousands)Machinery, equipment and tooling$3,343$3,341Buildings1,7111,711Information systems835835Land and land improvements594594Furniture and fixtures88Total cost6,4916,489Accumulated depreciation and amortization(4,009)(3,842)Property and equipment, net$2,482$2,647Property and equipment are carried at cost and depreciated over their estimated useful lives using the straightline method. The cost of maintenance and repairsis charged to expense as incurred. Significant renewals and improvements are capitalized. Depreciation expense associated with property and equipment was$167,000 and $169,000 for the years ended December 31, 2020 and 2019, respectively.The estimated useful lives are as follows:Asset descriptionLifeBuildings39 yearsMachinery, equipment and tooling310 yearsFurniture and fixtures7 yearsInformation systems3 yearsWarranty costThe Company’s sales terms include a warranty that its products will meet certain specifications. The Company records a current liability for the expected cost ofwarrantyrelated claims at the time of sale. The warranty reserve is included in accrued and other current liabilities on the Consolidated Balance Sheets.The following table presents changes in the Company’s product warranty liability:Year endedDecember 31,20202019(in thousands)Balance, beginning of period$4$8Charged to cost of sales1831Actual product warranty expenditures(20)(35)Balance, end of period$2$4The Company does not provide maintenance or other services and it does not have sales that involve bill & hold arrangements, multiple elements ordeliverables. However, the Company does provide product warranty for up to 90 days, for which the Company has accrued a warranty reserve of $2,000 and $4,000for the years ended December 31, 2020 and 2019, respectively.Fair value of financial instrumentsThe Company’s financial instruments consist primarily of cash and cash equivalents, shortterm investments, accounts receivable, and accounts payable. Thecarrying values of these assets and liabilities approximate their fair values due to the shortterm nature of these instruments at December 31, 2020 and 2019.F12Concentration of credit risks and other risks and uncertaintiesFinancial instruments that could potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, restrictedcash, shortterm investments and accounts receivable. At December 31, 2020 the Company had no deposits at foreign financial institutions and $1.6 million ondeposit at foreign financial institutions at December 31, 2019. As of December 31, 2020, the Company had $8 million on deposit at financial institutions in excess ofamounts insured by the FDIC. This compares to a $5.7 million as of December 31, 2019. The Company performs a periodic evaluation of these institutions for relativecredit standing. The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant risk of loss on thesebalances.The Company uses third parties for certain finishing functions for its products, including the slicing and polishing of its sapphire crystal inventory. These typesof services are only available from a limited number of third parties. The Company’s ability to successfully outsource these finishing functions will substantiallydepend on its ability to develop, maintain and expand its strategic relationship with these third parties. As a result, the Company may be unable to meet the demandfor its products, which could have a material adverse impact on the Company.Concentration of credit risk related to revenue and accounts receivable is discussed in Note 4.Revenue recognitionRevenues recognized include product sales and billings for costs and fees for government contracts.Product SalesThe Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1,2018. The Company recognizes revenue when performance obligations under a purchase order or signed quotation are satisfied. The Company’s business practicecommits the Company to manufacture and deliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement withthe customer includes specifications of the product to be delivered, price, expected ship date and payment terms. The Company’s agreements generally do notcontain variable, financing, rights of return or noncash components. There are no upfront costs to develop the production process. The performance obligation issatisfied at the point in time (single performance obligation) when the product is manufactured to the customer’s specification, as performance does not create anasset with an alternative use to the Company. Accordingly, the Company recognizes revenue when the product is shipped, and control of the product, title and riskof loss have been transferred to the customer. The Company grants credit terms considering normal collection risk. If there is doubt about collection, full prepaymentfor the order is required. Any payments received prior to shipment are recorded as deferred revenue and included in Advance Payments in the Consolidated BalanceSheets. The Company does not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of the Company’s revenue is denominated in U.S. dollars.Shipping and handling costsThe Company records costs incurred in connection with shipping and handling of products as cost of goods sold. Amounts billed to customers in connectionwith these costs are included in revenue and are not material for any of the periods presented in the accompanying financial statements.Sales taxThe Company collects and remits sales taxes on products sold to customers and reports such amounts under the net method in its Consolidated Statements ofOperations and records a liability until remitted to the respective tax authority.F13Stockbased compensationThe Company requires all sharebased payments to employees, including grants of employee stock options, to be measured at fair value and expensed in theConsolidated Statements of Operations over the service period (generally the vesting period) of the grant. Expense is recognized in the Consolidated Statements ofOperations for these sharebased payments. The Company uses Black Scholes option pricing model in order to determine the fair value of stock option grants.Accounting for uncertainty in income taxesThe Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by thetaxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured basedon the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and/or penalties related to incometax matters in income tax expense. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years endedDecember 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.Income taxesDeferred tax assets and liabilities are provided for temporary differences between financial reporting and income tax bases of assets and liabilities, and aremeasured using the enacted tax rates and laws expected to be in effect when the differences will reverse. Deferred income taxes also arise from the future benefits ofNOL carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Full valuationallowances on net deferred tax assets are maintained until an appropriate level of profitability that generates taxable income is deemed sustainable or until a taxstrategy is developed that would enable the Company to conclude that it is more likely than not that a portion of the deferred tax assets will be realizable. Based onan evaluation in accordance with the accounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. andMalaysia deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all theavailable evidence.Use of estimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at thedate of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.Other comprehensive lossComprehensive loss is defined as the change in equity of a business enterprise from transactions and other events from nonowner sources. Comprehensiveloss includes net loss and other nonowner changes in equity that bypass the statement of operations and are reported in a separate component of equity.Net income (loss) per common shareBasic net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of common shares outstanding duringthe period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of diluted common sharesoutstanding during the period. Diluted shares outstanding are calculated by adding to the weightedaverage shares (a) any outstanding stock options based on thetreasury stock method and (b) restricted stock units (“RSU”).F14Diluted net income per share was the same as basic net income per share for the year ended December 31, 2020, because the effects of potentially dilutivesecurities did not have a material impact on the calculation of diluted net income per share. The Company had outstanding options exercisable into 18,250 shares ofthe Company’s common stock that would have had an antidilutive effect at December 31, 2020.Diluted net loss per common share was the same as basic net loss per common share for the year ended December 31, 2020, because the effects of potentiallydilutive securities were antidilutive.New accounting pronouncements adoptedThe Company has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significantimpact the Company’s consolidated financial statements and related disclosures. 2. SEGMENT INFORMATIONThe Company has determined that it operates in two segments, the sapphire and pharmacy business.Revenue is attributed by geographic region based on shipto location of the Company’s customers. The following table summarizes revenue by geographicregion:Year ended December 31,20202019(in thousands)North America$4,039$3,324Asia406185Other2217Total revenue$4,467$3,526The following table summarizes sales by product type:Year ended December 31,20202019(in thousands)Optical$3,611$3,338Core69Rubicon DTP850179Total revenue$4,467$3,526The following table summarizes assets by geographic region:As ofDecember 31,20202019(in thousands)United States$31,240$29,703Malaysia—5,094Other—4Total assets$31,240$34,801 The total assets of Rubicon DTP were not material to the total assets of the Company as stated on the consolidated balance sheets, as of December 31, 2020and 2019.Rubicon DTP accounted for approximately $340,000 and $447,000 of the Company’s loss for the year ended December 31, 2020 and 2019, respectively. F153. INVESTMENTSThe Company invests available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, commonstock, equity related securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains andlosses recorded in accumulated other comprehensive income/(loss). Investments in equity securities are reported at fair value, with both realized and unrealizedgains and losses recorded as unrealized gain/(loss) on investments and realized gain on investments, in other income/(expense), in the Consolidated Statements ofOperations. Investments in which the Company has the ability and intent, if necessary, to liquidate are classified as shortterm.The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2020:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,748$—$—$14,748Marketable securities————Total shortterm investments$14,748$—$—$14,748The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2019:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,668$—$—$14,668Marketable securities961(171)790Total shortterm investments$15,629$—$(171)$15,458The Company values its investments at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in theprincipal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniquesused to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchybased on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are thefollowing:●Level 1—Quoted prices in active markets for identical assets or liabilities.●Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices inmarkets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assetsor liabilities.●Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.The Company’s fixed income availableforsale securities consist of U.S. Treasury securities, highquality investment grade commercial paper, FDIC guaranteedcertificates of deposit, common stock, equity related securities and corporate notes. The Company values these securities based on pricing from pricing vendors,who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly(Level 2 inputs) in determining fair value. The valuation techniques used to measure the fair value of the Company’s financial instruments having Level 2 inputswere derived from nonbinding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricingmodels, such as discounted cash flow techniques.F16The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2020:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,136$—$—$3,136Investments:Availableforsales securities—current:U.S. Treasury securities—14,748—14,748Total$3,136$14,748$—$17,884The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2019:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,759$—$—$3,759Investments:Availableforsales securities—current:U.S. Treasury securities—14,668—14,668790790Total$4,549$14,668$—$19,217There are no terms or conditions restricting the Company from redeeming any of its investments.In addition to the debt securities noted above, the Company had approximately $8.0 million and $4.9 million of time deposits included in cash and cashequivalents as of December 31, 2020 and 2019, respectively.4. SIGNIFICANT CUSTOMERSFor the year ended December 31, 2020, the Company had four customers that accounted for approximately 21%, 13%, 11% and 10% of its revenue. For the yearended December 31, 2019, the Company had three customers that accounted for approximately 31%, 15% and 12% of its revenue.Customers individually representing more than 10% of trade receivables accounted for approximately 44% and 77% of accounts receivable as of December 31,2020 and 2019, respectively. 5. ASSETS HELD FOR SALE AND LONGLIVED ASSETSWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, the Company performs ananalysis to review the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expectedfuture operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.F17In connection with the Company’s decision in 2016 to limit its focus to the optical and industrial sapphire markets and exit the LED market, the Companydeveloped a plan to close its Malaysia facility, scale down and consolidate remaining operations in the U.S. and sell additional assets that would not be needed. TheCompany evaluated its U.S. and Malaysia asset portfolios to identify assets needed for its current business strategy and excess assets that were no longer needed.The Company determined it had excess machinery, equipment and facilities. Excess U.S. and Malaysia assets were evaluated based on assuming an orderlyliquidation plan, which considers economic obsolescence and sales of comparable equipment, as it is the Company’s intention to sell these assets. Additionally, theCompany evaluated its U.S. assets continuing to be used in operations using a cost and market approach to determine the current fair value. In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.6. STOCKHOLDERS’ EQUITYCommon stockAt the Company’s annual meeting of stockholders held on May 3, 2017, the Company’s stockholders approved amendments to the Company’s Eighth Amendedand Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”) to (i) effect a reverse stock split of the Company’s common stock; and (ii)decrease the Company’s authorized number of shares of common stock to three times the number of shares of the Company’s common stock outstandingimmediately following the reverse stock split. On May 3, 2017, following the annual meeting, the Company filed with the Secretary of State of the State of Delaware aCertificate of Amendment to (a) implement the reverse stock split at a ratio of 1for10; and (b) to reduce the number of authorized shares of common stock from40,000,000 to 8,200,000, consequently reducing the number of total authorized shares from 45,000,000 to 13,200,000. With the completion of the reverse stock split,the Company’s shares began trading above the required $1.00 per share closing bid price, as required by the Listing Qualifications Department of NASDAQ. Theshare information has been retroactively reflected for the effects of this reverse stock split for all periods presented.Preferred stockAt the Company’s annual meeting of stockholders held on May 10, 2018, the Company’s stockholders approved an amendment to the Certificate ofIncorporation to decrease the Company’s authorized number of shares of preferred stock from 5,000,000 shares to 1,000,000 shares. The Company filed with theSecretary of State of the State of Delaware a Certificate of Amendment to decrease the authorized number of preferred shares, consequently reducing the number oftotal authorized shares from 13,200,000 to 9,200,000.Common shares reservedAs of December 31, 2020, the Company had reserved 65,103 shares of common stock for issuance upon the exercise of outstanding common stock options andvesting of RSUs. Also 301,105 shares of the Company’s common stock were reserved for future grants of stock options and RSUs (or other similar equityinstruments) under the Rubicon Technology, Inc. 2016 Stock Incentive Plan (the “2016 Plan”) as of December 31, 2020.F187. STOCKHOLDER RIGHTS AGREEMENT On December 18, 2017, the Company entered into a Section 382 Rights Agreement with American Stock Transfer & Trust Company, LLC, as Rights Agent (the“Rights Agreement”) in an effort to protect stockholder value by attempting to diminish the risk that the Company’s ability to use its net NOLs to reduce potentialfuture federal income tax obligations may become substantially limited. The Company’s ability to utilize its NOLs may be substantially limited if the Companyexperiences an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”). The Rights Agreement isintended to act as a deterrent to any person acquiring beneficial ownership of 4.9% or more of the Company’s outstanding common stock without the approval ofthe Company’s Board of Directors (the “Board”).The Board authorized the issuance of one Right for each outstanding share of common stock, par value $0.001 per share, of the Company, payable tostockholders of record date of the close of business on January 2, 2018. One Right will also be issued together with each share of the Company’s common stockissued after January 2, 2018 but before the Distribution Date (as defined below) and, in certain circumstances, after the Distribution Date. Subject to the terms,provisions and conditions of the Rights Agreement, if the Rights become exercisable, each Right would initially represent the right to purchase from the Companyone onethousandth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company (the “Series A Preferred Stock”) for apurchase price of $40.00. If issued, each onethousandth of a share of Series A Preferred Stock would give the stockholder approximately the same dividend, votingand liquidation rights as does one share of common stock. However, prior to exercise, a Right does not give its holder any rights as a stockholder of the Company,including, without limitation, any dividend, voting or liquidation rights.The Rights will not be exercisable until the earlier of (i) ten business days after a public announcement that a person has become an “Acquiring Person” byacquiring beneficial ownership of 4.9% or more of outstanding common stock (or, in the case of a person that had beneficial ownership of 4.9% or more of theoutstanding common stock as of the close of business on December 18, 2017, by obtaining beneficial ownership of any additional shares of common stockrepresenting 0.5% or more of the shares of common stock then outstanding (other than pursuant to a dividend or distribution paid or made by the Company on theoutstanding shares of the common stock or pursuant to a split or subdivision of the outstanding shares of common stock) at a time such person still beneficiallyowns 4.9% or more of the outstanding common stock), and (ii) ten business days (or such later date as may be specified by the Board prior to such time as anyperson becomes an Acquiring Person) after the commencement of a tender or exchange offer by or on behalf of a person that, if completed, would result in suchperson becoming an Acquiring Person (the “Distribution Date”).Until the Distribution Date, common stock certificates or the ownership statements issued with respect to uncertificated shares of common stock will evidencethe Rights. Any transfer of shares of common stock prior to the Distribution Date will also constitute a transfer of the associated Rights. After the Distribution Date,separate rights certificates will be issued and the Rights may be transferred other than in connection with the transfer of the underlying shares of common stockunless and until the Board has determined to effect an exchange pursuant to the Rights Agreement (as described below).In the event that a person becomes an Acquiring Person, each holder of a Right, other than Rights that are or, under certain circumstances, were beneficiallyowned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right and payment of the purchaseprice, a number of shares of the Company’s common stock (or, in certain circumstances, cash, property or other securities of the Company) having a market valueequal to two times the purchase price. However, Rights are subject to redemption and exchange at the option of the Company.In the event that, at any time following a person becoming an Acquiring Person, (i) the Company engages in a merger or other business combination transactionin which the Company is not the surviving corporation; (ii) the Company engages in a merger or other business combination transaction in which the Company isthe surviving corporation and the common stock is changed or exchanged; or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold ortransferred, each holder of a Right (except Rights which have previously been voided) shall thereafter have the right to receive, upon exercise of the Right, commonstock of the acquiring company having a value equal to two times the purchase price.F19At any time until the earlier of December 18, 2023, and ten calendar days following the first date of public announcement that a person has become an AcquiringPerson or that discloses information which reveals the existence of an Acquiring Person or such earlier date as a majority of the Board becomes aware of theexistence of an Acquiring Person, the Board may redeem the Rights in whole, but not in part, at a price of $0.001 per Right (the “Redemption Price”). The redemptionof the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon anyredemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.At any time after a person becomes an Acquiring Person, the Board may, at its option, exchange the Rights (other than Rights that have become void), in wholeor in part, at an exchange ratio of one share of common stock, or a fractional share of Series A Preferred Stock (or of a share of a similar class or series of theCompany’s preferred stock having similar rights, preferences and privileges) of equivalent value, per Right (subject to adjustment). Immediately upon an exchange ofany Rights, the right to exercise such Rights will terminate and the only right of the holders of Rights will be to receive the number of shares of common stock (orfractional share of Series A Preferred Stock or of a share of a similar class or series of the Company’s preferred stock having similar rights, preferences andprivileges) equal to the number of such Rights held by such holder multiplied by the exchange ratio.Each one onethousandth of a share of Series A Preferred Stock, if issued: (i) will be nonredeemable and junior to any other series of preferred stock theCompany may issue (unless otherwise provided in the terms of such other series), (ii) will entitle holders to preferential cumulative quarterly dividends in an amountper share of Series A Preferred Stock equal to the greater of (a) $1 or (b) 1,000 times the aggregate the dividends, if any, declared on one share of the Company’scommon stock, (iii) will entitle holders upon liquidation (voluntary or otherwise) to receive $1,000 per share of Series A Preferred Stock plus an amount equal toaccrued and unpaid dividends and distributions thereon, whether or not declared, (iv) will have the same voting power as one share of common stock, and (v) willentitle holders to a per share payment equal to the payment made on one share of the Company’s common stock, if shares of the common stock are exchanged viamerger, consolidation, or a similar transaction. Because of the nature of the Series A Preferred Stock’s dividend, liquidation and voting rights, the value of a Unit ofSeries A Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of common stock.The Rights and the Rights Agreement will expire on the earliest of (i) December 18, 2023, (ii) the time at which the Rights are redeemed pursuant to the RightsAgreement, (iii) the time at which the Rights are exchanged in full pursuant to the Rights Agreement, (iv) the date that the Board determines that the RightsAgreement is no longer necessary for the preservation of material valuable Tax Benefits, (v) the beginning of a taxable year of the Company to which the Boarddetermines that no NOL tax benefits may be carried forward, and (vi) a determination by the Board, prior to the time any Person becomes an Acquiring Person, thatthe Rights Agreement and the Rights are no longer in the best interests of the Company and its stockholders.The Board may adjust the purchase price, the number of shares of Series A Preferred Stock or other securities or assets issuable and the number of outstandingRights to prevent dilution that may occur as a result of certain events, including among others, a stock dividend, a stock split or a reclassification of the Series APreferred Stock or common stock. With certain exceptions, no adjustments to the purchase price will be required until cumulative adjustments amount to at least 1%of the purchase price.For so long as the Rights are redeemable, the Board may supplement or amend any provision of the Rights Agreement in any respect without the approval ofthe holders of the Rights. From and after the time the Rights are no longer redeemable, the Board may supplement or amend the Rights Agreement only to cure anambiguity, to alter time period provisions, to correct inconsistent provisions, or to make any additional changes to the Rights Agreement which the Company maydeem necessary or desirable, but only to the extent that those changes do not impair or adversely affect any Rights holder (other than an Acquiring Person or anyAffiliate or Associate of an Acquiring Person or certain of their transferees) and do not result in the Rights again becoming redeemable or the Rights Agreementagain becoming amendable other than in accordance with this sentence.In connection with the adoption of the Rights Agreement and authorization and declaration of the dividend of the Rights, on December 18, 2017, the Companyfiled the Certificate of Designation with the Secretary of State of the State of Delaware. The Certificate of Designation became effective on December 18, 2017.F208. STOCK INCENTIVE PLANSIn August 2007, the Company adopted the Rubicon Technology Inc. 2007 Stock Incentive Plan, which was amended and restated effective in March 2011 (the“2007 Plan”), and which allowed for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, RSUs, performanceawards and bonus shares. The maximum number of shares that could be awarded under the 2007 Plan was 440,769 shares. Options granted under the 2007 Planentitle the holder to purchase shares of the Company’s common stock at the specified option exercise price, which could not be less than the fair market value of thecommon stock on the grant date. On June 24, 2016, the 2007 Plan terminated with the adoption of the Rubicon Technology, Inc. 2016 Stock Incentive Plan, (the “2016Plan”). Any existing awards under the 2007 Plan remain outstanding in accordance with their current terms under the 2007 Plan. In June 2016, the Company’sstockholders approved adoption of the 2016 Plan effective as of March 17, 2016, which allows for the grant of incentive stock options, nonstatutory stock options,stock appreciation rights, restricted stock, RSUs, performance awards and bonus shares. The Compensation Committee of the Board administers the 2016 Plan. Thecommittee determines the type of award to be granted, the fair value, the number of shares covered by the award, and the time when the award vests and may beexercised.Pursuant to the 2016 Plan, 222,980 shares of the Company’s common stock plus any shares subject to outstanding awards under the 2007 Plan thatsubsequently expire unexercised, are forfeited without the delivery of shares or are settled in cash, will be available for issuance under the 2016 Plan. The 2016 Planwill automatically terminate on March 17, 2026, unless the Company terminates it sooner.The following table summarizes the activity of the stock incentive and equity plans:Sharesavailablefor grantNumber ofoptionsoutstandingWeightedaverageoptionexercise priceNumber ofrestrictedstock sharesissuedNumber ofRSUsoutstandingOutstanding at January 1, 2019295,06769,08312.1099,57050,176Granted(60,925)1,000——9,925Exercised/issued—(5,000)——(6,098)Canceled/forfeited42,244(42,244)11.35——Outstanding at December 31, 2019276,38622,83913.4899,57054,003Granted(20,877)———3,597Exercised/issued—(2,250)——(3,597)Canceled/forfeited40,596(489)202.56—(9,000)Outstanding at December 31, 2020296,10520,100$9.7199,57045,003There were no option grants made during 2020. At December 31, 2020, the exercise prices of outstanding options were as follows:Exercise priceNumber ofoptionsoutstandingAverageremainingcontractual life(years)Number ofoptionsexercisable$6.10 $8.3418,2505.7518,250$44.101,8503.941,85020,1004.7320,100F21The aggregate grant date fair value of the options that became vested in the years ended 2020 and 2019 was $30,000 and $77,000, respectively.The following table summarizes the activity of nonvested options:NonvestedoptionsWeightedaverage optionexercisepriceNonvested at January 1, 201921,992$6.86Granted1,0008.34Vested(10,878)7.07Cancelled(7,248)7.25Nonvested at December 31, 20194,8666.10Granted——Vested(4,866)6.10Cancelled——Nonvested at December 31, 2020—$—The Company’s aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of theCompany’s common stock. Based on the fair value of the common stock at December 31, 2020 there was $52,000 of intrinsic value arising from 18,250 stock optionsexercisable or outstanding.The Company used historical stock prices as the basis for its volatility assumptions. The assumed riskfree rates were based on U.S. Treasury rates in effect atthe time of grant with a term consistent with the expected option lives. The expected term for the year ended December 31, 2020, is based upon the Company’smedian average life of its options. The forfeiture rate is based on the past history of forfeited options. The expense is being allocated using the straightline method.For the years ended December 31, 2020 and 2019, the Company recorded $14,000 and $24,000, respectively, of stock option compensation expense. As ofDecember 31, 2020, all outstanding options awarded have been fully vested.For the year ended December 31, 2020, there were no options granted.The following table summarizes the award vesting terms for the RSUs granted in 2019:Number of RSUsTarget price925$7.95The following table summarizes the award vesting terms for the RSUs granted in 2018:Number of restricted stock unitsTarget price902$11.0015,000$12.5015,000$14.00F22The RSUs vest in the amounts set forth below on the first date the 15trading day average closing price of the Company’s common stock equals or exceeds thecorresponding target price for the common stock before May 12, 2021. At the time the negotiation of the terms of the employment agreement began, the closing priceof the common stock was $5.50. On the date of grant, the closing price of the common stock was $6.30. During the twelve months ended December 31, 2017, the firstthree tranches of the grant vested. No additional tranches vested during the years ended December 31, 2020, 2019 and 2018.The Company used Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted because the awards vest based uponachievement of market price targets. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the marketcondition stipulated in the award and calculates the fair value of each RSU. The Company used the following assumptions in determining the fair value of the RSUs:GrantedJanuary2018March2017Daily expected stock price volatility4.2806%4.4237%Daily expected mean return on equity(0.2575)%(0.2226)%Daily expected dividend yield0.0%0.0%Average daily riskfree interest rate0.0078%0.0063%The daily expected stock price volatility is based on a fouryear historical volatility of the Company’s common stock. The daily expected dividend yield is basedon annual expected dividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches iscalculated to have its own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period which is upto four years. The RSUs granted in January 2018 and March 2017 had a grant date fair value of $209,000 and $323,000, respectively. There were no grants with marketprice targets issued in the years ended December 31, 2020 and 2019. A summary of the Company’s RSUs is as follows:RSUsoutstandingWeightedaverageprice attime of grantAggregateintrinsicvalueNonvested RSUs as of January 1, 201950,176$6.31Granted9,9258.32Vested(6,098)7.40Cancelled——Nonvested RSUs as of December 31, 201954,0036.56Granted3,5978.34Vested(3,597)8.34Cancelled(9,000)8.36Nonvested RSUs at December 31, 202045,003$6.20$278,961The fair value of each RSU is the market price on the date of grant and is being recorded as compensation expense ratably over the vesting terms or theexpected achievement of market price targets based on the Monte Carlo simulation model. For the years ended December 31, 2020 and 2019, the Company recorded$38,000 and $7,000 of RSU expense, respectively. The RSUs are forfeited by a participant upon termination for any reason, and there is no proportionate or partialvesting in the periods between the vesting dates. As of December 31, 2020, there was no unrecognized compensation cost related to the nonvested RSUs.For the year ended December 31, 2020 the Company recorded no compensation related to restricted stock compared to $14,000 in the prior year. During the year ended December 31, 2020 the Company awarded approximately 17,000 shares to an officer of the Company with a fair value of $146,000.F239. INCOME TAXESOn December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed theCompany to record provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date ofenactment. The Company has completed its accounting for the tax effects of enactment of the Act. The deemed inclusion from the repatriation tax increased from$3.9 million at the time of provision to $5.0 million at the time the calculation was finalized for the tax return. The increase of the inclusion related primarily to therefinement of Malaysia earnings and profits. As the Company is in a full valuation allowance position, an equal benefit adjustment was recorded for the impact ofthe increase of the deemed repatriation tax.Components of income before income taxes and the income tax provision are as follows:Income (loss) before income taxesYear endedDecember 31,20202019(in thousands)U.S.$(3,060)$(1,142)Foreign2,01817Total$(1,050)$(1,125)Income taxesYear endedDecember 31,20202019(in thousands)CurrentU.S.$—$—State——Foreign1322Total current income tax expense1322DeferredU.S.——State——Foreign——Total deferred income tax expense (benefit)——Total income tax expense (benefit)$13$22The reconciliation of income tax computed at the federal statutory rate to income before taxes is as follows:Year endedDecember 31,20202019U.S. federal statutory rate(21.0)%(21.0)%State taxes net of federal benefit(18.2)(7.6)Foreign rate differential and transactional tax5.90.1Tax credits——Valuation allowance33.328.5Other12.01.0%2.0%F24Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amount of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred income taxes are as follows at December 31:20202019(in thousands)Deferred tax assets:Allowance for doubtful accounts$1$11Inventory reserves3,0963,185Consumables excess reserve167169Accrued liabilities8152Warrant interest expense195196Stock compensation expense789789State net operating loss14,47615,010Net operating loss carryforward41,10540,437Tax credits710740Depreciation1,0001,329Valuation allowance(61,556)(61,869)Total deferred tax assets6449Deferred tax liability:Prepaid expenses(64)(49)Net deferred tax liability$—$—In February 2018, the FASB issued ASU No. 201802 (“ASU 201802), Income StatementReporting Comprehensive Income (Topic 220): Reclassification ofCertain Tax Effects from Accumulated Comprehensive Income. The new guidance allows companies to reclassify stranded tax effects resulting from the Tax Act,from accumulated other comprehensive income to retained earnings. The guidance also requires certain new disclosures regardless of the election. Early adoption ispermitted. The Company’s adoption of ASU 201802 did not have a material impact on its consolidated financial statements.The Company adopted the guidance in ASU No. 201517, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which requires that alldeferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent in the balance sheet. As a result, each jurisdiction has onenet noncurrent deferred tax asset or liability. The new guidance does not change the existing requirement that only permits offsetting within a jurisdiction.Companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The change inaccounting principle did not have an impact on the Company’s results of operations, cash flows or stockholders’ equity. At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.The Company completed an analysis of the utilization of NOLs subject to limits based upon certain ownership changes as of December 31, 2020. The results ofthis analysis indicated no ownership change limiting the utilization of net operating losses and tax credits.F25The Company prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, orexpected to be taken, in a tax return. At December 31, 2020 and 2019, the Company had $1.1 million of unrecognized tax benefits taken or expected to be taken in a taxreturn that have been recorded on the Company’s financial statements as an offset to the valuation allowance related to tax positions taken in 2012. It is notreasonably possible that the amount will change in the next twelve months. There were no material changes to prior year or current year positions taken during theyear ended December 31, 2020.There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company files income tax returns in the United States federal jurisdiction and in a state jurisdiction. During 2009, the Company began foreign operations inMalaysia and is subject to local income taxes in that jurisdiction. The Company’s Malaysia tax returns for the periods ended December 31, 2010 through 2012 havebeen audited by the Malaysia Inland Revenue Board with no changes made to the taxable income for those years. All other tax years in Malaysia are open toexamination by tax authorities.The Company’s federal tax returns for the periods ended December 31, 2010, 2008 and 2007 have been audited by the Internal Revenue Service (IRS) with nochanges made to the Company’s taxable losses for those years. The Company’s state tax returns for the periods ended December 31, 2009 through 2012 have beenaudited by the Illinois Department of Revenue with no changes made to the Company’s taxable losses for those years. Due to the existence of NOL carryforwards,tax years ended December 31, 2001 through 2006, 2008, 2009 and 2011 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOLcarryforwards at the State level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 areopen to examination by the Malaysia Inland Revenue Board.Due to the closing of the Rubicon Malaysia operations, the Company no longer considers the undistributed earnings of Rubicon Malaysia to be indefinitelyreinvested. Upon liquidation of Rubicon Malaysia, it is anticipated any cash left after the liquidation will be brought back to the U.S. via a payment of principaltowards the intercompany loan. A withholding tax may be payable to the Malaysian government on the interest portion of the loan. At December 31, 2020 and 2019,the Company accrued the withholding tax on the interest balance of the loan in the amount of $13,000 and $22,000, respectively, which represents the incremental tax.10. COMMITMENTS AND CONTINGENCIESCOVID19 PandemicIn March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID19) as a pandemic. The full impact of the COVID19outbreak is unknown and cannot be reasonably estimated. The magnitude and duration of the COVID19 outbreak, as well as other factors, could result in a materialimpact to the Company’s financial statements in future reporting periods.Operating LeasesThe Company adopted ASU 201602 in the first quarter of the fiscal year ending December 31, 2019. The adoption of ASU 201602 did not have a material impacton the Company’s consolidated financial statements, as the Company does not have any material lease agreements Rubicon DTP leases a building for itsmanufacturing and offices, however such lease was not considered material to the Company’s financial statements.Direct Dose’s net rent expense under operating leases in 2020 and 2019 amounted to $34,200 and $25,900, respectively. As of December 31, 2020, Direct Dose’soperating lease for its facility was monthtomonth. On January 6, 2021, Direct Dose entered into a one year lease for an aggregate commitment of approximately$35,500.LitigationFrom time to time, the Company experiences routine litigation in the ordinary course of its business.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.11. BENEFIT PLANThe Company sponsors a 401(k) savings plan (the “Plan”). Employees are eligible to participate in the Plan upon reaching 18 years of age. Employees makecontributions to the Plan through payroll deferrals. Employer matching contributions are discretionary. There were no employer matching contributions for the yearsended December 31, 2020 and 2019.12. SUBSEQUENT EVENTSNone.F26EX21.1 2 f10k2020ex211_rubicon.htm SUBSIDIARIES OF THE COMPANYExhibit 21.1Rubicon Technologies, Inc.Subsidiaries of the CompanyName of subsidiaryState (or other jurisdiction of incorporation)Rubicon Technology Worldwide LLCIllinoisRubicon Technology BP LLCDelawareRubicon DTP LLCDelawareEX23.1 3 f10k2020ex231_rubicon.htm CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMExhibit 23.1INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENTWe consent to the incorporation by reference in the Registration Statements of Rubicon Technology, Inc. on Form S3 (File No. 333167272), as amended (File No.333192536) and on Forms S8 (File No. 333147552, File No. 333180211 and File No. 333213025) of our report dated March 22, 2021 with respect to our audits of theconsolidated financial statements of Rubicon Technology, Inc. and Subsidiaries as of December 31, 2020 and 2019 and for each of the two years in the period endedDecember 31, 2020, which report is included in this Annual Report on Form 10K of Rubicon Technology, Inc. and Subsidiaries for the year ended December 31, 2020./s/ Marcum LLPMarcum LLPChicago, IllinoisMarch 22, 2021EX31.1 4 f10k2020ex311_rubicon.htm CERTIFICATIONExhibit 31.1CertificationsCertification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Timothy E. Brog, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerEX31.2 5 f10k2020ex312_rubicon.htm CERTIFICATIONExhibit 31.2Certification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Kevin T. Lusardi, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerEX32.1 6 f10k2020ex321_rubicon.htm CERTIFICATIONExhibit 32.1Certification Pursuant to Section 906 of The SarbanesOxley Act of 2002,18 U.S.C. Section 1350In connection with the Annual Report of Rubicon Technology, Inc. (the “Company”) on Form 10K for the year ended December 31, 2020, as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Timothy E. Brog, President and Chief Executive Officer of the Company, and I, Kevin T.Lusardi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the SarbanesOxley Act of 2002,that, to my knowledge:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerDate: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerA signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnishedto the Securities and Exchange Commission or its staff upon request. F8Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanthe functional currency of the Company, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in thedetermination of net income (loss) for the period. The Company records these gains and losses in other income.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expenses), in the Consolidated Statements of Operations. Investments in which the Company has the ability and intent, ifnecessary, to liquidate in order to support the current operations are classified as shortterm.The Company reviews its availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on thespecific identification method. The Company considers various factors in determining whether an impairment is otherthantemporary, including the severity andduration of the impairment, changes in underlying credit ratings, forecasted recovery, its ability and intent to hold the investment for a period of time sufficient toallow for any anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When the Company concludesthat an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on theConsolidated Statements of Operations. As of December 31, 2020, and 2019, no impairment was recorded.Purchases of Equity Securities by the IssuerIn November 2018, the Company’s Board of Directors authorized a program to repurchase up to $3 million of its common stock. In July 2020, the Company usedall of the original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time. There can be no assurance as to the number of shares of common stock repurchased. The Company records treasurystock purchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock.Share repurchase activity during the year ended December 31, 2020, was as follows:PeriodsTotalnumber ofsharespurchasedAveragepricepaid pershareTotalnumber ofsharespurchasedas part ofpubliclyannouncedprogramApproximatedollar valueof sharesthat may yetbe purchasedunder theprogram(in thousands)January 1, 2020, to December 31, 2020295,946$8.10295,546$3,000Total295,946$3,000F9Accounts receivableThe majority of the Company’s accounts receivable are due from defense subcontractors, industrial manufacturers, fabricators and resellers. Credit is extendedbased on an evaluation of the customer’s financial condition. Accounts receivable are due based on contract terms and at stated amounts due from customers, netof an allowance for doubtful accounts. Losses from credit sales are provided for in the financial statements.Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number offactors, including the length of time a customer’s account is past due, the customer’s current ability to pay and the condition of the general economy and industryas a whole. The Company writes off accounts receivable when they are deemed uncollectible and such writeoffs, net of payments received, are recorded as areduction to the allowance.The following table shows the activity of the allowance for doubtful accounts:Year endedDecember 31,20202019(in thousands)Beginning balance$40$7Charges to costs and expenses(20)33Account writeoffs, less recoveries(17)—Ending balance$3$40InventoriesInventories are valued at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary course ofbusiness less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis, which includes materials, labor and overhead. The Company reduces the carrying value of itsinventories for differences between the cost and the estimated net realizable value, taking into account usage, expected demand, technological obsolescence andother relevant information.The Company establishes inventory reserves when conditions exist that suggest inventory may be in excess of anticipated demand or is obsolete based oncustomer specifications. The Company evaluates the ability to realize the value of its inventory based on a combination of factors, including forecasted sales,estimated current and future market value and changes in customers’ product specifications. The Company’s method of estimating excess and obsolete inventoryhas remained consistent for all periods presented. The Company also carries a lower of cost or market inventory reserve based on net realizable value using mostrecent sales prices to determine market value. As of December 31, 2020 and 2019, the balance of the lower of cost or market reserve was $51,000 and $72,000,respectively, representing a decrease of $21,000 resulting from sales of related reserved for inventory. In addition, in 2020 we sold inventory that was valued at thelower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $21,000. In 2019 we sold inventorythat was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $35,000.In 2019 and 2020, the Company used some of its previously written down twoinch diameter core material in production of optical and industrial sapphire wafersand did not record any additional adjustments for the years ended December 31, 2019 and December 31, 2020.The Company evaluates the amount of raw material needed for future production based on expected crystal growth production needed to meet anticipatedsales. The Company did not record any writedowns of its raw materials inventory for the years ended December 31, 2019 and December 31, 2020.F10Inventories are composed of the following:As ofDecember 31,20202019(in thousands)Raw materials$468$468Workinprocess614901Finished goods459809$1,541$2,178As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.Other inventory suppliesThe Company’s other inventory supplies include stock of consumable assets and spare parts used in the manufacturing process.Assets held for saleAn asset is considered to be held for sale when all of the following criteria are met: (i) management commits to a plan to sell the asset; (ii) it is unlikely that thedisposal plan will be significantly modified or discontinued; (iii) the asset is available for immediate sale in its present condition; (iv) actions required to complete thesale of the asset have been initiated; (v) sale of the asset is probable and the completed sale is expected to occur within one year; and (vi) the asset is actively beingmarketed for sale at a price that is reasonable given its current market value.A longlived asset classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. If the longlived asset is newlyacquired, the carrying amount of the longlived asset is established based on its fair value less cost to sell at the acquisition date. A longlived asset is notdepreciated or amortized while it is classified as held for sale.In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.F11Property and equipmentProperty and equipment consisted of the following:As ofDecember 31,20202019(in thousands)Machinery, equipment and tooling$3,343$3,341Buildings1,7111,711Information systems835835Land and land improvements594594Furniture and fixtures88Total cost6,4916,489Accumulated depreciation and amortization(4,009)(3,842)Property and equipment, net$2,482$2,647Property and equipment are carried at cost and depreciated over their estimated useful lives using the straightline method. The cost of maintenance and repairsis charged to expense as incurred. Significant renewals and improvements are capitalized. Depreciation expense associated with property and equipment was$167,000 and $169,000 for the years ended December 31, 2020 and 2019, respectively.The estimated useful lives are as follows:Asset descriptionLifeBuildings39 yearsMachinery, equipment and tooling310 yearsFurniture and fixtures7 yearsInformation systems3 yearsWarranty costThe Company’s sales terms include a warranty that its products will meet certain specifications. The Company records a current liability for the expected cost ofwarrantyrelated claims at the time of sale. The warranty reserve is included in accrued and other current liabilities on the Consolidated Balance Sheets.The following table presents changes in the Company’s product warranty liability:Year endedDecember 31,20202019(in thousands)Balance, beginning of period$4$8Charged to cost of sales1831Actual product warranty expenditures(20)(35)Balance, end of period$2$4The Company does not provide maintenance or other services and it does not have sales that involve bill & hold arrangements, multiple elements ordeliverables. However, the Company does provide product warranty for up to 90 days, for which the Company has accrued a warranty reserve of $2,000 and $4,000for the years ended December 31, 2020 and 2019, respectively.Fair value of financial instrumentsThe Company’s financial instruments consist primarily of cash and cash equivalents, shortterm investments, accounts receivable, and accounts payable. Thecarrying values of these assets and liabilities approximate their fair values due to the shortterm nature of these instruments at December 31, 2020 and 2019.F12Concentration of credit risks and other risks and uncertaintiesFinancial instruments that could potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, restrictedcash, shortterm investments and accounts receivable. At December 31, 2020 the Company had no deposits at foreign financial institutions and $1.6 million ondeposit at foreign financial institutions at December 31, 2019. As of December 31, 2020, the Company had $8 million on deposit at financial institutions in excess ofamounts insured by the FDIC. This compares to a $5.7 million as of December 31, 2019. The Company performs a periodic evaluation of these institutions for relativecredit standing. The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant risk of loss on thesebalances.The Company uses third parties for certain finishing functions for its products, including the slicing and polishing of its sapphire crystal inventory. These typesof services are only available from a limited number of third parties. The Company’s ability to successfully outsource these finishing functions will substantiallydepend on its ability to develop, maintain and expand its strategic relationship with these third parties. As a result, the Company may be unable to meet the demandfor its products, which could have a material adverse impact on the Company.Concentration of credit risk related to revenue and accounts receivable is discussed in Note 4.Revenue recognitionRevenues recognized include product sales and billings for costs and fees for government contracts.Product SalesThe Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1,2018. The Company recognizes revenue when performance obligations under a purchase order or signed quotation are satisfied. The Company’s business practicecommits the Company to manufacture and deliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement withthe customer includes specifications of the product to be delivered, price, expected ship date and payment terms. The Company’s agreements generally do notcontain variable, financing, rights of return or noncash components. There are no upfront costs to develop the production process. The performance obligation issatisfied at the point in time (single performance obligation) when the product is manufactured to the customer’s specification, as performance does not create anasset with an alternative use to the Company. Accordingly, the Company recognizes revenue when the product is shipped, and control of the product, title and riskof loss have been transferred to the customer. The Company grants credit terms considering normal collection risk. If there is doubt about collection, full prepaymentfor the order is required. Any payments received prior to shipment are recorded as deferred revenue and included in Advance Payments in the Consolidated BalanceSheets. The Company does not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of the Company’s revenue is denominated in U.S. dollars.Shipping and handling costsThe Company records costs incurred in connection with shipping and handling of products as cost of goods sold. Amounts billed to customers in connectionwith these costs are included in revenue and are not material for any of the periods presented in the accompanying financial statements.Sales taxThe Company collects and remits sales taxes on products sold to customers and reports such amounts under the net method in its Consolidated Statements ofOperations and records a liability until remitted to the respective tax authority.F13Stockbased compensationThe Company requires all sharebased payments to employees, including grants of employee stock options, to be measured at fair value and expensed in theConsolidated Statements of Operations over the service period (generally the vesting period) of the grant. Expense is recognized in the Consolidated Statements ofOperations for these sharebased payments. The Company uses Black Scholes option pricing model in order to determine the fair value of stock option grants.Accounting for uncertainty in income taxesThe Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by thetaxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured basedon the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and/or penalties related to incometax matters in income tax expense. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years endedDecember 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.Income taxesDeferred tax assets and liabilities are provided for temporary differences between financial reporting and income tax bases of assets and liabilities, and aremeasured using the enacted tax rates and laws expected to be in effect when the differences will reverse. Deferred income taxes also arise from the future benefits ofNOL carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Full valuationallowances on net deferred tax assets are maintained until an appropriate level of profitability that generates taxable income is deemed sustainable or until a taxstrategy is developed that would enable the Company to conclude that it is more likely than not that a portion of the deferred tax assets will be realizable. Based onan evaluation in accordance with the accounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. andMalaysia deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all theavailable evidence.Use of estimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at thedate of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.Other comprehensive lossComprehensive loss is defined as the change in equity of a business enterprise from transactions and other events from nonowner sources. Comprehensiveloss includes net loss and other nonowner changes in equity that bypass the statement of operations and are reported in a separate component of equity.Net income (loss) per common shareBasic net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of common shares outstanding duringthe period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of diluted common sharesoutstanding during the period. Diluted shares outstanding are calculated by adding to the weightedaverage shares (a) any outstanding stock options based on thetreasury stock method and (b) restricted stock units (“RSU”).F14Diluted net income per share was the same as basic net income per share for the year ended December 31, 2020, because the effects of potentially dilutivesecurities did not have a material impact on the calculation of diluted net income per share. The Company had outstanding options exercisable into 18,250 shares ofthe Company’s common stock that would have had an antidilutive effect at December 31, 2020.Diluted net loss per common share was the same as basic net loss per common share for the year ended December 31, 2020, because the effects of potentiallydilutive securities were antidilutive.New accounting pronouncements adoptedThe Company has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significantimpact the Company’s consolidated financial statements and related disclosures. 2. SEGMENT INFORMATIONThe Company has determined that it operates in two segments, the sapphire and pharmacy business.Revenue is attributed by geographic region based on shipto location of the Company’s customers. The following table summarizes revenue by geographicregion:Year ended December 31,20202019(in thousands)North America$4,039$3,324Asia406185Other2217Total revenue$4,467$3,526The following table summarizes sales by product type:Year ended December 31,20202019(in thousands)Optical$3,611$3,338Core69Rubicon DTP850179Total revenue$4,467$3,526The following table summarizes assets by geographic region:As ofDecember 31,20202019(in thousands)United States$31,240$29,703Malaysia—5,094Other—4Total assets$31,240$34,801 The total assets of Rubicon DTP were not material to the total assets of the Company as stated on the consolidated balance sheets, as of December 31, 2020and 2019.Rubicon DTP accounted for approximately $340,000 and $447,000 of the Company’s loss for the year ended December 31, 2020 and 2019, respectively. F153. INVESTMENTSThe Company invests available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, commonstock, equity related securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains andlosses recorded in accumulated other comprehensive income/(loss). Investments in equity securities are reported at fair value, with both realized and unrealizedgains and losses recorded as unrealized gain/(loss) on investments and realized gain on investments, in other income/(expense), in the Consolidated Statements ofOperations. Investments in which the Company has the ability and intent, if necessary, to liquidate are classified as shortterm.The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2020:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,748$—$—$14,748Marketable securities————Total shortterm investments$14,748$—$—$14,748The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2019:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,668$—$—$14,668Marketable securities961(171)790Total shortterm investments$15,629$—$(171)$15,458The Company values its investments at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in theprincipal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniquesused to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchybased on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are thefollowing:●Level 1—Quoted prices in active markets for identical assets or liabilities.●Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices inmarkets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assetsor liabilities.●Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.The Company’s fixed income availableforsale securities consist of U.S. Treasury securities, highquality investment grade commercial paper, FDIC guaranteedcertificates of deposit, common stock, equity related securities and corporate notes. The Company values these securities based on pricing from pricing vendors,who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly(Level 2 inputs) in determining fair value. The valuation techniques used to measure the fair value of the Company’s financial instruments having Level 2 inputswere derived from nonbinding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricingmodels, such as discounted cash flow techniques.F16The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2020:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,136$—$—$3,136Investments:Availableforsales securities—current:U.S. Treasury securities—14,748—14,748Total$3,136$14,748$—$17,884The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2019:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,759$—$—$3,759Investments:Availableforsales securities—current:U.S. Treasury securities—14,668—14,668790790Total$4,549$14,668$—$19,217There are no terms or conditions restricting the Company from redeeming any of its investments.In addition to the debt securities noted above, the Company had approximately $8.0 million and $4.9 million of time deposits included in cash and cashequivalents as of December 31, 2020 and 2019, respectively.4. SIGNIFICANT CUSTOMERSFor the year ended December 31, 2020, the Company had four customers that accounted for approximately 21%, 13%, 11% and 10% of its revenue. For the yearended December 31, 2019, the Company had three customers that accounted for approximately 31%, 15% and 12% of its revenue.Customers individually representing more than 10% of trade receivables accounted for approximately 44% and 77% of accounts receivable as of December 31,2020 and 2019, respectively. 5. ASSETS HELD FOR SALE AND LONGLIVED ASSETSWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, the Company performs ananalysis to review the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expectedfuture operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.F17In connection with the Company’s decision in 2016 to limit its focus to the optical and industrial sapphire markets and exit the LED market, the Companydeveloped a plan to close its Malaysia facility, scale down and consolidate remaining operations in the U.S. and sell additional assets that would not be needed. TheCompany evaluated its U.S. and Malaysia asset portfolios to identify assets needed for its current business strategy and excess assets that were no longer needed.The Company determined it had excess machinery, equipment and facilities. Excess U.S. and Malaysia assets were evaluated based on assuming an orderlyliquidation plan, which considers economic obsolescence and sales of comparable equipment, as it is the Company’s intention to sell these assets. Additionally, theCompany evaluated its U.S. assets continuing to be used in operations using a cost and market approach to determine the current fair value. In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.6. STOCKHOLDERS’ EQUITYCommon stockAt the Company’s annual meeting of stockholders held on May 3, 2017, the Company’s stockholders approved amendments to the Company’s Eighth Amendedand Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”) to (i) effect a reverse stock split of the Company’s common stock; and (ii)decrease the Company’s authorized number of shares of common stock to three times the number of shares of the Company’s common stock outstandingimmediately following the reverse stock split. On May 3, 2017, following the annual meeting, the Company filed with the Secretary of State of the State of Delaware aCertificate of Amendment to (a) implement the reverse stock split at a ratio of 1for10; and (b) to reduce the number of authorized shares of common stock from40,000,000 to 8,200,000, consequently reducing the number of total authorized shares from 45,000,000 to 13,200,000. With the completion of the reverse stock split,the Company’s shares began trading above the required $1.00 per share closing bid price, as required by the Listing Qualifications Department of NASDAQ. Theshare information has been retroactively reflected for the effects of this reverse stock split for all periods presented.Preferred stockAt the Company’s annual meeting of stockholders held on May 10, 2018, the Company’s stockholders approved an amendment to the Certificate ofIncorporation to decrease the Company’s authorized number of shares of preferred stock from 5,000,000 shares to 1,000,000 shares. The Company filed with theSecretary of State of the State of Delaware a Certificate of Amendment to decrease the authorized number of preferred shares, consequently reducing the number oftotal authorized shares from 13,200,000 to 9,200,000.Common shares reservedAs of December 31, 2020, the Company had reserved 65,103 shares of common stock for issuance upon the exercise of outstanding common stock options andvesting of RSUs. Also 301,105 shares of the Company’s common stock were reserved for future grants of stock options and RSUs (or other similar equityinstruments) under the Rubicon Technology, Inc. 2016 Stock Incentive Plan (the “2016 Plan”) as of December 31, 2020.F187. STOCKHOLDER RIGHTS AGREEMENT On December 18, 2017, the Company entered into a Section 382 Rights Agreement with American Stock Transfer & Trust Company, LLC, as Rights Agent (the“Rights Agreement”) in an effort to protect stockholder value by attempting to diminish the risk that the Company’s ability to use its net NOLs to reduce potentialfuture federal income tax obligations may become substantially limited. The Company’s ability to utilize its NOLs may be substantially limited if the Companyexperiences an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”). The Rights Agreement isintended to act as a deterrent to any person acquiring beneficial ownership of 4.9% or more of the Company’s outstanding common stock without the approval ofthe Company’s Board of Directors (the “Board”).The Board authorized the issuance of one Right for each outstanding share of common stock, par value $0.001 per share, of the Company, payable tostockholders of record date of the close of business on January 2, 2018. One Right will also be issued together with each share of the Company’s common stockissued after January 2, 2018 but before the Distribution Date (as defined below) and, in certain circumstances, after the Distribution Date. Subject to the terms,provisions and conditions of the Rights Agreement, if the Rights become exercisable, each Right would initially represent the right to purchase from the Companyone onethousandth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company (the “Series A Preferred Stock”) for apurchase price of $40.00. If issued, each onethousandth of a share of Series A Preferred Stock would give the stockholder approximately the same dividend, votingand liquidation rights as does one share of common stock. However, prior to exercise, a Right does not give its holder any rights as a stockholder of the Company,including, without limitation, any dividend, voting or liquidation rights.The Rights will not be exercisable until the earlier of (i) ten business days after a public announcement that a person has become an “Acquiring Person” byacquiring beneficial ownership of 4.9% or more of outstanding common stock (or, in the case of a person that had beneficial ownership of 4.9% or more of theoutstanding common stock as of the close of business on December 18, 2017, by obtaining beneficial ownership of any additional shares of common stockrepresenting 0.5% or more of the shares of common stock then outstanding (other than pursuant to a dividend or distribution paid or made by the Company on theoutstanding shares of the common stock or pursuant to a split or subdivision of the outstanding shares of common stock) at a time such person still beneficiallyowns 4.9% or more of the outstanding common stock), and (ii) ten business days (or such later date as may be specified by the Board prior to such time as anyperson becomes an Acquiring Person) after the commencement of a tender or exchange offer by or on behalf of a person that, if completed, would result in suchperson becoming an Acquiring Person (the “Distribution Date”).Until the Distribution Date, common stock certificates or the ownership statements issued with respect to uncertificated shares of common stock will evidencethe Rights. Any transfer of shares of common stock prior to the Distribution Date will also constitute a transfer of the associated Rights. After the Distribution Date,separate rights certificates will be issued and the Rights may be transferred other than in connection with the transfer of the underlying shares of common stockunless and until the Board has determined to effect an exchange pursuant to the Rights Agreement (as described below).In the event that a person becomes an Acquiring Person, each holder of a Right, other than Rights that are or, under certain circumstances, were beneficiallyowned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right and payment of the purchaseprice, a number of shares of the Company’s common stock (or, in certain circumstances, cash, property or other securities of the Company) having a market valueequal to two times the purchase price. However, Rights are subject to redemption and exchange at the option of the Company.In the event that, at any time following a person becoming an Acquiring Person, (i) the Company engages in a merger or other business combination transactionin which the Company is not the surviving corporation; (ii) the Company engages in a merger or other business combination transaction in which the Company isthe surviving corporation and the common stock is changed or exchanged; or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold ortransferred, each holder of a Right (except Rights which have previously been voided) shall thereafter have the right to receive, upon exercise of the Right, commonstock of the acquiring company having a value equal to two times the purchase price.F19At any time until the earlier of December 18, 2023, and ten calendar days following the first date of public announcement that a person has become an AcquiringPerson or that discloses information which reveals the existence of an Acquiring Person or such earlier date as a majority of the Board becomes aware of theexistence of an Acquiring Person, the Board may redeem the Rights in whole, but not in part, at a price of $0.001 per Right (the “Redemption Price”). The redemptionof the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon anyredemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.At any time after a person becomes an Acquiring Person, the Board may, at its option, exchange the Rights (other than Rights that have become void), in wholeor in part, at an exchange ratio of one share of common stock, or a fractional share of Series A Preferred Stock (or of a share of a similar class or series of theCompany’s preferred stock having similar rights, preferences and privileges) of equivalent value, per Right (subject to adjustment). Immediately upon an exchange ofany Rights, the right to exercise such Rights will terminate and the only right of the holders of Rights will be to receive the number of shares of common stock (orfractional share of Series A Preferred Stock or of a share of a similar class or series of the Company’s preferred stock having similar rights, preferences andprivileges) equal to the number of such Rights held by such holder multiplied by the exchange ratio.Each one onethousandth of a share of Series A Preferred Stock, if issued: (i) will be nonredeemable and junior to any other series of preferred stock theCompany may issue (unless otherwise provided in the terms of such other series), (ii) will entitle holders to preferential cumulative quarterly dividends in an amountper share of Series A Preferred Stock equal to the greater of (a) $1 or (b) 1,000 times the aggregate the dividends, if any, declared on one share of the Company’scommon stock, (iii) will entitle holders upon liquidation (voluntary or otherwise) to receive $1,000 per share of Series A Preferred Stock plus an amount equal toaccrued and unpaid dividends and distributions thereon, whether or not declared, (iv) will have the same voting power as one share of common stock, and (v) willentitle holders to a per share payment equal to the payment made on one share of the Company’s common stock, if shares of the common stock are exchanged viamerger, consolidation, or a similar transaction. Because of the nature of the Series A Preferred Stock’s dividend, liquidation and voting rights, the value of a Unit ofSeries A Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of common stock.The Rights and the Rights Agreement will expire on the earliest of (i) December 18, 2023, (ii) the time at which the Rights are redeemed pursuant to the RightsAgreement, (iii) the time at which the Rights are exchanged in full pursuant to the Rights Agreement, (iv) the date that the Board determines that the RightsAgreement is no longer necessary for the preservation of material valuable Tax Benefits, (v) the beginning of a taxable year of the Company to which the Boarddetermines that no NOL tax benefits may be carried forward, and (vi) a determination by the Board, prior to the time any Person becomes an Acquiring Person, thatthe Rights Agreement and the Rights are no longer in the best interests of the Company and its stockholders.The Board may adjust the purchase price, the number of shares of Series A Preferred Stock or other securities or assets issuable and the number of outstandingRights to prevent dilution that may occur as a result of certain events, including among others, a stock dividend, a stock split or a reclassification of the Series APreferred Stock or common stock. With certain exceptions, no adjustments to the purchase price will be required until cumulative adjustments amount to at least 1%of the purchase price.For so long as the Rights are redeemable, the Board may supplement or amend any provision of the Rights Agreement in any respect without the approval ofthe holders of the Rights. From and after the time the Rights are no longer redeemable, the Board may supplement or amend the Rights Agreement only to cure anambiguity, to alter time period provisions, to correct inconsistent provisions, or to make any additional changes to the Rights Agreement which the Company maydeem necessary or desirable, but only to the extent that those changes do not impair or adversely affect any Rights holder (other than an Acquiring Person or anyAffiliate or Associate of an Acquiring Person or certain of their transferees) and do not result in the Rights again becoming redeemable or the Rights Agreementagain becoming amendable other than in accordance with this sentence.In connection with the adoption of the Rights Agreement and authorization and declaration of the dividend of the Rights, on December 18, 2017, the Companyfiled the Certificate of Designation with the Secretary of State of the State of Delaware. The Certificate of Designation became effective on December 18, 2017.F208. STOCK INCENTIVE PLANSIn August 2007, the Company adopted the Rubicon Technology Inc. 2007 Stock Incentive Plan, which was amended and restated effective in March 2011 (the“2007 Plan”), and which allowed for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, RSUs, performanceawards and bonus shares. The maximum number of shares that could be awarded under the 2007 Plan was 440,769 shares. Options granted under the 2007 Planentitle the holder to purchase shares of the Company’s common stock at the specified option exercise price, which could not be less than the fair market value of thecommon stock on the grant date. On June 24, 2016, the 2007 Plan terminated with the adoption of the Rubicon Technology, Inc. 2016 Stock Incentive Plan, (the “2016Plan”). Any existing awards under the 2007 Plan remain outstanding in accordance with their current terms under the 2007 Plan. In June 2016, the Company’sstockholders approved adoption of the 2016 Plan effective as of March 17, 2016, which allows for the grant of incentive stock options, nonstatutory stock options,stock appreciation rights, restricted stock, RSUs, performance awards and bonus shares. The Compensation Committee of the Board administers the 2016 Plan. Thecommittee determines the type of award to be granted, the fair value, the number of shares covered by the award, and the time when the award vests and may beexercised.Pursuant to the 2016 Plan, 222,980 shares of the Company’s common stock plus any shares subject to outstanding awards under the 2007 Plan thatsubsequently expire unexercised, are forfeited without the delivery of shares or are settled in cash, will be available for issuance under the 2016 Plan. The 2016 Planwill automatically terminate on March 17, 2026, unless the Company terminates it sooner.The following table summarizes the activity of the stock incentive and equity plans:Sharesavailablefor grantNumber ofoptionsoutstandingWeightedaverageoptionexercise priceNumber ofrestrictedstock sharesissuedNumber ofRSUsoutstandingOutstanding at January 1, 2019295,06769,08312.1099,57050,176Granted(60,925)1,000——9,925Exercised/issued—(5,000)——(6,098)Canceled/forfeited42,244(42,244)11.35——Outstanding at December 31, 2019276,38622,83913.4899,57054,003Granted(20,877)———3,597Exercised/issued—(2,250)——(3,597)Canceled/forfeited40,596(489)202.56—(9,000)Outstanding at December 31, 2020296,10520,100$9.7199,57045,003There were no option grants made during 2020. At December 31, 2020, the exercise prices of outstanding options were as follows:Exercise priceNumber ofoptionsoutstandingAverageremainingcontractual life(years)Number ofoptionsexercisable$6.10 $8.3418,2505.7518,250$44.101,8503.941,85020,1004.7320,100F21The aggregate grant date fair value of the options that became vested in the years ended 2020 and 2019 was $30,000 and $77,000, respectively.The following table summarizes the activity of nonvested options:NonvestedoptionsWeightedaverage optionexercisepriceNonvested at January 1, 201921,992$6.86Granted1,0008.34Vested(10,878)7.07Cancelled(7,248)7.25Nonvested at December 31, 20194,8666.10Granted——Vested(4,866)6.10Cancelled——Nonvested at December 31, 2020—$—The Company’s aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of theCompany’s common stock. Based on the fair value of the common stock at December 31, 2020 there was $52,000 of intrinsic value arising from 18,250 stock optionsexercisable or outstanding.The Company used historical stock prices as the basis for its volatility assumptions. The assumed riskfree rates were based on U.S. Treasury rates in effect atthe time of grant with a term consistent with the expected option lives. The expected term for the year ended December 31, 2020, is based upon the Company’smedian average life of its options. The forfeiture rate is based on the past history of forfeited options. The expense is being allocated using the straightline method.For the years ended December 31, 2020 and 2019, the Company recorded $14,000 and $24,000, respectively, of stock option compensation expense. As ofDecember 31, 2020, all outstanding options awarded have been fully vested.For the year ended December 31, 2020, there were no options granted.The following table summarizes the award vesting terms for the RSUs granted in 2019:Number of RSUsTarget price925$7.95The following table summarizes the award vesting terms for the RSUs granted in 2018:Number of restricted stock unitsTarget price902$11.0015,000$12.5015,000$14.00F22The RSUs vest in the amounts set forth below on the first date the 15trading day average closing price of the Company’s common stock equals or exceeds thecorresponding target price for the common stock before May 12, 2021. At the time the negotiation of the terms of the employment agreement began, the closing priceof the common stock was $5.50. On the date of grant, the closing price of the common stock was $6.30. During the twelve months ended December 31, 2017, the firstthree tranches of the grant vested. No additional tranches vested during the years ended December 31, 2020, 2019 and 2018.The Company used Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted because the awards vest based uponachievement of market price targets. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the marketcondition stipulated in the award and calculates the fair value of each RSU. The Company used the following assumptions in determining the fair value of the RSUs:GrantedJanuary2018March2017Daily expected stock price volatility4.2806%4.4237%Daily expected mean return on equity(0.2575)%(0.2226)%Daily expected dividend yield0.0%0.0%Average daily riskfree interest rate0.0078%0.0063%The daily expected stock price volatility is based on a fouryear historical volatility of the Company’s common stock. The daily expected dividend yield is basedon annual expected dividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches iscalculated to have its own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period which is upto four years. The RSUs granted in January 2018 and March 2017 had a grant date fair value of $209,000 and $323,000, respectively. There were no grants with marketprice targets issued in the years ended December 31, 2020 and 2019. A summary of the Company’s RSUs is as follows:RSUsoutstandingWeightedaverageprice attime of grantAggregateintrinsicvalueNonvested RSUs as of January 1, 201950,176$6.31Granted9,9258.32Vested(6,098)7.40Cancelled——Nonvested RSUs as of December 31, 201954,0036.56Granted3,5978.34Vested(3,597)8.34Cancelled(9,000)8.36Nonvested RSUs at December 31, 202045,003$6.20$278,961The fair value of each RSU is the market price on the date of grant and is being recorded as compensation expense ratably over the vesting terms or theexpected achievement of market price targets based on the Monte Carlo simulation model. For the years ended December 31, 2020 and 2019, the Company recorded$38,000 and $7,000 of RSU expense, respectively. The RSUs are forfeited by a participant upon termination for any reason, and there is no proportionate or partialvesting in the periods between the vesting dates. As of December 31, 2020, there was no unrecognized compensation cost related to the nonvested RSUs.For the year ended December 31, 2020 the Company recorded no compensation related to restricted stock compared to $14,000 in the prior year. During the year ended December 31, 2020 the Company awarded approximately 17,000 shares to an officer of the Company with a fair value of $146,000.F239. INCOME TAXESOn December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed theCompany to record provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date ofenactment. The Company has completed its accounting for the tax effects of enactment of the Act. The deemed inclusion from the repatriation tax increased from$3.9 million at the time of provision to $5.0 million at the time the calculation was finalized for the tax return. The increase of the inclusion related primarily to therefinement of Malaysia earnings and profits. As the Company is in a full valuation allowance position, an equal benefit adjustment was recorded for the impact ofthe increase of the deemed repatriation tax.Components of income before income taxes and the income tax provision are as follows:Income (loss) before income taxesYear endedDecember 31,20202019(in thousands)U.S.$(3,060)$(1,142)Foreign2,01817Total$(1,050)$(1,125)Income taxesYear endedDecember 31,20202019(in thousands)CurrentU.S.$—$—State——Foreign1322Total current income tax expense1322DeferredU.S.——State——Foreign——Total deferred income tax expense (benefit)——Total income tax expense (benefit)$13$22The reconciliation of income tax computed at the federal statutory rate to income before taxes is as follows:Year endedDecember 31,20202019U.S. federal statutory rate(21.0)%(21.0)%State taxes net of federal benefit(18.2)(7.6)Foreign rate differential and transactional tax5.90.1Tax credits——Valuation allowance33.328.5Other12.01.0%2.0%F24Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amount of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred income taxes are as follows at December 31:20202019(in thousands)Deferred tax assets:Allowance for doubtful accounts$1$11Inventory reserves3,0963,185Consumables excess reserve167169Accrued liabilities8152Warrant interest expense195196Stock compensation expense789789State net operating loss14,47615,010Net operating loss carryforward41,10540,437Tax credits710740Depreciation1,0001,329Valuation allowance(61,556)(61,869)Total deferred tax assets6449Deferred tax liability:Prepaid expenses(64)(49)Net deferred tax liability$—$—In February 2018, the FASB issued ASU No. 201802 (“ASU 201802), Income StatementReporting Comprehensive Income (Topic 220): Reclassification ofCertain Tax Effects from Accumulated Comprehensive Income. The new guidance allows companies to reclassify stranded tax effects resulting from the Tax Act,from accumulated other comprehensive income to retained earnings. The guidance also requires certain new disclosures regardless of the election. Early adoption ispermitted. The Company’s adoption of ASU 201802 did not have a material impact on its consolidated financial statements.The Company adopted the guidance in ASU No. 201517, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which requires that alldeferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent in the balance sheet. As a result, each jurisdiction has onenet noncurrent deferred tax asset or liability. The new guidance does not change the existing requirement that only permits offsetting within a jurisdiction.Companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The change inaccounting principle did not have an impact on the Company’s results of operations, cash flows or stockholders’ equity. At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.The Company completed an analysis of the utilization of NOLs subject to limits based upon certain ownership changes as of December 31, 2020. The results ofthis analysis indicated no ownership change limiting the utilization of net operating losses and tax credits.F25The Company prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, orexpected to be taken, in a tax return. At December 31, 2020 and 2019, the Company had $1.1 million of unrecognized tax benefits taken or expected to be taken in a taxreturn that have been recorded on the Company’s financial statements as an offset to the valuation allowance related to tax positions taken in 2012. It is notreasonably possible that the amount will change in the next twelve months. There were no material changes to prior year or current year positions taken during theyear ended December 31, 2020.There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company files income tax returns in the United States federal jurisdiction and in a state jurisdiction. During 2009, the Company began foreign operations inMalaysia and is subject to local income taxes in that jurisdiction. The Company’s Malaysia tax returns for the periods ended December 31, 2010 through 2012 havebeen audited by the Malaysia Inland Revenue Board with no changes made to the taxable income for those years. All other tax years in Malaysia are open toexamination by tax authorities.The Company’s federal tax returns for the periods ended December 31, 2010, 2008 and 2007 have been audited by the Internal Revenue Service (IRS) with nochanges made to the Company’s taxable losses for those years. The Company’s state tax returns for the periods ended December 31, 2009 through 2012 have beenaudited by the Illinois Department of Revenue with no changes made to the Company’s taxable losses for those years. Due to the existence of NOL carryforwards,tax years ended December 31, 2001 through 2006, 2008, 2009 and 2011 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOLcarryforwards at the State level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 areopen to examination by the Malaysia Inland Revenue Board.Due to the closing of the Rubicon Malaysia operations, the Company no longer considers the undistributed earnings of Rubicon Malaysia to be indefinitelyreinvested. Upon liquidation of Rubicon Malaysia, it is anticipated any cash left after the liquidation will be brought back to the U.S. via a payment of principaltowards the intercompany loan. A withholding tax may be payable to the Malaysian government on the interest portion of the loan. At December 31, 2020 and 2019,the Company accrued the withholding tax on the interest balance of the loan in the amount of $13,000 and $22,000, respectively, which represents the incremental tax.10. COMMITMENTS AND CONTINGENCIESCOVID19 PandemicIn March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID19) as a pandemic. The full impact of the COVID19outbreak is unknown and cannot be reasonably estimated. The magnitude and duration of the COVID19 outbreak, as well as other factors, could result in a materialimpact to the Company’s financial statements in future reporting periods.Operating LeasesThe Company adopted ASU 201602 in the first quarter of the fiscal year ending December 31, 2019. The adoption of ASU 201602 did not have a material impacton the Company’s consolidated financial statements, as the Company does not have any material lease agreements Rubicon DTP leases a building for itsmanufacturing and offices, however such lease was not considered material to the Company’s financial statements.Direct Dose’s net rent expense under operating leases in 2020 and 2019 amounted to $34,200 and $25,900, respectively. As of December 31, 2020, Direct Dose’soperating lease for its facility was monthtomonth. On January 6, 2021, Direct Dose entered into a one year lease for an aggregate commitment of approximately$35,500.LitigationFrom time to time, the Company experiences routine litigation in the ordinary course of its business.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.11. BENEFIT PLANThe Company sponsors a 401(k) savings plan (the “Plan”). Employees are eligible to participate in the Plan upon reaching 18 years of age. Employees makecontributions to the Plan through payroll deferrals. Employer matching contributions are discretionary. There were no employer matching contributions for the yearsended December 31, 2020 and 2019.12. SUBSEQUENT EVENTSNone.F26EX21.1 2 f10k2020ex211_rubicon.htm SUBSIDIARIES OF THE COMPANYExhibit 21.1Rubicon Technologies, Inc.Subsidiaries of the CompanyName of subsidiaryState (or other jurisdiction of incorporation)Rubicon Technology Worldwide LLCIllinoisRubicon Technology BP LLCDelawareRubicon DTP LLCDelawareEX23.1 3 f10k2020ex231_rubicon.htm CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMExhibit 23.1INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENTWe consent to the incorporation by reference in the Registration Statements of Rubicon Technology, Inc. on Form S3 (File No. 333167272), as amended (File No.333192536) and on Forms S8 (File No. 333147552, File No. 333180211 and File No. 333213025) of our report dated March 22, 2021 with respect to our audits of theconsolidated financial statements of Rubicon Technology, Inc. and Subsidiaries as of December 31, 2020 and 2019 and for each of the two years in the period endedDecember 31, 2020, which report is included in this Annual Report on Form 10K of Rubicon Technology, Inc. and Subsidiaries for the year ended December 31, 2020./s/ Marcum LLPMarcum LLPChicago, IllinoisMarch 22, 2021EX31.1 4 f10k2020ex311_rubicon.htm CERTIFICATIONExhibit 31.1CertificationsCertification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Timothy E. Brog, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerEX31.2 5 f10k2020ex312_rubicon.htm CERTIFICATIONExhibit 31.2Certification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Kevin T. Lusardi, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerEX32.1 6 f10k2020ex321_rubicon.htm CERTIFICATIONExhibit 32.1Certification Pursuant to Section 906 of The SarbanesOxley Act of 2002,18 U.S.C. Section 1350In connection with the Annual Report of Rubicon Technology, Inc. (the “Company”) on Form 10K for the year ended December 31, 2020, as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Timothy E. Brog, President and Chief Executive Officer of the Company, and I, Kevin T.Lusardi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the SarbanesOxley Act of 2002,that, to my knowledge:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerDate: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerA signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnishedto the Securities and Exchange Commission or its staff upon request. F8Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanthe functional currency of the Company, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in thedetermination of net income (loss) for the period. The Company records these gains and losses in other income.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expenses), in the Consolidated Statements of Operations. Investments in which the Company has the ability and intent, ifnecessary, to liquidate in order to support the current operations are classified as shortterm.The Company reviews its availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on thespecific identification method. The Company considers various factors in determining whether an impairment is otherthantemporary, including the severity andduration of the impairment, changes in underlying credit ratings, forecasted recovery, its ability and intent to hold the investment for a period of time sufficient toallow for any anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When the Company concludesthat an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on theConsolidated Statements of Operations. As of December 31, 2020, and 2019, no impairment was recorded.Purchases of Equity Securities by the IssuerIn November 2018, the Company’s Board of Directors authorized a program to repurchase up to $3 million of its common stock. In July 2020, the Company usedall of the original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time. There can be no assurance as to the number of shares of common stock repurchased. The Company records treasurystock purchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock.Share repurchase activity during the year ended December 31, 2020, was as follows:PeriodsTotalnumber ofsharespurchasedAveragepricepaid pershareTotalnumber ofsharespurchasedas part ofpubliclyannouncedprogramApproximatedollar valueof sharesthat may yetbe purchasedunder theprogram(in thousands)January 1, 2020, to December 31, 2020295,946$8.10295,546$3,000Total295,946$3,000F9Accounts receivableThe majority of the Company’s accounts receivable are due from defense subcontractors, industrial manufacturers, fabricators and resellers. Credit is extendedbased on an evaluation of the customer’s financial condition. Accounts receivable are due based on contract terms and at stated amounts due from customers, netof an allowance for doubtful accounts. Losses from credit sales are provided for in the financial statements.Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number offactors, including the length of time a customer’s account is past due, the customer’s current ability to pay and the condition of the general economy and industryas a whole. The Company writes off accounts receivable when they are deemed uncollectible and such writeoffs, net of payments received, are recorded as areduction to the allowance.The following table shows the activity of the allowance for doubtful accounts:Year endedDecember 31,20202019(in thousands)Beginning balance$40$7Charges to costs and expenses(20)33Account writeoffs, less recoveries(17)—Ending balance$3$40InventoriesInventories are valued at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary course ofbusiness less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis, which includes materials, labor and overhead. The Company reduces the carrying value of itsinventories for differences between the cost and the estimated net realizable value, taking into account usage, expected demand, technological obsolescence andother relevant information.The Company establishes inventory reserves when conditions exist that suggest inventory may be in excess of anticipated demand or is obsolete based oncustomer specifications. The Company evaluates the ability to realize the value of its inventory based on a combination of factors, including forecasted sales,estimated current and future market value and changes in customers’ product specifications. The Company’s method of estimating excess and obsolete inventoryhas remained consistent for all periods presented. The Company also carries a lower of cost or market inventory reserve based on net realizable value using mostrecent sales prices to determine market value. As of December 31, 2020 and 2019, the balance of the lower of cost or market reserve was $51,000 and $72,000,respectively, representing a decrease of $21,000 resulting from sales of related reserved for inventory. In addition, in 2020 we sold inventory that was valued at thelower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $21,000. In 2019 we sold inventorythat was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $35,000.In 2019 and 2020, the Company used some of its previously written down twoinch diameter core material in production of optical and industrial sapphire wafersand did not record any additional adjustments for the years ended December 31, 2019 and December 31, 2020.The Company evaluates the amount of raw material needed for future production based on expected crystal growth production needed to meet anticipatedsales. The Company did not record any writedowns of its raw materials inventory for the years ended December 31, 2019 and December 31, 2020.F10Inventories are composed of the following:As ofDecember 31,20202019(in thousands)Raw materials$468$468Workinprocess614901Finished goods459809$1,541$2,178As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.Other inventory suppliesThe Company’s other inventory supplies include stock of consumable assets and spare parts used in the manufacturing process.Assets held for saleAn asset is considered to be held for sale when all of the following criteria are met: (i) management commits to a plan to sell the asset; (ii) it is unlikely that thedisposal plan will be significantly modified or discontinued; (iii) the asset is available for immediate sale in its present condition; (iv) actions required to complete thesale of the asset have been initiated; (v) sale of the asset is probable and the completed sale is expected to occur within one year; and (vi) the asset is actively beingmarketed for sale at a price that is reasonable given its current market value.A longlived asset classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. If the longlived asset is newlyacquired, the carrying amount of the longlived asset is established based on its fair value less cost to sell at the acquisition date. A longlived asset is notdepreciated or amortized while it is classified as held for sale.In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.F11Property and equipmentProperty and equipment consisted of the following:As ofDecember 31,20202019(in thousands)Machinery, equipment and tooling$3,343$3,341Buildings1,7111,711Information systems835835Land and land improvements594594Furniture and fixtures88Total cost6,4916,489Accumulated depreciation and amortization(4,009)(3,842)Property and equipment, net$2,482$2,647Property and equipment are carried at cost and depreciated over their estimated useful lives using the straightline method. The cost of maintenance and repairsis charged to expense as incurred. Significant renewals and improvements are capitalized. Depreciation expense associated with property and equipment was$167,000 and $169,000 for the years ended December 31, 2020 and 2019, respectively.The estimated useful lives are as follows:Asset descriptionLifeBuildings39 yearsMachinery, equipment and tooling310 yearsFurniture and fixtures7 yearsInformation systems3 yearsWarranty costThe Company’s sales terms include a warranty that its products will meet certain specifications. The Company records a current liability for the expected cost ofwarrantyrelated claims at the time of sale. The warranty reserve is included in accrued and other current liabilities on the Consolidated Balance Sheets.The following table presents changes in the Company’s product warranty liability:Year endedDecember 31,20202019(in thousands)Balance, beginning of period$4$8Charged to cost of sales1831Actual product warranty expenditures(20)(35)Balance, end of period$2$4The Company does not provide maintenance or other services and it does not have sales that involve bill & hold arrangements, multiple elements ordeliverables. However, the Company does provide product warranty for up to 90 days, for which the Company has accrued a warranty reserve of $2,000 and $4,000for the years ended December 31, 2020 and 2019, respectively.Fair value of financial instrumentsThe Company’s financial instruments consist primarily of cash and cash equivalents, shortterm investments, accounts receivable, and accounts payable. Thecarrying values of these assets and liabilities approximate their fair values due to the shortterm nature of these instruments at December 31, 2020 and 2019.F12Concentration of credit risks and other risks and uncertaintiesFinancial instruments that could potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, restrictedcash, shortterm investments and accounts receivable. At December 31, 2020 the Company had no deposits at foreign financial institutions and $1.6 million ondeposit at foreign financial institutions at December 31, 2019. As of December 31, 2020, the Company had $8 million on deposit at financial institutions in excess ofamounts insured by the FDIC. This compares to a $5.7 million as of December 31, 2019. The Company performs a periodic evaluation of these institutions for relativecredit standing. The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant risk of loss on thesebalances.The Company uses third parties for certain finishing functions for its products, including the slicing and polishing of its sapphire crystal inventory. These typesof services are only available from a limited number of third parties. The Company’s ability to successfully outsource these finishing functions will substantiallydepend on its ability to develop, maintain and expand its strategic relationship with these third parties. As a result, the Company may be unable to meet the demandfor its products, which could have a material adverse impact on the Company.Concentration of credit risk related to revenue and accounts receivable is discussed in Note 4.Revenue recognitionRevenues recognized include product sales and billings for costs and fees for government contracts.Product SalesThe Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1,2018. The Company recognizes revenue when performance obligations under a purchase order or signed quotation are satisfied. The Company’s business practicecommits the Company to manufacture and deliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement withthe customer includes specifications of the product to be delivered, price, expected ship date and payment terms. The Company’s agreements generally do notcontain variable, financing, rights of return or noncash components. There are no upfront costs to develop the production process. The performance obligation issatisfied at the point in time (single performance obligation) when the product is manufactured to the customer’s specification, as performance does not create anasset with an alternative use to the Company. Accordingly, the Company recognizes revenue when the product is shipped, and control of the product, title and riskof loss have been transferred to the customer. The Company grants credit terms considering normal collection risk. If there is doubt about collection, full prepaymentfor the order is required. Any payments received prior to shipment are recorded as deferred revenue and included in Advance Payments in the Consolidated BalanceSheets. The Company does not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of the Company’s revenue is denominated in U.S. dollars.Shipping and handling costsThe Company records costs incurred in connection with shipping and handling of products as cost of goods sold. Amounts billed to customers in connectionwith these costs are included in revenue and are not material for any of the periods presented in the accompanying financial statements.Sales taxThe Company collects and remits sales taxes on products sold to customers and reports such amounts under the net method in its Consolidated Statements ofOperations and records a liability until remitted to the respective tax authority.F13Stockbased compensationThe Company requires all sharebased payments to employees, including grants of employee stock options, to be measured at fair value and expensed in theConsolidated Statements of Operations over the service period (generally the vesting period) of the grant. Expense is recognized in the Consolidated Statements ofOperations for these sharebased payments. The Company uses Black Scholes option pricing model in order to determine the fair value of stock option grants.Accounting for uncertainty in income taxesThe Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by thetaxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured basedon the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and/or penalties related to incometax matters in income tax expense. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years endedDecember 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.Income taxesDeferred tax assets and liabilities are provided for temporary differences between financial reporting and income tax bases of assets and liabilities, and aremeasured using the enacted tax rates and laws expected to be in effect when the differences will reverse. Deferred income taxes also arise from the future benefits ofNOL carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Full valuationallowances on net deferred tax assets are maintained until an appropriate level of profitability that generates taxable income is deemed sustainable or until a taxstrategy is developed that would enable the Company to conclude that it is more likely than not that a portion of the deferred tax assets will be realizable. Based onan evaluation in accordance with the accounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. andMalaysia deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all theavailable evidence.Use of estimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at thedate of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.Other comprehensive lossComprehensive loss is defined as the change in equity of a business enterprise from transactions and other events from nonowner sources. Comprehensiveloss includes net loss and other nonowner changes in equity that bypass the statement of operations and are reported in a separate component of equity.Net income (loss) per common shareBasic net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of common shares outstanding duringthe period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of diluted common sharesoutstanding during the period. Diluted shares outstanding are calculated by adding to the weightedaverage shares (a) any outstanding stock options based on thetreasury stock method and (b) restricted stock units (“RSU”).F14Diluted net income per share was the same as basic net income per share for the year ended December 31, 2020, because the effects of potentially dilutivesecurities did not have a material impact on the calculation of diluted net income per share. The Company had outstanding options exercisable into 18,250 shares ofthe Company’s common stock that would have had an antidilutive effect at December 31, 2020.Diluted net loss per common share was the same as basic net loss per common share for the year ended December 31, 2020, because the effects of potentiallydilutive securities were antidilutive.New accounting pronouncements adoptedThe Company has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significantimpact the Company’s consolidated financial statements and related disclosures. 2. SEGMENT INFORMATIONThe Company has determined that it operates in two segments, the sapphire and pharmacy business.Revenue is attributed by geographic region based on shipto location of the Company’s customers. The following table summarizes revenue by geographicregion:Year ended December 31,20202019(in thousands)North America$4,039$3,324Asia406185Other2217Total revenue$4,467$3,526The following table summarizes sales by product type:Year ended December 31,20202019(in thousands)Optical$3,611$3,338Core69Rubicon DTP850179Total revenue$4,467$3,526The following table summarizes assets by geographic region:As ofDecember 31,20202019(in thousands)United States$31,240$29,703Malaysia—5,094Other—4Total assets$31,240$34,801 The total assets of Rubicon DTP were not material to the total assets of the Company as stated on the consolidated balance sheets, as of December 31, 2020and 2019.Rubicon DTP accounted for approximately $340,000 and $447,000 of the Company’s loss for the year ended December 31, 2020 and 2019, respectively. F153. INVESTMENTSThe Company invests available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, commonstock, equity related securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains andlosses recorded in accumulated other comprehensive income/(loss). Investments in equity securities are reported at fair value, with both realized and unrealizedgains and losses recorded as unrealized gain/(loss) on investments and realized gain on investments, in other income/(expense), in the Consolidated Statements ofOperations. Investments in which the Company has the ability and intent, if necessary, to liquidate are classified as shortterm.The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2020:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,748$—$—$14,748Marketable securities————Total shortterm investments$14,748$—$—$14,748The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2019:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,668$—$—$14,668Marketable securities961(171)790Total shortterm investments$15,629$—$(171)$15,458The Company values its investments at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in theprincipal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniquesused to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchybased on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are thefollowing:●Level 1—Quoted prices in active markets for identical assets or liabilities.●Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices inmarkets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assetsor liabilities.●Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.The Company’s fixed income availableforsale securities consist of U.S. Treasury securities, highquality investment grade commercial paper, FDIC guaranteedcertificates of deposit, common stock, equity related securities and corporate notes. The Company values these securities based on pricing from pricing vendors,who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly(Level 2 inputs) in determining fair value. The valuation techniques used to measure the fair value of the Company’s financial instruments having Level 2 inputswere derived from nonbinding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricingmodels, such as discounted cash flow techniques.F16The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2020:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,136$—$—$3,136Investments:Availableforsales securities—current:U.S. Treasury securities—14,748—14,748Total$3,136$14,748$—$17,884The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2019:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,759$—$—$3,759Investments:Availableforsales securities—current:U.S. Treasury securities—14,668—14,668790790Total$4,549$14,668$—$19,217There are no terms or conditions restricting the Company from redeeming any of its investments.In addition to the debt securities noted above, the Company had approximately $8.0 million and $4.9 million of time deposits included in cash and cashequivalents as of December 31, 2020 and 2019, respectively.4. SIGNIFICANT CUSTOMERSFor the year ended December 31, 2020, the Company had four customers that accounted for approximately 21%, 13%, 11% and 10% of its revenue. For the yearended December 31, 2019, the Company had three customers that accounted for approximately 31%, 15% and 12% of its revenue.Customers individually representing more than 10% of trade receivables accounted for approximately 44% and 77% of accounts receivable as of December 31,2020 and 2019, respectively. 5. ASSETS HELD FOR SALE AND LONGLIVED ASSETSWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, the Company performs ananalysis to review the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expectedfuture operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.F17In connection with the Company’s decision in 2016 to limit its focus to the optical and industrial sapphire markets and exit the LED market, the Companydeveloped a plan to close its Malaysia facility, scale down and consolidate remaining operations in the U.S. and sell additional assets that would not be needed. TheCompany evaluated its U.S. and Malaysia asset portfolios to identify assets needed for its current business strategy and excess assets that were no longer needed.The Company determined it had excess machinery, equipment and facilities. Excess U.S. and Malaysia assets were evaluated based on assuming an orderlyliquidation plan, which considers economic obsolescence and sales of comparable equipment, as it is the Company’s intention to sell these assets. Additionally, theCompany evaluated its U.S. assets continuing to be used in operations using a cost and market approach to determine the current fair value. In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.6. STOCKHOLDERS’ EQUITYCommon stockAt the Company’s annual meeting of stockholders held on May 3, 2017, the Company’s stockholders approved amendments to the Company’s Eighth Amendedand Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”) to (i) effect a reverse stock split of the Company’s common stock; and (ii)decrease the Company’s authorized number of shares of common stock to three times the number of shares of the Company’s common stock outstandingimmediately following the reverse stock split. On May 3, 2017, following the annual meeting, the Company filed with the Secretary of State of the State of Delaware aCertificate of Amendment to (a) implement the reverse stock split at a ratio of 1for10; and (b) to reduce the number of authorized shares of common stock from40,000,000 to 8,200,000, consequently reducing the number of total authorized shares from 45,000,000 to 13,200,000. With the completion of the reverse stock split,the Company’s shares began trading above the required $1.00 per share closing bid price, as required by the Listing Qualifications Department of NASDAQ. Theshare information has been retroactively reflected for the effects of this reverse stock split for all periods presented.Preferred stockAt the Company’s annual meeting of stockholders held on May 10, 2018, the Company’s stockholders approved an amendment to the Certificate ofIncorporation to decrease the Company’s authorized number of shares of preferred stock from 5,000,000 shares to 1,000,000 shares. The Company filed with theSecretary of State of the State of Delaware a Certificate of Amendment to decrease the authorized number of preferred shares, consequently reducing the number oftotal authorized shares from 13,200,000 to 9,200,000.Common shares reservedAs of December 31, 2020, the Company had reserved 65,103 shares of common stock for issuance upon the exercise of outstanding common stock options andvesting of RSUs. Also 301,105 shares of the Company’s common stock were reserved for future grants of stock options and RSUs (or other similar equityinstruments) under the Rubicon Technology, Inc. 2016 Stock Incentive Plan (the “2016 Plan”) as of December 31, 2020.F187. STOCKHOLDER RIGHTS AGREEMENT On December 18, 2017, the Company entered into a Section 382 Rights Agreement with American Stock Transfer & Trust Company, LLC, as Rights Agent (the“Rights Agreement”) in an effort to protect stockholder value by attempting to diminish the risk that the Company’s ability to use its net NOLs to reduce potentialfuture federal income tax obligations may become substantially limited. The Company’s ability to utilize its NOLs may be substantially limited if the Companyexperiences an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”). The Rights Agreement isintended to act as a deterrent to any person acquiring beneficial ownership of 4.9% or more of the Company’s outstanding common stock without the approval ofthe Company’s Board of Directors (the “Board”).The Board authorized the issuance of one Right for each outstanding share of common stock, par value $0.001 per share, of the Company, payable tostockholders of record date of the close of business on January 2, 2018. One Right will also be issued together with each share of the Company’s common stockissued after January 2, 2018 but before the Distribution Date (as defined below) and, in certain circumstances, after the Distribution Date. Subject to the terms,provisions and conditions of the Rights Agreement, if the Rights become exercisable, each Right would initially represent the right to purchase from the Companyone onethousandth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company (the “Series A Preferred Stock”) for apurchase price of $40.00. If issued, each onethousandth of a share of Series A Preferred Stock would give the stockholder approximately the same dividend, votingand liquidation rights as does one share of common stock. However, prior to exercise, a Right does not give its holder any rights as a stockholder of the Company,including, without limitation, any dividend, voting or liquidation rights.The Rights will not be exercisable until the earlier of (i) ten business days after a public announcement that a person has become an “Acquiring Person” byacquiring beneficial ownership of 4.9% or more of outstanding common stock (or, in the case of a person that had beneficial ownership of 4.9% or more of theoutstanding common stock as of the close of business on December 18, 2017, by obtaining beneficial ownership of any additional shares of common stockrepresenting 0.5% or more of the shares of common stock then outstanding (other than pursuant to a dividend or distribution paid or made by the Company on theoutstanding shares of the common stock or pursuant to a split or subdivision of the outstanding shares of common stock) at a time such person still beneficiallyowns 4.9% or more of the outstanding common stock), and (ii) ten business days (or such later date as may be specified by the Board prior to such time as anyperson becomes an Acquiring Person) after the commencement of a tender or exchange offer by or on behalf of a person that, if completed, would result in suchperson becoming an Acquiring Person (the “Distribution Date”).Until the Distribution Date, common stock certificates or the ownership statements issued with respect to uncertificated shares of common stock will evidencethe Rights. Any transfer of shares of common stock prior to the Distribution Date will also constitute a transfer of the associated Rights. After the Distribution Date,separate rights certificates will be issued and the Rights may be transferred other than in connection with the transfer of the underlying shares of common stockunless and until the Board has determined to effect an exchange pursuant to the Rights Agreement (as described below).In the event that a person becomes an Acquiring Person, each holder of a Right, other than Rights that are or, under certain circumstances, were beneficiallyowned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right and payment of the purchaseprice, a number of shares of the Company’s common stock (or, in certain circumstances, cash, property or other securities of the Company) having a market valueequal to two times the purchase price. However, Rights are subject to redemption and exchange at the option of the Company.In the event that, at any time following a person becoming an Acquiring Person, (i) the Company engages in a merger or other business combination transactionin which the Company is not the surviving corporation; (ii) the Company engages in a merger or other business combination transaction in which the Company isthe surviving corporation and the common stock is changed or exchanged; or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold ortransferred, each holder of a Right (except Rights which have previously been voided) shall thereafter have the right to receive, upon exercise of the Right, commonstock of the acquiring company having a value equal to two times the purchase price.F19At any time until the earlier of December 18, 2023, and ten calendar days following the first date of public announcement that a person has become an AcquiringPerson or that discloses information which reveals the existence of an Acquiring Person or such earlier date as a majority of the Board becomes aware of theexistence of an Acquiring Person, the Board may redeem the Rights in whole, but not in part, at a price of $0.001 per Right (the “Redemption Price”). The redemptionof the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon anyredemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.At any time after a person becomes an Acquiring Person, the Board may, at its option, exchange the Rights (other than Rights that have become void), in wholeor in part, at an exchange ratio of one share of common stock, or a fractional share of Series A Preferred Stock (or of a share of a similar class or series of theCompany’s preferred stock having similar rights, preferences and privileges) of equivalent value, per Right (subject to adjustment). Immediately upon an exchange ofany Rights, the right to exercise such Rights will terminate and the only right of the holders of Rights will be to receive the number of shares of common stock (orfractional share of Series A Preferred Stock or of a share of a similar class or series of the Company’s preferred stock having similar rights, preferences andprivileges) equal to the number of such Rights held by such holder multiplied by the exchange ratio.Each one onethousandth of a share of Series A Preferred Stock, if issued: (i) will be nonredeemable and junior to any other series of preferred stock theCompany may issue (unless otherwise provided in the terms of such other series), (ii) will entitle holders to preferential cumulative quarterly dividends in an amountper share of Series A Preferred Stock equal to the greater of (a) $1 or (b) 1,000 times the aggregate the dividends, if any, declared on one share of the Company’scommon stock, (iii) will entitle holders upon liquidation (voluntary or otherwise) to receive $1,000 per share of Series A Preferred Stock plus an amount equal toaccrued and unpaid dividends and distributions thereon, whether or not declared, (iv) will have the same voting power as one share of common stock, and (v) willentitle holders to a per share payment equal to the payment made on one share of the Company’s common stock, if shares of the common stock are exchanged viamerger, consolidation, or a similar transaction. Because of the nature of the Series A Preferred Stock’s dividend, liquidation and voting rights, the value of a Unit ofSeries A Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of common stock.The Rights and the Rights Agreement will expire on the earliest of (i) December 18, 2023, (ii) the time at which the Rights are redeemed pursuant to the RightsAgreement, (iii) the time at which the Rights are exchanged in full pursuant to the Rights Agreement, (iv) the date that the Board determines that the RightsAgreement is no longer necessary for the preservation of material valuable Tax Benefits, (v) the beginning of a taxable year of the Company to which the Boarddetermines that no NOL tax benefits may be carried forward, and (vi) a determination by the Board, prior to the time any Person becomes an Acquiring Person, thatthe Rights Agreement and the Rights are no longer in the best interests of the Company and its stockholders.The Board may adjust the purchase price, the number of shares of Series A Preferred Stock or other securities or assets issuable and the number of outstandingRights to prevent dilution that may occur as a result of certain events, including among others, a stock dividend, a stock split or a reclassification of the Series APreferred Stock or common stock. With certain exceptions, no adjustments to the purchase price will be required until cumulative adjustments amount to at least 1%of the purchase price.For so long as the Rights are redeemable, the Board may supplement or amend any provision of the Rights Agreement in any respect without the approval ofthe holders of the Rights. From and after the time the Rights are no longer redeemable, the Board may supplement or amend the Rights Agreement only to cure anambiguity, to alter time period provisions, to correct inconsistent provisions, or to make any additional changes to the Rights Agreement which the Company maydeem necessary or desirable, but only to the extent that those changes do not impair or adversely affect any Rights holder (other than an Acquiring Person or anyAffiliate or Associate of an Acquiring Person or certain of their transferees) and do not result in the Rights again becoming redeemable or the Rights Agreementagain becoming amendable other than in accordance with this sentence.In connection with the adoption of the Rights Agreement and authorization and declaration of the dividend of the Rights, on December 18, 2017, the Companyfiled the Certificate of Designation with the Secretary of State of the State of Delaware. The Certificate of Designation became effective on December 18, 2017.F208. STOCK INCENTIVE PLANSIn August 2007, the Company adopted the Rubicon Technology Inc. 2007 Stock Incentive Plan, which was amended and restated effective in March 2011 (the“2007 Plan”), and which allowed for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, RSUs, performanceawards and bonus shares. The maximum number of shares that could be awarded under the 2007 Plan was 440,769 shares. Options granted under the 2007 Planentitle the holder to purchase shares of the Company’s common stock at the specified option exercise price, which could not be less than the fair market value of thecommon stock on the grant date. On June 24, 2016, the 2007 Plan terminated with the adoption of the Rubicon Technology, Inc. 2016 Stock Incentive Plan, (the “2016Plan”). Any existing awards under the 2007 Plan remain outstanding in accordance with their current terms under the 2007 Plan. In June 2016, the Company’sstockholders approved adoption of the 2016 Plan effective as of March 17, 2016, which allows for the grant of incentive stock options, nonstatutory stock options,stock appreciation rights, restricted stock, RSUs, performance awards and bonus shares. The Compensation Committee of the Board administers the 2016 Plan. Thecommittee determines the type of award to be granted, the fair value, the number of shares covered by the award, and the time when the award vests and may beexercised.Pursuant to the 2016 Plan, 222,980 shares of the Company’s common stock plus any shares subject to outstanding awards under the 2007 Plan thatsubsequently expire unexercised, are forfeited without the delivery of shares or are settled in cash, will be available for issuance under the 2016 Plan. The 2016 Planwill automatically terminate on March 17, 2026, unless the Company terminates it sooner.The following table summarizes the activity of the stock incentive and equity plans:Sharesavailablefor grantNumber ofoptionsoutstandingWeightedaverageoptionexercise priceNumber ofrestrictedstock sharesissuedNumber ofRSUsoutstandingOutstanding at January 1, 2019295,06769,08312.1099,57050,176Granted(60,925)1,000——9,925Exercised/issued—(5,000)——(6,098)Canceled/forfeited42,244(42,244)11.35——Outstanding at December 31, 2019276,38622,83913.4899,57054,003Granted(20,877)———3,597Exercised/issued—(2,250)——(3,597)Canceled/forfeited40,596(489)202.56—(9,000)Outstanding at December 31, 2020296,10520,100$9.7199,57045,003There were no option grants made during 2020. At December 31, 2020, the exercise prices of outstanding options were as follows:Exercise priceNumber ofoptionsoutstandingAverageremainingcontractual life(years)Number ofoptionsexercisable$6.10 $8.3418,2505.7518,250$44.101,8503.941,85020,1004.7320,100F21The aggregate grant date fair value of the options that became vested in the years ended 2020 and 2019 was $30,000 and $77,000, respectively.The following table summarizes the activity of nonvested options:NonvestedoptionsWeightedaverage optionexercisepriceNonvested at January 1, 201921,992$6.86Granted1,0008.34Vested(10,878)7.07Cancelled(7,248)7.25Nonvested at December 31, 20194,8666.10Granted——Vested(4,866)6.10Cancelled——Nonvested at December 31, 2020—$—The Company’s aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of theCompany’s common stock. Based on the fair value of the common stock at December 31, 2020 there was $52,000 of intrinsic value arising from 18,250 stock optionsexercisable or outstanding.The Company used historical stock prices as the basis for its volatility assumptions. The assumed riskfree rates were based on U.S. Treasury rates in effect atthe time of grant with a term consistent with the expected option lives. The expected term for the year ended December 31, 2020, is based upon the Company’smedian average life of its options. The forfeiture rate is based on the past history of forfeited options. The expense is being allocated using the straightline method.For the years ended December 31, 2020 and 2019, the Company recorded $14,000 and $24,000, respectively, of stock option compensation expense. As ofDecember 31, 2020, all outstanding options awarded have been fully vested.For the year ended December 31, 2020, there were no options granted.The following table summarizes the award vesting terms for the RSUs granted in 2019:Number of RSUsTarget price925$7.95The following table summarizes the award vesting terms for the RSUs granted in 2018:Number of restricted stock unitsTarget price902$11.0015,000$12.5015,000$14.00F22The RSUs vest in the amounts set forth below on the first date the 15trading day average closing price of the Company’s common stock equals or exceeds thecorresponding target price for the common stock before May 12, 2021. At the time the negotiation of the terms of the employment agreement began, the closing priceof the common stock was $5.50. On the date of grant, the closing price of the common stock was $6.30. During the twelve months ended December 31, 2017, the firstthree tranches of the grant vested. No additional tranches vested during the years ended December 31, 2020, 2019 and 2018.The Company used Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted because the awards vest based uponachievement of market price targets. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the marketcondition stipulated in the award and calculates the fair value of each RSU. The Company used the following assumptions in determining the fair value of the RSUs:GrantedJanuary2018March2017Daily expected stock price volatility4.2806%4.4237%Daily expected mean return on equity(0.2575)%(0.2226)%Daily expected dividend yield0.0%0.0%Average daily riskfree interest rate0.0078%0.0063%The daily expected stock price volatility is based on a fouryear historical volatility of the Company’s common stock. The daily expected dividend yield is basedon annual expected dividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches iscalculated to have its own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period which is upto four years. The RSUs granted in January 2018 and March 2017 had a grant date fair value of $209,000 and $323,000, respectively. There were no grants with marketprice targets issued in the years ended December 31, 2020 and 2019. A summary of the Company’s RSUs is as follows:RSUsoutstandingWeightedaverageprice attime of grantAggregateintrinsicvalueNonvested RSUs as of January 1, 201950,176$6.31Granted9,9258.32Vested(6,098)7.40Cancelled——Nonvested RSUs as of December 31, 201954,0036.56Granted3,5978.34Vested(3,597)8.34Cancelled(9,000)8.36Nonvested RSUs at December 31, 202045,003$6.20$278,961The fair value of each RSU is the market price on the date of grant and is being recorded as compensation expense ratably over the vesting terms or theexpected achievement of market price targets based on the Monte Carlo simulation model. For the years ended December 31, 2020 and 2019, the Company recorded$38,000 and $7,000 of RSU expense, respectively. The RSUs are forfeited by a participant upon termination for any reason, and there is no proportionate or partialvesting in the periods between the vesting dates. As of December 31, 2020, there was no unrecognized compensation cost related to the nonvested RSUs.For the year ended December 31, 2020 the Company recorded no compensation related to restricted stock compared to $14,000 in the prior year. During the year ended December 31, 2020 the Company awarded approximately 17,000 shares to an officer of the Company with a fair value of $146,000.F239. INCOME TAXESOn December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed theCompany to record provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date ofenactment. The Company has completed its accounting for the tax effects of enactment of the Act. The deemed inclusion from the repatriation tax increased from$3.9 million at the time of provision to $5.0 million at the time the calculation was finalized for the tax return. The increase of the inclusion related primarily to therefinement of Malaysia earnings and profits. As the Company is in a full valuation allowance position, an equal benefit adjustment was recorded for the impact ofthe increase of the deemed repatriation tax.Components of income before income taxes and the income tax provision are as follows:Income (loss) before income taxesYear endedDecember 31,20202019(in thousands)U.S.$(3,060)$(1,142)Foreign2,01817Total$(1,050)$(1,125)Income taxesYear endedDecember 31,20202019(in thousands)CurrentU.S.$—$—State——Foreign1322Total current income tax expense1322DeferredU.S.——State——Foreign——Total deferred income tax expense (benefit)——Total income tax expense (benefit)$13$22The reconciliation of income tax computed at the federal statutory rate to income before taxes is as follows:Year endedDecember 31,20202019U.S. federal statutory rate(21.0)%(21.0)%State taxes net of federal benefit(18.2)(7.6)Foreign rate differential and transactional tax5.90.1Tax credits——Valuation allowance33.328.5Other12.01.0%2.0%F24Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amount of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred income taxes are as follows at December 31:20202019(in thousands)Deferred tax assets:Allowance for doubtful accounts$1$11Inventory reserves3,0963,185Consumables excess reserve167169Accrued liabilities8152Warrant interest expense195196Stock compensation expense789789State net operating loss14,47615,010Net operating loss carryforward41,10540,437Tax credits710740Depreciation1,0001,329Valuation allowance(61,556)(61,869)Total deferred tax assets6449Deferred tax liability:Prepaid expenses(64)(49)Net deferred tax liability$—$—In February 2018, the FASB issued ASU No. 201802 (“ASU 201802), Income StatementReporting Comprehensive Income (Topic 220): Reclassification ofCertain Tax Effects from Accumulated Comprehensive Income. The new guidance allows companies to reclassify stranded tax effects resulting from the Tax Act,from accumulated other comprehensive income to retained earnings. The guidance also requires certain new disclosures regardless of the election. Early adoption ispermitted. The Company’s adoption of ASU 201802 did not have a material impact on its consolidated financial statements.The Company adopted the guidance in ASU No. 201517, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which requires that alldeferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent in the balance sheet. As a result, each jurisdiction has onenet noncurrent deferred tax asset or liability. The new guidance does not change the existing requirement that only permits offsetting within a jurisdiction.Companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The change inaccounting principle did not have an impact on the Company’s results of operations, cash flows or stockholders’ equity. At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.The Company completed an analysis of the utilization of NOLs subject to limits based upon certain ownership changes as of December 31, 2020. The results ofthis analysis indicated no ownership change limiting the utilization of net operating losses and tax credits.F25The Company prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, orexpected to be taken, in a tax return. At December 31, 2020 and 2019, the Company had $1.1 million of unrecognized tax benefits taken or expected to be taken in a taxreturn that have been recorded on the Company’s financial statements as an offset to the valuation allowance related to tax positions taken in 2012. It is notreasonably possible that the amount will change in the next twelve months. There were no material changes to prior year or current year positions taken during theyear ended December 31, 2020.There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company files income tax returns in the United States federal jurisdiction and in a state jurisdiction. During 2009, the Company began foreign operations inMalaysia and is subject to local income taxes in that jurisdiction. The Company’s Malaysia tax returns for the periods ended December 31, 2010 through 2012 havebeen audited by the Malaysia Inland Revenue Board with no changes made to the taxable income for those years. All other tax years in Malaysia are open toexamination by tax authorities.The Company’s federal tax returns for the periods ended December 31, 2010, 2008 and 2007 have been audited by the Internal Revenue Service (IRS) with nochanges made to the Company’s taxable losses for those years. The Company’s state tax returns for the periods ended December 31, 2009 through 2012 have beenaudited by the Illinois Department of Revenue with no changes made to the Company’s taxable losses for those years. Due to the existence of NOL carryforwards,tax years ended December 31, 2001 through 2006, 2008, 2009 and 2011 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOLcarryforwards at the State level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 areopen to examination by the Malaysia Inland Revenue Board.Due to the closing of the Rubicon Malaysia operations, the Company no longer considers the undistributed earnings of Rubicon Malaysia to be indefinitelyreinvested. Upon liquidation of Rubicon Malaysia, it is anticipated any cash left after the liquidation will be brought back to the U.S. via a payment of principaltowards the intercompany loan. A withholding tax may be payable to the Malaysian government on the interest portion of the loan. At December 31, 2020 and 2019,the Company accrued the withholding tax on the interest balance of the loan in the amount of $13,000 and $22,000, respectively, which represents the incremental tax.10. COMMITMENTS AND CONTINGENCIESCOVID19 PandemicIn March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID19) as a pandemic. The full impact of the COVID19outbreak is unknown and cannot be reasonably estimated. The magnitude and duration of the COVID19 outbreak, as well as other factors, could result in a materialimpact to the Company’s financial statements in future reporting periods.Operating LeasesThe Company adopted ASU 201602 in the first quarter of the fiscal year ending December 31, 2019. The adoption of ASU 201602 did not have a material impacton the Company’s consolidated financial statements, as the Company does not have any material lease agreements Rubicon DTP leases a building for itsmanufacturing and offices, however such lease was not considered material to the Company’s financial statements.Direct Dose’s net rent expense under operating leases in 2020 and 2019 amounted to $34,200 and $25,900, respectively. As of December 31, 2020, Direct Dose’soperating lease for its facility was monthtomonth. On January 6, 2021, Direct Dose entered into a one year lease for an aggregate commitment of approximately$35,500.LitigationFrom time to time, the Company experiences routine litigation in the ordinary course of its business.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.11. BENEFIT PLANThe Company sponsors a 401(k) savings plan (the “Plan”). Employees are eligible to participate in the Plan upon reaching 18 years of age. Employees makecontributions to the Plan through payroll deferrals. Employer matching contributions are discretionary. There were no employer matching contributions for the yearsended December 31, 2020 and 2019.12. SUBSEQUENT EVENTSNone.F26EX21.1 2 f10k2020ex211_rubicon.htm SUBSIDIARIES OF THE COMPANYExhibit 21.1Rubicon Technologies, Inc.Subsidiaries of the CompanyName of subsidiaryState (or other jurisdiction of incorporation)Rubicon Technology Worldwide LLCIllinoisRubicon Technology BP LLCDelawareRubicon DTP LLCDelawareEX23.1 3 f10k2020ex231_rubicon.htm CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMExhibit 23.1INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENTWe consent to the incorporation by reference in the Registration Statements of Rubicon Technology, Inc. on Form S3 (File No. 333167272), as amended (File No.333192536) and on Forms S8 (File No. 333147552, File No. 333180211 and File No. 333213025) of our report dated March 22, 2021 with respect to our audits of theconsolidated financial statements of Rubicon Technology, Inc. and Subsidiaries as of December 31, 2020 and 2019 and for each of the two years in the period endedDecember 31, 2020, which report is included in this Annual Report on Form 10K of Rubicon Technology, Inc. and Subsidiaries for the year ended December 31, 2020./s/ Marcum LLPMarcum LLPChicago, IllinoisMarch 22, 2021EX31.1 4 f10k2020ex311_rubicon.htm CERTIFICATIONExhibit 31.1CertificationsCertification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Timothy E. Brog, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerEX31.2 5 f10k2020ex312_rubicon.htm CERTIFICATIONExhibit 31.2Certification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Kevin T. Lusardi, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerEX32.1 6 f10k2020ex321_rubicon.htm CERTIFICATIONExhibit 32.1Certification Pursuant to Section 906 of The SarbanesOxley Act of 2002,18 U.S.C. Section 1350In connection with the Annual Report of Rubicon Technology, Inc. (the “Company”) on Form 10K for the year ended December 31, 2020, as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Timothy E. Brog, President and Chief Executive Officer of the Company, and I, Kevin T.Lusardi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the SarbanesOxley Act of 2002,that, to my knowledge:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerDate: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerA signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnishedto the Securities and Exchange Commission or its staff upon request. F8Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanthe functional currency of the Company, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in thedetermination of net income (loss) for the period. The Company records these gains and losses in other income.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expenses), in the Consolidated Statements of Operations. Investments in which the Company has the ability and intent, ifnecessary, to liquidate in order to support the current operations are classified as shortterm.The Company reviews its availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on thespecific identification method. The Company considers various factors in determining whether an impairment is otherthantemporary, including the severity andduration of the impairment, changes in underlying credit ratings, forecasted recovery, its ability and intent to hold the investment for a period of time sufficient toallow for any anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When the Company concludesthat an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on theConsolidated Statements of Operations. As of December 31, 2020, and 2019, no impairment was recorded.Purchases of Equity Securities by the IssuerIn November 2018, the Company’s Board of Directors authorized a program to repurchase up to $3 million of its common stock. In July 2020, the Company usedall of the original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time. There can be no assurance as to the number of shares of common stock repurchased. The Company records treasurystock purchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock.Share repurchase activity during the year ended December 31, 2020, was as follows:PeriodsTotalnumber ofsharespurchasedAveragepricepaid pershareTotalnumber ofsharespurchasedas part ofpubliclyannouncedprogramApproximatedollar valueof sharesthat may yetbe purchasedunder theprogram(in thousands)January 1, 2020, to December 31, 2020295,946$8.10295,546$3,000Total295,946$3,000F9Accounts receivableThe majority of the Company’s accounts receivable are due from defense subcontractors, industrial manufacturers, fabricators and resellers. Credit is extendedbased on an evaluation of the customer’s financial condition. Accounts receivable are due based on contract terms and at stated amounts due from customers, netof an allowance for doubtful accounts. Losses from credit sales are provided for in the financial statements.Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number offactors, including the length of time a customer’s account is past due, the customer’s current ability to pay and the condition of the general economy and industryas a whole. The Company writes off accounts receivable when they are deemed uncollectible and such writeoffs, net of payments received, are recorded as areduction to the allowance.The following table shows the activity of the allowance for doubtful accounts:Year endedDecember 31,20202019(in thousands)Beginning balance$40$7Charges to costs and expenses(20)33Account writeoffs, less recoveries(17)—Ending balance$3$40InventoriesInventories are valued at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary course ofbusiness less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis, which includes materials, labor and overhead. The Company reduces the carrying value of itsinventories for differences between the cost and the estimated net realizable value, taking into account usage, expected demand, technological obsolescence andother relevant information.The Company establishes inventory reserves when conditions exist that suggest inventory may be in excess of anticipated demand or is obsolete based oncustomer specifications. The Company evaluates the ability to realize the value of its inventory based on a combination of factors, including forecasted sales,estimated current and future market value and changes in customers’ product specifications. The Company’s method of estimating excess and obsolete inventoryhas remained consistent for all periods presented. The Company also carries a lower of cost or market inventory reserve based on net realizable value using mostrecent sales prices to determine market value. As of December 31, 2020 and 2019, the balance of the lower of cost or market reserve was $51,000 and $72,000,respectively, representing a decrease of $21,000 resulting from sales of related reserved for inventory. In addition, in 2020 we sold inventory that was valued at thelower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $21,000. In 2019 we sold inventorythat was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $35,000.In 2019 and 2020, the Company used some of its previously written down twoinch diameter core material in production of optical and industrial sapphire wafersand did not record any additional adjustments for the years ended December 31, 2019 and December 31, 2020.The Company evaluates the amount of raw material needed for future production based on expected crystal growth production needed to meet anticipatedsales. The Company did not record any writedowns of its raw materials inventory for the years ended December 31, 2019 and December 31, 2020.F10Inventories are composed of the following:As ofDecember 31,20202019(in thousands)Raw materials$468$468Workinprocess614901Finished goods459809$1,541$2,178As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.Other inventory suppliesThe Company’s other inventory supplies include stock of consumable assets and spare parts used in the manufacturing process.Assets held for saleAn asset is considered to be held for sale when all of the following criteria are met: (i) management commits to a plan to sell the asset; (ii) it is unlikely that thedisposal plan will be significantly modified or discontinued; (iii) the asset is available for immediate sale in its present condition; (iv) actions required to complete thesale of the asset have been initiated; (v) sale of the asset is probable and the completed sale is expected to occur within one year; and (vi) the asset is actively beingmarketed for sale at a price that is reasonable given its current market value.A longlived asset classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. If the longlived asset is newlyacquired, the carrying amount of the longlived asset is established based on its fair value less cost to sell at the acquisition date. A longlived asset is notdepreciated or amortized while it is classified as held for sale.In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.F11Property and equipmentProperty and equipment consisted of the following:As ofDecember 31,20202019(in thousands)Machinery, equipment and tooling$3,343$3,341Buildings1,7111,711Information systems835835Land and land improvements594594Furniture and fixtures88Total cost6,4916,489Accumulated depreciation and amortization(4,009)(3,842)Property and equipment, net$2,482$2,647Property and equipment are carried at cost and depreciated over their estimated useful lives using the straightline method. The cost of maintenance and repairsis charged to expense as incurred. Significant renewals and improvements are capitalized. Depreciation expense associated with property and equipment was$167,000 and $169,000 for the years ended December 31, 2020 and 2019, respectively.The estimated useful lives are as follows:Asset descriptionLifeBuildings39 yearsMachinery, equipment and tooling310 yearsFurniture and fixtures7 yearsInformation systems3 yearsWarranty costThe Company’s sales terms include a warranty that its products will meet certain specifications. The Company records a current liability for the expected cost ofwarrantyrelated claims at the time of sale. The warranty reserve is included in accrued and other current liabilities on the Consolidated Balance Sheets.The following table presents changes in the Company’s product warranty liability:Year endedDecember 31,20202019(in thousands)Balance, beginning of period$4$8Charged to cost of sales1831Actual product warranty expenditures(20)(35)Balance, end of period$2$4The Company does not provide maintenance or other services and it does not have sales that involve bill & hold arrangements, multiple elements ordeliverables. However, the Company does provide product warranty for up to 90 days, for which the Company has accrued a warranty reserve of $2,000 and $4,000for the years ended December 31, 2020 and 2019, respectively.Fair value of financial instrumentsThe Company’s financial instruments consist primarily of cash and cash equivalents, shortterm investments, accounts receivable, and accounts payable. Thecarrying values of these assets and liabilities approximate their fair values due to the shortterm nature of these instruments at December 31, 2020 and 2019.F12Concentration of credit risks and other risks and uncertaintiesFinancial instruments that could potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, restrictedcash, shortterm investments and accounts receivable. At December 31, 2020 the Company had no deposits at foreign financial institutions and $1.6 million ondeposit at foreign financial institutions at December 31, 2019. As of December 31, 2020, the Company had $8 million on deposit at financial institutions in excess ofamounts insured by the FDIC. This compares to a $5.7 million as of December 31, 2019. The Company performs a periodic evaluation of these institutions for relativecredit standing. The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant risk of loss on thesebalances.The Company uses third parties for certain finishing functions for its products, including the slicing and polishing of its sapphire crystal inventory. These typesof services are only available from a limited number of third parties. The Company’s ability to successfully outsource these finishing functions will substantiallydepend on its ability to develop, maintain and expand its strategic relationship with these third parties. As a result, the Company may be unable to meet the demandfor its products, which could have a material adverse impact on the Company.Concentration of credit risk related to revenue and accounts receivable is discussed in Note 4.Revenue recognitionRevenues recognized include product sales and billings for costs and fees for government contracts.Product SalesThe Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1,2018. The Company recognizes revenue when performance obligations under a purchase order or signed quotation are satisfied. The Company’s business practicecommits the Company to manufacture and deliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement withthe customer includes specifications of the product to be delivered, price, expected ship date and payment terms. The Company’s agreements generally do notcontain variable, financing, rights of return or noncash components. There are no upfront costs to develop the production process. The performance obligation issatisfied at the point in time (single performance obligation) when the product is manufactured to the customer’s specification, as performance does not create anasset with an alternative use to the Company. Accordingly, the Company recognizes revenue when the product is shipped, and control of the product, title and riskof loss have been transferred to the customer. The Company grants credit terms considering normal collection risk. If there is doubt about collection, full prepaymentfor the order is required. Any payments received prior to shipment are recorded as deferred revenue and included in Advance Payments in the Consolidated BalanceSheets. The Company does not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of the Company’s revenue is denominated in U.S. dollars.Shipping and handling costsThe Company records costs incurred in connection with shipping and handling of products as cost of goods sold. Amounts billed to customers in connectionwith these costs are included in revenue and are not material for any of the periods presented in the accompanying financial statements.Sales taxThe Company collects and remits sales taxes on products sold to customers and reports such amounts under the net method in its Consolidated Statements ofOperations and records a liability until remitted to the respective tax authority.F13Stockbased compensationThe Company requires all sharebased payments to employees, including grants of employee stock options, to be measured at fair value and expensed in theConsolidated Statements of Operations over the service period (generally the vesting period) of the grant. Expense is recognized in the Consolidated Statements ofOperations for these sharebased payments. The Company uses Black Scholes option pricing model in order to determine the fair value of stock option grants.Accounting for uncertainty in income taxesThe Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by thetaxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured basedon the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and/or penalties related to incometax matters in income tax expense. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years endedDecember 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.Income taxesDeferred tax assets and liabilities are provided for temporary differences between financial reporting and income tax bases of assets and liabilities, and aremeasured using the enacted tax rates and laws expected to be in effect when the differences will reverse. Deferred income taxes also arise from the future benefits ofNOL carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Full valuationallowances on net deferred tax assets are maintained until an appropriate level of profitability that generates taxable income is deemed sustainable or until a taxstrategy is developed that would enable the Company to conclude that it is more likely than not that a portion of the deferred tax assets will be realizable. Based onan evaluation in accordance with the accounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. andMalaysia deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all theavailable evidence.Use of estimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at thedate of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.Other comprehensive lossComprehensive loss is defined as the change in equity of a business enterprise from transactions and other events from nonowner sources. Comprehensiveloss includes net loss and other nonowner changes in equity that bypass the statement of operations and are reported in a separate component of equity.Net income (loss) per common shareBasic net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of common shares outstanding duringthe period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of diluted common sharesoutstanding during the period. Diluted shares outstanding are calculated by adding to the weightedaverage shares (a) any outstanding stock options based on thetreasury stock method and (b) restricted stock units (“RSU”).F14Diluted net income per share was the same as basic net income per share for the year ended December 31, 2020, because the effects of potentially dilutivesecurities did not have a material impact on the calculation of diluted net income per share. The Company had outstanding options exercisable into 18,250 shares ofthe Company’s common stock that would have had an antidilutive effect at December 31, 2020.Diluted net loss per common share was the same as basic net loss per common share for the year ended December 31, 2020, because the effects of potentiallydilutive securities were antidilutive.New accounting pronouncements adoptedThe Company has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significantimpact the Company’s consolidated financial statements and related disclosures. 2. SEGMENT INFORMATIONThe Company has determined that it operates in two segments, the sapphire and pharmacy business.Revenue is attributed by geographic region based on shipto location of the Company’s customers. The following table summarizes revenue by geographicregion:Year ended December 31,20202019(in thousands)North America$4,039$3,324Asia406185Other2217Total revenue$4,467$3,526The following table summarizes sales by product type:Year ended December 31,20202019(in thousands)Optical$3,611$3,338Core69Rubicon DTP850179Total revenue$4,467$3,526The following table summarizes assets by geographic region:As ofDecember 31,20202019(in thousands)United States$31,240$29,703Malaysia—5,094Other—4Total assets$31,240$34,801 The total assets of Rubicon DTP were not material to the total assets of the Company as stated on the consolidated balance sheets, as of December 31, 2020and 2019.Rubicon DTP accounted for approximately $340,000 and $447,000 of the Company’s loss for the year ended December 31, 2020 and 2019, respectively. F153. INVESTMENTSThe Company invests available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, commonstock, equity related securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains andlosses recorded in accumulated other comprehensive income/(loss). Investments in equity securities are reported at fair value, with both realized and unrealizedgains and losses recorded as unrealized gain/(loss) on investments and realized gain on investments, in other income/(expense), in the Consolidated Statements ofOperations. Investments in which the Company has the ability and intent, if necessary, to liquidate are classified as shortterm.The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2020:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,748$—$—$14,748Marketable securities————Total shortterm investments$14,748$—$—$14,748The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2019:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,668$—$—$14,668Marketable securities961(171)790Total shortterm investments$15,629$—$(171)$15,458The Company values its investments at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in theprincipal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniquesused to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchybased on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are thefollowing:●Level 1—Quoted prices in active markets for identical assets or liabilities.●Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices inmarkets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assetsor liabilities.●Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.The Company’s fixed income availableforsale securities consist of U.S. Treasury securities, highquality investment grade commercial paper, FDIC guaranteedcertificates of deposit, common stock, equity related securities and corporate notes. The Company values these securities based on pricing from pricing vendors,who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly(Level 2 inputs) in determining fair value. The valuation techniques used to measure the fair value of the Company’s financial instruments having Level 2 inputswere derived from nonbinding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricingmodels, such as discounted cash flow techniques.F16The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2020:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,136$—$—$3,136Investments:Availableforsales securities—current:U.S. Treasury securities—14,748—14,748Total$3,136$14,748$—$17,884The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2019:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,759$—$—$3,759Investments:Availableforsales securities—current:U.S. Treasury securities—14,668—14,668790790Total$4,549$14,668$—$19,217There are no terms or conditions restricting the Company from redeeming any of its investments.In addition to the debt securities noted above, the Company had approximately $8.0 million and $4.9 million of time deposits included in cash and cashequivalents as of December 31, 2020 and 2019, respectively.4. SIGNIFICANT CUSTOMERSFor the year ended December 31, 2020, the Company had four customers that accounted for approximately 21%, 13%, 11% and 10% of its revenue. For the yearended December 31, 2019, the Company had three customers that accounted for approximately 31%, 15% and 12% of its revenue.Customers individually representing more than 10% of trade receivables accounted for approximately 44% and 77% of accounts receivable as of December 31,2020 and 2019, respectively. 5. ASSETS HELD FOR SALE AND LONGLIVED ASSETSWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, the Company performs ananalysis to review the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expectedfuture operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.F17In connection with the Company’s decision in 2016 to limit its focus to the optical and industrial sapphire markets and exit the LED market, the Companydeveloped a plan to close its Malaysia facility, scale down and consolidate remaining operations in the U.S. and sell additional assets that would not be needed. TheCompany evaluated its U.S. and Malaysia asset portfolios to identify assets needed for its current business strategy and excess assets that were no longer needed.The Company determined it had excess machinery, equipment and facilities. Excess U.S. and Malaysia assets were evaluated based on assuming an orderlyliquidation plan, which considers economic obsolescence and sales of comparable equipment, as it is the Company’s intention to sell these assets. Additionally, theCompany evaluated its U.S. assets continuing to be used in operations using a cost and market approach to determine the current fair value. In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.6. STOCKHOLDERS’ EQUITYCommon stockAt the Company’s annual meeting of stockholders held on May 3, 2017, the Company’s stockholders approved amendments to the Company’s Eighth Amendedand Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”) to (i) effect a reverse stock split of the Company’s common stock; and (ii)decrease the Company’s authorized number of shares of common stock to three times the number of shares of the Company’s common stock outstandingimmediately following the reverse stock split. On May 3, 2017, following the annual meeting, the Company filed with the Secretary of State of the State of Delaware aCertificate of Amendment to (a) implement the reverse stock split at a ratio of 1for10; and (b) to reduce the number of authorized shares of common stock from40,000,000 to 8,200,000, consequently reducing the number of total authorized shares from 45,000,000 to 13,200,000. With the completion of the reverse stock split,the Company’s shares began trading above the required $1.00 per share closing bid price, as required by the Listing Qualifications Department of NASDAQ. Theshare information has been retroactively reflected for the effects of this reverse stock split for all periods presented.Preferred stockAt the Company’s annual meeting of stockholders held on May 10, 2018, the Company’s stockholders approved an amendment to the Certificate ofIncorporation to decrease the Company’s authorized number of shares of preferred stock from 5,000,000 shares to 1,000,000 shares. The Company filed with theSecretary of State of the State of Delaware a Certificate of Amendment to decrease the authorized number of preferred shares, consequently reducing the number oftotal authorized shares from 13,200,000 to 9,200,000.Common shares reservedAs of December 31, 2020, the Company had reserved 65,103 shares of common stock for issuance upon the exercise of outstanding common stock options andvesting of RSUs. Also 301,105 shares of the Company’s common stock were reserved for future grants of stock options and RSUs (or other similar equityinstruments) under the Rubicon Technology, Inc. 2016 Stock Incentive Plan (the “2016 Plan”) as of December 31, 2020.F187. STOCKHOLDER RIGHTS AGREEMENT On December 18, 2017, the Company entered into a Section 382 Rights Agreement with American Stock Transfer & Trust Company, LLC, as Rights Agent (the“Rights Agreement”) in an effort to protect stockholder value by attempting to diminish the risk that the Company’s ability to use its net NOLs to reduce potentialfuture federal income tax obligations may become substantially limited. The Company’s ability to utilize its NOLs may be substantially limited if the Companyexperiences an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”). The Rights Agreement isintended to act as a deterrent to any person acquiring beneficial ownership of 4.9% or more of the Company’s outstanding common stock without the approval ofthe Company’s Board of Directors (the “Board”).The Board authorized the issuance of one Right for each outstanding share of common stock, par value $0.001 per share, of the Company, payable tostockholders of record date of the close of business on January 2, 2018. One Right will also be issued together with each share of the Company’s common stockissued after January 2, 2018 but before the Distribution Date (as defined below) and, in certain circumstances, after the Distribution Date. Subject to the terms,provisions and conditions of the Rights Agreement, if the Rights become exercisable, each Right would initially represent the right to purchase from the Companyone onethousandth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company (the “Series A Preferred Stock”) for apurchase price of $40.00. If issued, each onethousandth of a share of Series A Preferred Stock would give the stockholder approximately the same dividend, votingand liquidation rights as does one share of common stock. However, prior to exercise, a Right does not give its holder any rights as a stockholder of the Company,including, without limitation, any dividend, voting or liquidation rights.The Rights will not be exercisable until the earlier of (i) ten business days after a public announcement that a person has become an “Acquiring Person” byacquiring beneficial ownership of 4.9% or more of outstanding common stock (or, in the case of a person that had beneficial ownership of 4.9% or more of theoutstanding common stock as of the close of business on December 18, 2017, by obtaining beneficial ownership of any additional shares of common stockrepresenting 0.5% or more of the shares of common stock then outstanding (other than pursuant to a dividend or distribution paid or made by the Company on theoutstanding shares of the common stock or pursuant to a split or subdivision of the outstanding shares of common stock) at a time such person still beneficiallyowns 4.9% or more of the outstanding common stock), and (ii) ten business days (or such later date as may be specified by the Board prior to such time as anyperson becomes an Acquiring Person) after the commencement of a tender or exchange offer by or on behalf of a person that, if completed, would result in suchperson becoming an Acquiring Person (the “Distribution Date”).Until the Distribution Date, common stock certificates or the ownership statements issued with respect to uncertificated shares of common stock will evidencethe Rights. Any transfer of shares of common stock prior to the Distribution Date will also constitute a transfer of the associated Rights. After the Distribution Date,separate rights certificates will be issued and the Rights may be transferred other than in connection with the transfer of the underlying shares of common stockunless and until the Board has determined to effect an exchange pursuant to the Rights Agreement (as described below).In the event that a person becomes an Acquiring Person, each holder of a Right, other than Rights that are or, under certain circumstances, were beneficiallyowned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right and payment of the purchaseprice, a number of shares of the Company’s common stock (or, in certain circumstances, cash, property or other securities of the Company) having a market valueequal to two times the purchase price. However, Rights are subject to redemption and exchange at the option of the Company.In the event that, at any time following a person becoming an Acquiring Person, (i) the Company engages in a merger or other business combination transactionin which the Company is not the surviving corporation; (ii) the Company engages in a merger or other business combination transaction in which the Company isthe surviving corporation and the common stock is changed or exchanged; or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold ortransferred, each holder of a Right (except Rights which have previously been voided) shall thereafter have the right to receive, upon exercise of the Right, commonstock of the acquiring company having a value equal to two times the purchase price.F19At any time until the earlier of December 18, 2023, and ten calendar days following the first date of public announcement that a person has become an AcquiringPerson or that discloses information which reveals the existence of an Acquiring Person or such earlier date as a majority of the Board becomes aware of theexistence of an Acquiring Person, the Board may redeem the Rights in whole, but not in part, at a price of $0.001 per Right (the “Redemption Price”). The redemptionof the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon anyredemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.At any time after a person becomes an Acquiring Person, the Board may, at its option, exchange the Rights (other than Rights that have become void), in wholeor in part, at an exchange ratio of one share of common stock, or a fractional share of Series A Preferred Stock (or of a share of a similar class or series of theCompany’s preferred stock having similar rights, preferences and privileges) of equivalent value, per Right (subject to adjustment). Immediately upon an exchange ofany Rights, the right to exercise such Rights will terminate and the only right of the holders of Rights will be to receive the number of shares of common stock (orfractional share of Series A Preferred Stock or of a share of a similar class or series of the Company’s preferred stock having similar rights, preferences andprivileges) equal to the number of such Rights held by such holder multiplied by the exchange ratio.Each one onethousandth of a share of Series A Preferred Stock, if issued: (i) will be nonredeemable and junior to any other series of preferred stock theCompany may issue (unless otherwise provided in the terms of such other series), (ii) will entitle holders to preferential cumulative quarterly dividends in an amountper share of Series A Preferred Stock equal to the greater of (a) $1 or (b) 1,000 times the aggregate the dividends, if any, declared on one share of the Company’scommon stock, (iii) will entitle holders upon liquidation (voluntary or otherwise) to receive $1,000 per share of Series A Preferred Stock plus an amount equal toaccrued and unpaid dividends and distributions thereon, whether or not declared, (iv) will have the same voting power as one share of common stock, and (v) willentitle holders to a per share payment equal to the payment made on one share of the Company’s common stock, if shares of the common stock are exchanged viamerger, consolidation, or a similar transaction. Because of the nature of the Series A Preferred Stock’s dividend, liquidation and voting rights, the value of a Unit ofSeries A Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of common stock.The Rights and the Rights Agreement will expire on the earliest of (i) December 18, 2023, (ii) the time at which the Rights are redeemed pursuant to the RightsAgreement, (iii) the time at which the Rights are exchanged in full pursuant to the Rights Agreement, (iv) the date that the Board determines that the RightsAgreement is no longer necessary for the preservation of material valuable Tax Benefits, (v) the beginning of a taxable year of the Company to which the Boarddetermines that no NOL tax benefits may be carried forward, and (vi) a determination by the Board, prior to the time any Person becomes an Acquiring Person, thatthe Rights Agreement and the Rights are no longer in the best interests of the Company and its stockholders.The Board may adjust the purchase price, the number of shares of Series A Preferred Stock or other securities or assets issuable and the number of outstandingRights to prevent dilution that may occur as a result of certain events, including among others, a stock dividend, a stock split or a reclassification of the Series APreferred Stock or common stock. With certain exceptions, no adjustments to the purchase price will be required until cumulative adjustments amount to at least 1%of the purchase price.For so long as the Rights are redeemable, the Board may supplement or amend any provision of the Rights Agreement in any respect without the approval ofthe holders of the Rights. From and after the time the Rights are no longer redeemable, the Board may supplement or amend the Rights Agreement only to cure anambiguity, to alter time period provisions, to correct inconsistent provisions, or to make any additional changes to the Rights Agreement which the Company maydeem necessary or desirable, but only to the extent that those changes do not impair or adversely affect any Rights holder (other than an Acquiring Person or anyAffiliate or Associate of an Acquiring Person or certain of their transferees) and do not result in the Rights again becoming redeemable or the Rights Agreementagain becoming amendable other than in accordance with this sentence.In connection with the adoption of the Rights Agreement and authorization and declaration of the dividend of the Rights, on December 18, 2017, the Companyfiled the Certificate of Designation with the Secretary of State of the State of Delaware. The Certificate of Designation became effective on December 18, 2017.F208. STOCK INCENTIVE PLANSIn August 2007, the Company adopted the Rubicon Technology Inc. 2007 Stock Incentive Plan, which was amended and restated effective in March 2011 (the“2007 Plan”), and which allowed for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, RSUs, performanceawards and bonus shares. The maximum number of shares that could be awarded under the 2007 Plan was 440,769 shares. Options granted under the 2007 Planentitle the holder to purchase shares of the Company’s common stock at the specified option exercise price, which could not be less than the fair market value of thecommon stock on the grant date. On June 24, 2016, the 2007 Plan terminated with the adoption of the Rubicon Technology, Inc. 2016 Stock Incentive Plan, (the “2016Plan”). Any existing awards under the 2007 Plan remain outstanding in accordance with their current terms under the 2007 Plan. In June 2016, the Company’sstockholders approved adoption of the 2016 Plan effective as of March 17, 2016, which allows for the grant of incentive stock options, nonstatutory stock options,stock appreciation rights, restricted stock, RSUs, performance awards and bonus shares. The Compensation Committee of the Board administers the 2016 Plan. Thecommittee determines the type of award to be granted, the fair value, the number of shares covered by the award, and the time when the award vests and may beexercised.Pursuant to the 2016 Plan, 222,980 shares of the Company’s common stock plus any shares subject to outstanding awards under the 2007 Plan thatsubsequently expire unexercised, are forfeited without the delivery of shares or are settled in cash, will be available for issuance under the 2016 Plan. The 2016 Planwill automatically terminate on March 17, 2026, unless the Company terminates it sooner.The following table summarizes the activity of the stock incentive and equity plans:Sharesavailablefor grantNumber ofoptionsoutstandingWeightedaverageoptionexercise priceNumber ofrestrictedstock sharesissuedNumber ofRSUsoutstandingOutstanding at January 1, 2019295,06769,08312.1099,57050,176Granted(60,925)1,000——9,925Exercised/issued—(5,000)——(6,098)Canceled/forfeited42,244(42,244)11.35——Outstanding at December 31, 2019276,38622,83913.4899,57054,003Granted(20,877)———3,597Exercised/issued—(2,250)——(3,597)Canceled/forfeited40,596(489)202.56—(9,000)Outstanding at December 31, 2020296,10520,100$9.7199,57045,003There were no option grants made during 2020. At December 31, 2020, the exercise prices of outstanding options were as follows:Exercise priceNumber ofoptionsoutstandingAverageremainingcontractual life(years)Number ofoptionsexercisable$6.10 $8.3418,2505.7518,250$44.101,8503.941,85020,1004.7320,100F21The aggregate grant date fair value of the options that became vested in the years ended 2020 and 2019 was $30,000 and $77,000, respectively.The following table summarizes the activity of nonvested options:NonvestedoptionsWeightedaverage optionexercisepriceNonvested at January 1, 201921,992$6.86Granted1,0008.34Vested(10,878)7.07Cancelled(7,248)7.25Nonvested at December 31, 20194,8666.10Granted——Vested(4,866)6.10Cancelled——Nonvested at December 31, 2020—$—The Company’s aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of theCompany’s common stock. Based on the fair value of the common stock at December 31, 2020 there was $52,000 of intrinsic value arising from 18,250 stock optionsexercisable or outstanding.The Company used historical stock prices as the basis for its volatility assumptions. The assumed riskfree rates were based on U.S. Treasury rates in effect atthe time of grant with a term consistent with the expected option lives. The expected term for the year ended December 31, 2020, is based upon the Company’smedian average life of its options. The forfeiture rate is based on the past history of forfeited options. The expense is being allocated using the straightline method.For the years ended December 31, 2020 and 2019, the Company recorded $14,000 and $24,000, respectively, of stock option compensation expense. As ofDecember 31, 2020, all outstanding options awarded have been fully vested.For the year ended December 31, 2020, there were no options granted.The following table summarizes the award vesting terms for the RSUs granted in 2019:Number of RSUsTarget price925$7.95The following table summarizes the award vesting terms for the RSUs granted in 2018:Number of restricted stock unitsTarget price902$11.0015,000$12.5015,000$14.00F22The RSUs vest in the amounts set forth below on the first date the 15trading day average closing price of the Company’s common stock equals or exceeds thecorresponding target price for the common stock before May 12, 2021. At the time the negotiation of the terms of the employment agreement began, the closing priceof the common stock was $5.50. On the date of grant, the closing price of the common stock was $6.30. During the twelve months ended December 31, 2017, the firstthree tranches of the grant vested. No additional tranches vested during the years ended December 31, 2020, 2019 and 2018.The Company used Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted because the awards vest based uponachievement of market price targets. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the marketcondition stipulated in the award and calculates the fair value of each RSU. The Company used the following assumptions in determining the fair value of the RSUs:GrantedJanuary2018March2017Daily expected stock price volatility4.2806%4.4237%Daily expected mean return on equity(0.2575)%(0.2226)%Daily expected dividend yield0.0%0.0%Average daily riskfree interest rate0.0078%0.0063%The daily expected stock price volatility is based on a fouryear historical volatility of the Company’s common stock. The daily expected dividend yield is basedon annual expected dividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches iscalculated to have its own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period which is upto four years. The RSUs granted in January 2018 and March 2017 had a grant date fair value of $209,000 and $323,000, respectively. There were no grants with marketprice targets issued in the years ended December 31, 2020 and 2019. A summary of the Company’s RSUs is as follows:RSUsoutstandingWeightedaverageprice attime of grantAggregateintrinsicvalueNonvested RSUs as of January 1, 201950,176$6.31Granted9,9258.32Vested(6,098)7.40Cancelled——Nonvested RSUs as of December 31, 201954,0036.56Granted3,5978.34Vested(3,597)8.34Cancelled(9,000)8.36Nonvested RSUs at December 31, 202045,003$6.20$278,961The fair value of each RSU is the market price on the date of grant and is being recorded as compensation expense ratably over the vesting terms or theexpected achievement of market price targets based on the Monte Carlo simulation model. For the years ended December 31, 2020 and 2019, the Company recorded$38,000 and $7,000 of RSU expense, respectively. The RSUs are forfeited by a participant upon termination for any reason, and there is no proportionate or partialvesting in the periods between the vesting dates. As of December 31, 2020, there was no unrecognized compensation cost related to the nonvested RSUs.For the year ended December 31, 2020 the Company recorded no compensation related to restricted stock compared to $14,000 in the prior year. During the year ended December 31, 2020 the Company awarded approximately 17,000 shares to an officer of the Company with a fair value of $146,000.F239. INCOME TAXESOn December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed theCompany to record provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date ofenactment. The Company has completed its accounting for the tax effects of enactment of the Act. The deemed inclusion from the repatriation tax increased from$3.9 million at the time of provision to $5.0 million at the time the calculation was finalized for the tax return. The increase of the inclusion related primarily to therefinement of Malaysia earnings and profits. As the Company is in a full valuation allowance position, an equal benefit adjustment was recorded for the impact ofthe increase of the deemed repatriation tax.Components of income before income taxes and the income tax provision are as follows:Income (loss) before income taxesYear endedDecember 31,20202019(in thousands)U.S.$(3,060)$(1,142)Foreign2,01817Total$(1,050)$(1,125)Income taxesYear endedDecember 31,20202019(in thousands)CurrentU.S.$—$—State——Foreign1322Total current income tax expense1322DeferredU.S.——State——Foreign——Total deferred income tax expense (benefit)——Total income tax expense (benefit)$13$22The reconciliation of income tax computed at the federal statutory rate to income before taxes is as follows:Year endedDecember 31,20202019U.S. federal statutory rate(21.0)%(21.0)%State taxes net of federal benefit(18.2)(7.6)Foreign rate differential and transactional tax5.90.1Tax credits——Valuation allowance33.328.5Other12.01.0%2.0%F24Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amount of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred income taxes are as follows at December 31:20202019(in thousands)Deferred tax assets:Allowance for doubtful accounts$1$11Inventory reserves3,0963,185Consumables excess reserve167169Accrued liabilities8152Warrant interest expense195196Stock compensation expense789789State net operating loss14,47615,010Net operating loss carryforward41,10540,437Tax credits710740Depreciation1,0001,329Valuation allowance(61,556)(61,869)Total deferred tax assets6449Deferred tax liability:Prepaid expenses(64)(49)Net deferred tax liability$—$—In February 2018, the FASB issued ASU No. 201802 (“ASU 201802), Income StatementReporting Comprehensive Income (Topic 220): Reclassification ofCertain Tax Effects from Accumulated Comprehensive Income. The new guidance allows companies to reclassify stranded tax effects resulting from the Tax Act,from accumulated other comprehensive income to retained earnings. The guidance also requires certain new disclosures regardless of the election. Early adoption ispermitted. The Company’s adoption of ASU 201802 did not have a material impact on its consolidated financial statements.The Company adopted the guidance in ASU No. 201517, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which requires that alldeferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent in the balance sheet. As a result, each jurisdiction has onenet noncurrent deferred tax asset or liability. The new guidance does not change the existing requirement that only permits offsetting within a jurisdiction.Companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The change inaccounting principle did not have an impact on the Company’s results of operations, cash flows or stockholders’ equity. At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.The Company completed an analysis of the utilization of NOLs subject to limits based upon certain ownership changes as of December 31, 2020. The results ofthis analysis indicated no ownership change limiting the utilization of net operating losses and tax credits.F25The Company prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, orexpected to be taken, in a tax return. At December 31, 2020 and 2019, the Company had $1.1 million of unrecognized tax benefits taken or expected to be taken in a taxreturn that have been recorded on the Company’s financial statements as an offset to the valuation allowance related to tax positions taken in 2012. It is notreasonably possible that the amount will change in the next twelve months. There were no material changes to prior year or current year positions taken during theyear ended December 31, 2020.There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company files income tax returns in the United States federal jurisdiction and in a state jurisdiction. During 2009, the Company began foreign operations inMalaysia and is subject to local income taxes in that jurisdiction. The Company’s Malaysia tax returns for the periods ended December 31, 2010 through 2012 havebeen audited by the Malaysia Inland Revenue Board with no changes made to the taxable income for those years. All other tax years in Malaysia are open toexamination by tax authorities.The Company’s federal tax returns for the periods ended December 31, 2010, 2008 and 2007 have been audited by the Internal Revenue Service (IRS) with nochanges made to the Company’s taxable losses for those years. The Company’s state tax returns for the periods ended December 31, 2009 through 2012 have beenaudited by the Illinois Department of Revenue with no changes made to the Company’s taxable losses for those years. Due to the existence of NOL carryforwards,tax years ended December 31, 2001 through 2006, 2008, 2009 and 2011 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOLcarryforwards at the State level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 areopen to examination by the Malaysia Inland Revenue Board.Due to the closing of the Rubicon Malaysia operations, the Company no longer considers the undistributed earnings of Rubicon Malaysia to be indefinitelyreinvested. Upon liquidation of Rubicon Malaysia, it is anticipated any cash left after the liquidation will be brought back to the U.S. via a payment of principaltowards the intercompany loan. A withholding tax may be payable to the Malaysian government on the interest portion of the loan. At December 31, 2020 and 2019,the Company accrued the withholding tax on the interest balance of the loan in the amount of $13,000 and $22,000, respectively, which represents the incremental tax.10. COMMITMENTS AND CONTINGENCIESCOVID19 PandemicIn March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID19) as a pandemic. The full impact of the COVID19outbreak is unknown and cannot be reasonably estimated. The magnitude and duration of the COVID19 outbreak, as well as other factors, could result in a materialimpact to the Company’s financial statements in future reporting periods.Operating LeasesThe Company adopted ASU 201602 in the first quarter of the fiscal year ending December 31, 2019. The adoption of ASU 201602 did not have a material impacton the Company’s consolidated financial statements, as the Company does not have any material lease agreements Rubicon DTP leases a building for itsmanufacturing and offices, however such lease was not considered material to the Company’s financial statements.Direct Dose’s net rent expense under operating leases in 2020 and 2019 amounted to $34,200 and $25,900, respectively. As of December 31, 2020, Direct Dose’soperating lease for its facility was monthtomonth. On January 6, 2021, Direct Dose entered into a one year lease for an aggregate commitment of approximately$35,500.LitigationFrom time to time, the Company experiences routine litigation in the ordinary course of its business.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.11. BENEFIT PLANThe Company sponsors a 401(k) savings plan (the “Plan”). Employees are eligible to participate in the Plan upon reaching 18 years of age. Employees makecontributions to the Plan through payroll deferrals. Employer matching contributions are discretionary. There were no employer matching contributions for the yearsended December 31, 2020 and 2019.12. SUBSEQUENT EVENTSNone.F26EX21.1 2 f10k2020ex211_rubicon.htm SUBSIDIARIES OF THE COMPANYExhibit 21.1Rubicon Technologies, Inc.Subsidiaries of the CompanyName of subsidiaryState (or other jurisdiction of incorporation)Rubicon Technology Worldwide LLCIllinoisRubicon Technology BP LLCDelawareRubicon DTP LLCDelawareEX23.1 3 f10k2020ex231_rubicon.htm CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMExhibit 23.1INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENTWe consent to the incorporation by reference in the Registration Statements of Rubicon Technology, Inc. on Form S3 (File No. 333167272), as amended (File No.333192536) and on Forms S8 (File No. 333147552, File No. 333180211 and File No. 333213025) of our report dated March 22, 2021 with respect to our audits of theconsolidated financial statements of Rubicon Technology, Inc. and Subsidiaries as of December 31, 2020 and 2019 and for each of the two years in the period endedDecember 31, 2020, which report is included in this Annual Report on Form 10K of Rubicon Technology, Inc. and Subsidiaries for the year ended December 31, 2020./s/ Marcum LLPMarcum LLPChicago, IllinoisMarch 22, 2021EX31.1 4 f10k2020ex311_rubicon.htm CERTIFICATIONExhibit 31.1CertificationsCertification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Timothy E. Brog, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerEX31.2 5 f10k2020ex312_rubicon.htm CERTIFICATIONExhibit 31.2Certification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Kevin T. Lusardi, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerEX32.1 6 f10k2020ex321_rubicon.htm CERTIFICATIONExhibit 32.1Certification Pursuant to Section 906 of The SarbanesOxley Act of 2002,18 U.S.C. Section 1350In connection with the Annual Report of Rubicon Technology, Inc. (the “Company”) on Form 10K for the year ended December 31, 2020, as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Timothy E. Brog, President and Chief Executive Officer of the Company, and I, Kevin T.Lusardi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the SarbanesOxley Act of 2002,that, to my knowledge:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerDate: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerA signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnishedto the Securities and Exchange Commission or its staff upon request. F8Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanthe functional currency of the Company, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in thedetermination of net income (loss) for the period. The Company records these gains and losses in other income.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expenses), in the Consolidated Statements of Operations. Investments in which the Company has the ability and intent, ifnecessary, to liquidate in order to support the current operations are classified as shortterm.The Company reviews its availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on thespecific identification method. The Company considers various factors in determining whether an impairment is otherthantemporary, including the severity andduration of the impairment, changes in underlying credit ratings, forecasted recovery, its ability and intent to hold the investment for a period of time sufficient toallow for any anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When the Company concludesthat an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on theConsolidated Statements of Operations. As of December 31, 2020, and 2019, no impairment was recorded.Purchases of Equity Securities by the IssuerIn November 2018, the Company’s Board of Directors authorized a program to repurchase up to $3 million of its common stock. In July 2020, the Company usedall of the original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time. There can be no assurance as to the number of shares of common stock repurchased. The Company records treasurystock purchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock.Share repurchase activity during the year ended December 31, 2020, was as follows:PeriodsTotalnumber ofsharespurchasedAveragepricepaid pershareTotalnumber ofsharespurchasedas part ofpubliclyannouncedprogramApproximatedollar valueof sharesthat may yetbe purchasedunder theprogram(in thousands)January 1, 2020, to December 31, 2020295,946$8.10295,546$3,000Total295,946$3,000F9Accounts receivableThe majority of the Company’s accounts receivable are due from defense subcontractors, industrial manufacturers, fabricators and resellers. Credit is extendedbased on an evaluation of the customer’s financial condition. Accounts receivable are due based on contract terms and at stated amounts due from customers, netof an allowance for doubtful accounts. Losses from credit sales are provided for in the financial statements.Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number offactors, including the length of time a customer’s account is past due, the customer’s current ability to pay and the condition of the general economy and industryas a whole. The Company writes off accounts receivable when they are deemed uncollectible and such writeoffs, net of payments received, are recorded as areduction to the allowance.The following table shows the activity of the allowance for doubtful accounts:Year endedDecember 31,20202019(in thousands)Beginning balance$40$7Charges to costs and expenses(20)33Account writeoffs, less recoveries(17)—Ending balance$3$40InventoriesInventories are valued at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary course ofbusiness less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis, which includes materials, labor and overhead. The Company reduces the carrying value of itsinventories for differences between the cost and the estimated net realizable value, taking into account usage, expected demand, technological obsolescence andother relevant information.The Company establishes inventory reserves when conditions exist that suggest inventory may be in excess of anticipated demand or is obsolete based oncustomer specifications. The Company evaluates the ability to realize the value of its inventory based on a combination of factors, including forecasted sales,estimated current and future market value and changes in customers’ product specifications. The Company’s method of estimating excess and obsolete inventoryhas remained consistent for all periods presented. The Company also carries a lower of cost or market inventory reserve based on net realizable value using mostrecent sales prices to determine market value. As of December 31, 2020 and 2019, the balance of the lower of cost or market reserve was $51,000 and $72,000,respectively, representing a decrease of $21,000 resulting from sales of related reserved for inventory. In addition, in 2020 we sold inventory that was valued at thelower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $21,000. In 2019 we sold inventorythat was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $35,000.In 2019 and 2020, the Company used some of its previously written down twoinch diameter core material in production of optical and industrial sapphire wafersand did not record any additional adjustments for the years ended December 31, 2019 and December 31, 2020.The Company evaluates the amount of raw material needed for future production based on expected crystal growth production needed to meet anticipatedsales. The Company did not record any writedowns of its raw materials inventory for the years ended December 31, 2019 and December 31, 2020.F10Inventories are composed of the following:As ofDecember 31,20202019(in thousands)Raw materials$468$468Workinprocess614901Finished goods459809$1,541$2,178As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.Other inventory suppliesThe Company’s other inventory supplies include stock of consumable assets and spare parts used in the manufacturing process.Assets held for saleAn asset is considered to be held for sale when all of the following criteria are met: (i) management commits to a plan to sell the asset; (ii) it is unlikely that thedisposal plan will be significantly modified or discontinued; (iii) the asset is available for immediate sale in its present condition; (iv) actions required to complete thesale of the asset have been initiated; (v) sale of the asset is probable and the completed sale is expected to occur within one year; and (vi) the asset is actively beingmarketed for sale at a price that is reasonable given its current market value.A longlived asset classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. If the longlived asset is newlyacquired, the carrying amount of the longlived asset is established based on its fair value less cost to sell at the acquisition date. A longlived asset is notdepreciated or amortized while it is classified as held for sale.In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.F11Property and equipmentProperty and equipment consisted of the following:As ofDecember 31,20202019(in thousands)Machinery, equipment and tooling$3,343$3,341Buildings1,7111,711Information systems835835Land and land improvements594594Furniture and fixtures88Total cost6,4916,489Accumulated depreciation and amortization(4,009)(3,842)Property and equipment, net$2,482$2,647Property and equipment are carried at cost and depreciated over their estimated useful lives using the straightline method. The cost of maintenance and repairsis charged to expense as incurred. Significant renewals and improvements are capitalized. Depreciation expense associated with property and equipment was$167,000 and $169,000 for the years ended December 31, 2020 and 2019, respectively.The estimated useful lives are as follows:Asset descriptionLifeBuildings39 yearsMachinery, equipment and tooling310 yearsFurniture and fixtures7 yearsInformation systems3 yearsWarranty costThe Company’s sales terms include a warranty that its products will meet certain specifications. The Company records a current liability for the expected cost ofwarrantyrelated claims at the time of sale. The warranty reserve is included in accrued and other current liabilities on the Consolidated Balance Sheets.The following table presents changes in the Company’s product warranty liability:Year endedDecember 31,20202019(in thousands)Balance, beginning of period$4$8Charged to cost of sales1831Actual product warranty expenditures(20)(35)Balance, end of period$2$4The Company does not provide maintenance or other services and it does not have sales that involve bill & hold arrangements, multiple elements ordeliverables. However, the Company does provide product warranty for up to 90 days, for which the Company has accrued a warranty reserve of $2,000 and $4,000for the years ended December 31, 2020 and 2019, respectively.Fair value of financial instrumentsThe Company’s financial instruments consist primarily of cash and cash equivalents, shortterm investments, accounts receivable, and accounts payable. Thecarrying values of these assets and liabilities approximate their fair values due to the shortterm nature of these instruments at December 31, 2020 and 2019.F12Concentration of credit risks and other risks and uncertaintiesFinancial instruments that could potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, restrictedcash, shortterm investments and accounts receivable. At December 31, 2020 the Company had no deposits at foreign financial institutions and $1.6 million ondeposit at foreign financial institutions at December 31, 2019. As of December 31, 2020, the Company had $8 million on deposit at financial institutions in excess ofamounts insured by the FDIC. This compares to a $5.7 million as of December 31, 2019. The Company performs a periodic evaluation of these institutions for relativecredit standing. The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant risk of loss on thesebalances.The Company uses third parties for certain finishing functions for its products, including the slicing and polishing of its sapphire crystal inventory. These typesof services are only available from a limited number of third parties. The Company’s ability to successfully outsource these finishing functions will substantiallydepend on its ability to develop, maintain and expand its strategic relationship with these third parties. As a result, the Company may be unable to meet the demandfor its products, which could have a material adverse impact on the Company.Concentration of credit risk related to revenue and accounts receivable is discussed in Note 4.Revenue recognitionRevenues recognized include product sales and billings for costs and fees for government contracts.Product SalesThe Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1,2018. The Company recognizes revenue when performance obligations under a purchase order or signed quotation are satisfied. The Company’s business practicecommits the Company to manufacture and deliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement withthe customer includes specifications of the product to be delivered, price, expected ship date and payment terms. The Company’s agreements generally do notcontain variable, financing, rights of return or noncash components. There are no upfront costs to develop the production process. The performance obligation issatisfied at the point in time (single performance obligation) when the product is manufactured to the customer’s specification, as performance does not create anasset with an alternative use to the Company. Accordingly, the Company recognizes revenue when the product is shipped, and control of the product, title and riskof loss have been transferred to the customer. The Company grants credit terms considering normal collection risk. If there is doubt about collection, full prepaymentfor the order is required. Any payments received prior to shipment are recorded as deferred revenue and included in Advance Payments in the Consolidated BalanceSheets. The Company does not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of the Company’s revenue is denominated in U.S. dollars.Shipping and handling costsThe Company records costs incurred in connection with shipping and handling of products as cost of goods sold. Amounts billed to customers in connectionwith these costs are included in revenue and are not material for any of the periods presented in the accompanying financial statements.Sales taxThe Company collects and remits sales taxes on products sold to customers and reports such amounts under the net method in its Consolidated Statements ofOperations and records a liability until remitted to the respective tax authority.F13Stockbased compensationThe Company requires all sharebased payments to employees, including grants of employee stock options, to be measured at fair value and expensed in theConsolidated Statements of Operations over the service period (generally the vesting period) of the grant. Expense is recognized in the Consolidated Statements ofOperations for these sharebased payments. The Company uses Black Scholes option pricing model in order to determine the fair value of stock option grants.Accounting for uncertainty in income taxesThe Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by thetaxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured basedon the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and/or penalties related to incometax matters in income tax expense. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years endedDecember 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.Income taxesDeferred tax assets and liabilities are provided for temporary differences between financial reporting and income tax bases of assets and liabilities, and aremeasured using the enacted tax rates and laws expected to be in effect when the differences will reverse. Deferred income taxes also arise from the future benefits ofNOL carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Full valuationallowances on net deferred tax assets are maintained until an appropriate level of profitability that generates taxable income is deemed sustainable or until a taxstrategy is developed that would enable the Company to conclude that it is more likely than not that a portion of the deferred tax assets will be realizable. Based onan evaluation in accordance with the accounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. andMalaysia deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all theavailable evidence.Use of estimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at thedate of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.Other comprehensive lossComprehensive loss is defined as the change in equity of a business enterprise from transactions and other events from nonowner sources. Comprehensiveloss includes net loss and other nonowner changes in equity that bypass the statement of operations and are reported in a separate component of equity.Net income (loss) per common shareBasic net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of common shares outstanding duringthe period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of diluted common sharesoutstanding during the period. Diluted shares outstanding are calculated by adding to the weightedaverage shares (a) any outstanding stock options based on thetreasury stock method and (b) restricted stock units (“RSU”).F14Diluted net income per share was the same as basic net income per share for the year ended December 31, 2020, because the effects of potentially dilutivesecurities did not have a material impact on the calculation of diluted net income per share. The Company had outstanding options exercisable into 18,250 shares ofthe Company’s common stock that would have had an antidilutive effect at December 31, 2020.Diluted net loss per common share was the same as basic net loss per common share for the year ended December 31, 2020, because the effects of potentiallydilutive securities were antidilutive.New accounting pronouncements adoptedThe Company has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significantimpact the Company’s consolidated financial statements and related disclosures. 2. SEGMENT INFORMATIONThe Company has determined that it operates in two segments, the sapphire and pharmacy business.Revenue is attributed by geographic region based on shipto location of the Company’s customers. The following table summarizes revenue by geographicregion:Year ended December 31,20202019(in thousands)North America$4,039$3,324Asia406185Other2217Total revenue$4,467$3,526The following table summarizes sales by product type:Year ended December 31,20202019(in thousands)Optical$3,611$3,338Core69Rubicon DTP850179Total revenue$4,467$3,526The following table summarizes assets by geographic region:As ofDecember 31,20202019(in thousands)United States$31,240$29,703Malaysia—5,094Other—4Total assets$31,240$34,801 The total assets of Rubicon DTP were not material to the total assets of the Company as stated on the consolidated balance sheets, as of December 31, 2020and 2019.Rubicon DTP accounted for approximately $340,000 and $447,000 of the Company’s loss for the year ended December 31, 2020 and 2019, respectively. F153. INVESTMENTSThe Company invests available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, commonstock, equity related securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains andlosses recorded in accumulated other comprehensive income/(loss). Investments in equity securities are reported at fair value, with both realized and unrealizedgains and losses recorded as unrealized gain/(loss) on investments and realized gain on investments, in other income/(expense), in the Consolidated Statements ofOperations. Investments in which the Company has the ability and intent, if necessary, to liquidate are classified as shortterm.The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2020:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,748$—$—$14,748Marketable securities————Total shortterm investments$14,748$—$—$14,748The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2019:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,668$—$—$14,668Marketable securities961(171)790Total shortterm investments$15,629$—$(171)$15,458The Company values its investments at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in theprincipal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniquesused to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchybased on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are thefollowing:●Level 1—Quoted prices in active markets for identical assets or liabilities.●Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices inmarkets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assetsor liabilities.●Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.The Company’s fixed income availableforsale securities consist of U.S. Treasury securities, highquality investment grade commercial paper, FDIC guaranteedcertificates of deposit, common stock, equity related securities and corporate notes. The Company values these securities based on pricing from pricing vendors,who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly(Level 2 inputs) in determining fair value. The valuation techniques used to measure the fair value of the Company’s financial instruments having Level 2 inputswere derived from nonbinding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricingmodels, such as discounted cash flow techniques.F16The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2020:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,136$—$—$3,136Investments:Availableforsales securities—current:U.S. Treasury securities—14,748—14,748Total$3,136$14,748$—$17,884The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2019:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,759$—$—$3,759Investments:Availableforsales securities—current:U.S. Treasury securities—14,668—14,668790790Total$4,549$14,668$—$19,217There are no terms or conditions restricting the Company from redeeming any of its investments.In addition to the debt securities noted above, the Company had approximately $8.0 million and $4.9 million of time deposits included in cash and cashequivalents as of December 31, 2020 and 2019, respectively.4. SIGNIFICANT CUSTOMERSFor the year ended December 31, 2020, the Company had four customers that accounted for approximately 21%, 13%, 11% and 10% of its revenue. For the yearended December 31, 2019, the Company had three customers that accounted for approximately 31%, 15% and 12% of its revenue.Customers individually representing more than 10% of trade receivables accounted for approximately 44% and 77% of accounts receivable as of December 31,2020 and 2019, respectively. 5. ASSETS HELD FOR SALE AND LONGLIVED ASSETSWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, the Company performs ananalysis to review the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expectedfuture operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.F17In connection with the Company’s decision in 2016 to limit its focus to the optical and industrial sapphire markets and exit the LED market, the Companydeveloped a plan to close its Malaysia facility, scale down and consolidate remaining operations in the U.S. and sell additional assets that would not be needed. TheCompany evaluated its U.S. and Malaysia asset portfolios to identify assets needed for its current business strategy and excess assets that were no longer needed.The Company determined it had excess machinery, equipment and facilities. Excess U.S. and Malaysia assets were evaluated based on assuming an orderlyliquidation plan, which considers economic obsolescence and sales of comparable equipment, as it is the Company’s intention to sell these assets. Additionally, theCompany evaluated its U.S. assets continuing to be used in operations using a cost and market approach to determine the current fair value. In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.6. STOCKHOLDERS’ EQUITYCommon stockAt the Company’s annual meeting of stockholders held on May 3, 2017, the Company’s stockholders approved amendments to the Company’s Eighth Amendedand Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”) to (i) effect a reverse stock split of the Company’s common stock; and (ii)decrease the Company’s authorized number of shares of common stock to three times the number of shares of the Company’s common stock outstandingimmediately following the reverse stock split. On May 3, 2017, following the annual meeting, the Company filed with the Secretary of State of the State of Delaware aCertificate of Amendment to (a) implement the reverse stock split at a ratio of 1for10; and (b) to reduce the number of authorized shares of common stock from40,000,000 to 8,200,000, consequently reducing the number of total authorized shares from 45,000,000 to 13,200,000. With the completion of the reverse stock split,the Company’s shares began trading above the required $1.00 per share closing bid price, as required by the Listing Qualifications Department of NASDAQ. Theshare information has been retroactively reflected for the effects of this reverse stock split for all periods presented.Preferred stockAt the Company’s annual meeting of stockholders held on May 10, 2018, the Company’s stockholders approved an amendment to the Certificate ofIncorporation to decrease the Company’s authorized number of shares of preferred stock from 5,000,000 shares to 1,000,000 shares. The Company filed with theSecretary of State of the State of Delaware a Certificate of Amendment to decrease the authorized number of preferred shares, consequently reducing the number oftotal authorized shares from 13,200,000 to 9,200,000.Common shares reservedAs of December 31, 2020, the Company had reserved 65,103 shares of common stock for issuance upon the exercise of outstanding common stock options andvesting of RSUs. Also 301,105 shares of the Company’s common stock were reserved for future grants of stock options and RSUs (or other similar equityinstruments) under the Rubicon Technology, Inc. 2016 Stock Incentive Plan (the “2016 Plan”) as of December 31, 2020.F187. STOCKHOLDER RIGHTS AGREEMENT On December 18, 2017, the Company entered into a Section 382 Rights Agreement with American Stock Transfer & Trust Company, LLC, as Rights Agent (the“Rights Agreement”) in an effort to protect stockholder value by attempting to diminish the risk that the Company’s ability to use its net NOLs to reduce potentialfuture federal income tax obligations may become substantially limited. The Company’s ability to utilize its NOLs may be substantially limited if the Companyexperiences an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”). The Rights Agreement isintended to act as a deterrent to any person acquiring beneficial ownership of 4.9% or more of the Company’s outstanding common stock without the approval ofthe Company’s Board of Directors (the “Board”).The Board authorized the issuance of one Right for each outstanding share of common stock, par value $0.001 per share, of the Company, payable tostockholders of record date of the close of business on January 2, 2018. One Right will also be issued together with each share of the Company’s common stockissued after January 2, 2018 but before the Distribution Date (as defined below) and, in certain circumstances, after the Distribution Date. Subject to the terms,provisions and conditions of the Rights Agreement, if the Rights become exercisable, each Right would initially represent the right to purchase from the Companyone onethousandth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company (the “Series A Preferred Stock”) for apurchase price of $40.00. If issued, each onethousandth of a share of Series A Preferred Stock would give the stockholder approximately the same dividend, votingand liquidation rights as does one share of common stock. However, prior to exercise, a Right does not give its holder any rights as a stockholder of the Company,including, without limitation, any dividend, voting or liquidation rights.The Rights will not be exercisable until the earlier of (i) ten business days after a public announcement that a person has become an “Acquiring Person” byacquiring beneficial ownership of 4.9% or more of outstanding common stock (or, in the case of a person that had beneficial ownership of 4.9% or more of theoutstanding common stock as of the close of business on December 18, 2017, by obtaining beneficial ownership of any additional shares of common stockrepresenting 0.5% or more of the shares of common stock then outstanding (other than pursuant to a dividend or distribution paid or made by the Company on theoutstanding shares of the common stock or pursuant to a split or subdivision of the outstanding shares of common stock) at a time such person still beneficiallyowns 4.9% or more of the outstanding common stock), and (ii) ten business days (or such later date as may be specified by the Board prior to such time as anyperson becomes an Acquiring Person) after the commencement of a tender or exchange offer by or on behalf of a person that, if completed, would result in suchperson becoming an Acquiring Person (the “Distribution Date”).Until the Distribution Date, common stock certificates or the ownership statements issued with respect to uncertificated shares of common stock will evidencethe Rights. Any transfer of shares of common stock prior to the Distribution Date will also constitute a transfer of the associated Rights. After the Distribution Date,separate rights certificates will be issued and the Rights may be transferred other than in connection with the transfer of the underlying shares of common stockunless and until the Board has determined to effect an exchange pursuant to the Rights Agreement (as described below).In the event that a person becomes an Acquiring Person, each holder of a Right, other than Rights that are or, under certain circumstances, were beneficiallyowned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right and payment of the purchaseprice, a number of shares of the Company’s common stock (or, in certain circumstances, cash, property or other securities of the Company) having a market valueequal to two times the purchase price. However, Rights are subject to redemption and exchange at the option of the Company.In the event that, at any time following a person becoming an Acquiring Person, (i) the Company engages in a merger or other business combination transactionin which the Company is not the surviving corporation; (ii) the Company engages in a merger or other business combination transaction in which the Company isthe surviving corporation and the common stock is changed or exchanged; or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold ortransferred, each holder of a Right (except Rights which have previously been voided) shall thereafter have the right to receive, upon exercise of the Right, commonstock of the acquiring company having a value equal to two times the purchase price.F19At any time until the earlier of December 18, 2023, and ten calendar days following the first date of public announcement that a person has become an AcquiringPerson or that discloses information which reveals the existence of an Acquiring Person or such earlier date as a majority of the Board becomes aware of theexistence of an Acquiring Person, the Board may redeem the Rights in whole, but not in part, at a price of $0.001 per Right (the “Redemption Price”). The redemptionof the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon anyredemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.At any time after a person becomes an Acquiring Person, the Board may, at its option, exchange the Rights (other than Rights that have become void), in wholeor in part, at an exchange ratio of one share of common stock, or a fractional share of Series A Preferred Stock (or of a share of a similar class or series of theCompany’s preferred stock having similar rights, preferences and privileges) of equivalent value, per Right (subject to adjustment). Immediately upon an exchange ofany Rights, the right to exercise such Rights will terminate and the only right of the holders of Rights will be to receive the number of shares of common stock (orfractional share of Series A Preferred Stock or of a share of a similar class or series of the Company’s preferred stock having similar rights, preferences andprivileges) equal to the number of such Rights held by such holder multiplied by the exchange ratio.Each one onethousandth of a share of Series A Preferred Stock, if issued: (i) will be nonredeemable and junior to any other series of preferred stock theCompany may issue (unless otherwise provided in the terms of such other series), (ii) will entitle holders to preferential cumulative quarterly dividends in an amountper share of Series A Preferred Stock equal to the greater of (a) $1 or (b) 1,000 times the aggregate the dividends, if any, declared on one share of the Company’scommon stock, (iii) will entitle holders upon liquidation (voluntary or otherwise) to receive $1,000 per share of Series A Preferred Stock plus an amount equal toaccrued and unpaid dividends and distributions thereon, whether or not declared, (iv) will have the same voting power as one share of common stock, and (v) willentitle holders to a per share payment equal to the payment made on one share of the Company’s common stock, if shares of the common stock are exchanged viamerger, consolidation, or a similar transaction. Because of the nature of the Series A Preferred Stock’s dividend, liquidation and voting rights, the value of a Unit ofSeries A Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of common stock.The Rights and the Rights Agreement will expire on the earliest of (i) December 18, 2023, (ii) the time at which the Rights are redeemed pursuant to the RightsAgreement, (iii) the time at which the Rights are exchanged in full pursuant to the Rights Agreement, (iv) the date that the Board determines that the RightsAgreement is no longer necessary for the preservation of material valuable Tax Benefits, (v) the beginning of a taxable year of the Company to which the Boarddetermines that no NOL tax benefits may be carried forward, and (vi) a determination by the Board, prior to the time any Person becomes an Acquiring Person, thatthe Rights Agreement and the Rights are no longer in the best interests of the Company and its stockholders.The Board may adjust the purchase price, the number of shares of Series A Preferred Stock or other securities or assets issuable and the number of outstandingRights to prevent dilution that may occur as a result of certain events, including among others, a stock dividend, a stock split or a reclassification of the Series APreferred Stock or common stock. With certain exceptions, no adjustments to the purchase price will be required until cumulative adjustments amount to at least 1%of the purchase price.For so long as the Rights are redeemable, the Board may supplement or amend any provision of the Rights Agreement in any respect without the approval ofthe holders of the Rights. From and after the time the Rights are no longer redeemable, the Board may supplement or amend the Rights Agreement only to cure anambiguity, to alter time period provisions, to correct inconsistent provisions, or to make any additional changes to the Rights Agreement which the Company maydeem necessary or desirable, but only to the extent that those changes do not impair or adversely affect any Rights holder (other than an Acquiring Person or anyAffiliate or Associate of an Acquiring Person or certain of their transferees) and do not result in the Rights again becoming redeemable or the Rights Agreementagain becoming amendable other than in accordance with this sentence.In connection with the adoption of the Rights Agreement and authorization and declaration of the dividend of the Rights, on December 18, 2017, the Companyfiled the Certificate of Designation with the Secretary of State of the State of Delaware. The Certificate of Designation became effective on December 18, 2017.F208. STOCK INCENTIVE PLANSIn August 2007, the Company adopted the Rubicon Technology Inc. 2007 Stock Incentive Plan, which was amended and restated effective in March 2011 (the“2007 Plan”), and which allowed for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, RSUs, performanceawards and bonus shares. The maximum number of shares that could be awarded under the 2007 Plan was 440,769 shares. Options granted under the 2007 Planentitle the holder to purchase shares of the Company’s common stock at the specified option exercise price, which could not be less than the fair market value of thecommon stock on the grant date. On June 24, 2016, the 2007 Plan terminated with the adoption of the Rubicon Technology, Inc. 2016 Stock Incentive Plan, (the “2016Plan”). Any existing awards under the 2007 Plan remain outstanding in accordance with their current terms under the 2007 Plan. In June 2016, the Company’sstockholders approved adoption of the 2016 Plan effective as of March 17, 2016, which allows for the grant of incentive stock options, nonstatutory stock options,stock appreciation rights, restricted stock, RSUs, performance awards and bonus shares. The Compensation Committee of the Board administers the 2016 Plan. Thecommittee determines the type of award to be granted, the fair value, the number of shares covered by the award, and the time when the award vests and may beexercised.Pursuant to the 2016 Plan, 222,980 shares of the Company’s common stock plus any shares subject to outstanding awards under the 2007 Plan thatsubsequently expire unexercised, are forfeited without the delivery of shares or are settled in cash, will be available for issuance under the 2016 Plan. The 2016 Planwill automatically terminate on March 17, 2026, unless the Company terminates it sooner.The following table summarizes the activity of the stock incentive and equity plans:Sharesavailablefor grantNumber ofoptionsoutstandingWeightedaverageoptionexercise priceNumber ofrestrictedstock sharesissuedNumber ofRSUsoutstandingOutstanding at January 1, 2019295,06769,08312.1099,57050,176Granted(60,925)1,000——9,925Exercised/issued—(5,000)——(6,098)Canceled/forfeited42,244(42,244)11.35——Outstanding at December 31, 2019276,38622,83913.4899,57054,003Granted(20,877)———3,597Exercised/issued—(2,250)——(3,597)Canceled/forfeited40,596(489)202.56—(9,000)Outstanding at December 31, 2020296,10520,100$9.7199,57045,003There were no option grants made during 2020. At December 31, 2020, the exercise prices of outstanding options were as follows:Exercise priceNumber ofoptionsoutstandingAverageremainingcontractual life(years)Number ofoptionsexercisable$6.10 $8.3418,2505.7518,250$44.101,8503.941,85020,1004.7320,100F21The aggregate grant date fair value of the options that became vested in the years ended 2020 and 2019 was $30,000 and $77,000, respectively.The following table summarizes the activity of nonvested options:NonvestedoptionsWeightedaverage optionexercisepriceNonvested at January 1, 201921,992$6.86Granted1,0008.34Vested(10,878)7.07Cancelled(7,248)7.25Nonvested at December 31, 20194,8666.10Granted——Vested(4,866)6.10Cancelled——Nonvested at December 31, 2020—$—The Company’s aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of theCompany’s common stock. Based on the fair value of the common stock at December 31, 2020 there was $52,000 of intrinsic value arising from 18,250 stock optionsexercisable or outstanding.The Company used historical stock prices as the basis for its volatility assumptions. The assumed riskfree rates were based on U.S. Treasury rates in effect atthe time of grant with a term consistent with the expected option lives. The expected term for the year ended December 31, 2020, is based upon the Company’smedian average life of its options. The forfeiture rate is based on the past history of forfeited options. The expense is being allocated using the straightline method.For the years ended December 31, 2020 and 2019, the Company recorded $14,000 and $24,000, respectively, of stock option compensation expense. As ofDecember 31, 2020, all outstanding options awarded have been fully vested.For the year ended December 31, 2020, there were no options granted.The following table summarizes the award vesting terms for the RSUs granted in 2019:Number of RSUsTarget price925$7.95The following table summarizes the award vesting terms for the RSUs granted in 2018:Number of restricted stock unitsTarget price902$11.0015,000$12.5015,000$14.00F22The RSUs vest in the amounts set forth below on the first date the 15trading day average closing price of the Company’s common stock equals or exceeds thecorresponding target price for the common stock before May 12, 2021. At the time the negotiation of the terms of the employment agreement began, the closing priceof the common stock was $5.50. On the date of grant, the closing price of the common stock was $6.30. During the twelve months ended December 31, 2017, the firstthree tranches of the grant vested. No additional tranches vested during the years ended December 31, 2020, 2019 and 2018.The Company used Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted because the awards vest based uponachievement of market price targets. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the marketcondition stipulated in the award and calculates the fair value of each RSU. The Company used the following assumptions in determining the fair value of the RSUs:GrantedJanuary2018March2017Daily expected stock price volatility4.2806%4.4237%Daily expected mean return on equity(0.2575)%(0.2226)%Daily expected dividend yield0.0%0.0%Average daily riskfree interest rate0.0078%0.0063%The daily expected stock price volatility is based on a fouryear historical volatility of the Company’s common stock. The daily expected dividend yield is basedon annual expected dividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches iscalculated to have its own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period which is upto four years. The RSUs granted in January 2018 and March 2017 had a grant date fair value of $209,000 and $323,000, respectively. There were no grants with marketprice targets issued in the years ended December 31, 2020 and 2019. A summary of the Company’s RSUs is as follows:RSUsoutstandingWeightedaverageprice attime of grantAggregateintrinsicvalueNonvested RSUs as of January 1, 201950,176$6.31Granted9,9258.32Vested(6,098)7.40Cancelled——Nonvested RSUs as of December 31, 201954,0036.56Granted3,5978.34Vested(3,597)8.34Cancelled(9,000)8.36Nonvested RSUs at December 31, 202045,003$6.20$278,961The fair value of each RSU is the market price on the date of grant and is being recorded as compensation expense ratably over the vesting terms or theexpected achievement of market price targets based on the Monte Carlo simulation model. For the years ended December 31, 2020 and 2019, the Company recorded$38,000 and $7,000 of RSU expense, respectively. The RSUs are forfeited by a participant upon termination for any reason, and there is no proportionate or partialvesting in the periods between the vesting dates. As of December 31, 2020, there was no unrecognized compensation cost related to the nonvested RSUs.For the year ended December 31, 2020 the Company recorded no compensation related to restricted stock compared to $14,000 in the prior year. During the year ended December 31, 2020 the Company awarded approximately 17,000 shares to an officer of the Company with a fair value of $146,000.F239. INCOME TAXESOn December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed theCompany to record provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date ofenactment. The Company has completed its accounting for the tax effects of enactment of the Act. The deemed inclusion from the repatriation tax increased from$3.9 million at the time of provision to $5.0 million at the time the calculation was finalized for the tax return. The increase of the inclusion related primarily to therefinement of Malaysia earnings and profits. As the Company is in a full valuation allowance position, an equal benefit adjustment was recorded for the impact ofthe increase of the deemed repatriation tax.Components of income before income taxes and the income tax provision are as follows:Income (loss) before income taxesYear endedDecember 31,20202019(in thousands)U.S.$(3,060)$(1,142)Foreign2,01817Total$(1,050)$(1,125)Income taxesYear endedDecember 31,20202019(in thousands)CurrentU.S.$—$—State——Foreign1322Total current income tax expense1322DeferredU.S.——State——Foreign——Total deferred income tax expense (benefit)——Total income tax expense (benefit)$13$22The reconciliation of income tax computed at the federal statutory rate to income before taxes is as follows:Year endedDecember 31,20202019U.S. federal statutory rate(21.0)%(21.0)%State taxes net of federal benefit(18.2)(7.6)Foreign rate differential and transactional tax5.90.1Tax credits——Valuation allowance33.328.5Other12.01.0%2.0%F24Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amount of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred income taxes are as follows at December 31:20202019(in thousands)Deferred tax assets:Allowance for doubtful accounts$1$11Inventory reserves3,0963,185Consumables excess reserve167169Accrued liabilities8152Warrant interest expense195196Stock compensation expense789789State net operating loss14,47615,010Net operating loss carryforward41,10540,437Tax credits710740Depreciation1,0001,329Valuation allowance(61,556)(61,869)Total deferred tax assets6449Deferred tax liability:Prepaid expenses(64)(49)Net deferred tax liability$—$—In February 2018, the FASB issued ASU No. 201802 (“ASU 201802), Income StatementReporting Comprehensive Income (Topic 220): Reclassification ofCertain Tax Effects from Accumulated Comprehensive Income. The new guidance allows companies to reclassify stranded tax effects resulting from the Tax Act,from accumulated other comprehensive income to retained earnings. The guidance also requires certain new disclosures regardless of the election. Early adoption ispermitted. The Company’s adoption of ASU 201802 did not have a material impact on its consolidated financial statements.The Company adopted the guidance in ASU No. 201517, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which requires that alldeferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent in the balance sheet. As a result, each jurisdiction has onenet noncurrent deferred tax asset or liability. The new guidance does not change the existing requirement that only permits offsetting within a jurisdiction.Companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The change inaccounting principle did not have an impact on the Company’s results of operations, cash flows or stockholders’ equity. At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.The Company completed an analysis of the utilization of NOLs subject to limits based upon certain ownership changes as of December 31, 2020. The results ofthis analysis indicated no ownership change limiting the utilization of net operating losses and tax credits.F25The Company prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, orexpected to be taken, in a tax return. At December 31, 2020 and 2019, the Company had $1.1 million of unrecognized tax benefits taken or expected to be taken in a taxreturn that have been recorded on the Company’s financial statements as an offset to the valuation allowance related to tax positions taken in 2012. It is notreasonably possible that the amount will change in the next twelve months. There were no material changes to prior year or current year positions taken during theyear ended December 31, 2020.There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company files income tax returns in the United States federal jurisdiction and in a state jurisdiction. During 2009, the Company began foreign operations inMalaysia and is subject to local income taxes in that jurisdiction. The Company’s Malaysia tax returns for the periods ended December 31, 2010 through 2012 havebeen audited by the Malaysia Inland Revenue Board with no changes made to the taxable income for those years. All other tax years in Malaysia are open toexamination by tax authorities.The Company’s federal tax returns for the periods ended December 31, 2010, 2008 and 2007 have been audited by the Internal Revenue Service (IRS) with nochanges made to the Company’s taxable losses for those years. The Company’s state tax returns for the periods ended December 31, 2009 through 2012 have beenaudited by the Illinois Department of Revenue with no changes made to the Company’s taxable losses for those years. Due to the existence of NOL carryforwards,tax years ended December 31, 2001 through 2006, 2008, 2009 and 2011 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOLcarryforwards at the State level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 areopen to examination by the Malaysia Inland Revenue Board.Due to the closing of the Rubicon Malaysia operations, the Company no longer considers the undistributed earnings of Rubicon Malaysia to be indefinitelyreinvested. Upon liquidation of Rubicon Malaysia, it is anticipated any cash left after the liquidation will be brought back to the U.S. via a payment of principaltowards the intercompany loan. A withholding tax may be payable to the Malaysian government on the interest portion of the loan. At December 31, 2020 and 2019,the Company accrued the withholding tax on the interest balance of the loan in the amount of $13,000 and $22,000, respectively, which represents the incremental tax.10. COMMITMENTS AND CONTINGENCIESCOVID19 PandemicIn March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID19) as a pandemic. The full impact of the COVID19outbreak is unknown and cannot be reasonably estimated. The magnitude and duration of the COVID19 outbreak, as well as other factors, could result in a materialimpact to the Company’s financial statements in future reporting periods.Operating LeasesThe Company adopted ASU 201602 in the first quarter of the fiscal year ending December 31, 2019. The adoption of ASU 201602 did not have a material impacton the Company’s consolidated financial statements, as the Company does not have any material lease agreements Rubicon DTP leases a building for itsmanufacturing and offices, however such lease was not considered material to the Company’s financial statements.Direct Dose’s net rent expense under operating leases in 2020 and 2019 amounted to $34,200 and $25,900, respectively. As of December 31, 2020, Direct Dose’soperating lease for its facility was monthtomonth. On January 6, 2021, Direct Dose entered into a one year lease for an aggregate commitment of approximately$35,500.LitigationFrom time to time, the Company experiences routine litigation in the ordinary course of its business.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.11. BENEFIT PLANThe Company sponsors a 401(k) savings plan (the “Plan”). Employees are eligible to participate in the Plan upon reaching 18 years of age. Employees makecontributions to the Plan through payroll deferrals. Employer matching contributions are discretionary. There were no employer matching contributions for the yearsended December 31, 2020 and 2019.12. SUBSEQUENT EVENTSNone.F26EX21.1 2 f10k2020ex211_rubicon.htm SUBSIDIARIES OF THE COMPANYExhibit 21.1Rubicon Technologies, Inc.Subsidiaries of the CompanyName of subsidiaryState (or other jurisdiction of incorporation)Rubicon Technology Worldwide LLCIllinoisRubicon Technology BP LLCDelawareRubicon DTP LLCDelawareEX23.1 3 f10k2020ex231_rubicon.htm CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMExhibit 23.1INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENTWe consent to the incorporation by reference in the Registration Statements of Rubicon Technology, Inc. on Form S3 (File No. 333167272), as amended (File No.333192536) and on Forms S8 (File No. 333147552, File No. 333180211 and File No. 333213025) of our report dated March 22, 2021 with respect to our audits of theconsolidated financial statements of Rubicon Technology, Inc. and Subsidiaries as of December 31, 2020 and 2019 and for each of the two years in the period endedDecember 31, 2020, which report is included in this Annual Report on Form 10K of Rubicon Technology, Inc. and Subsidiaries for the year ended December 31, 2020./s/ Marcum LLPMarcum LLPChicago, IllinoisMarch 22, 2021EX31.1 4 f10k2020ex311_rubicon.htm CERTIFICATIONExhibit 31.1CertificationsCertification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Timothy E. Brog, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerEX31.2 5 f10k2020ex312_rubicon.htm CERTIFICATIONExhibit 31.2Certification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Kevin T. Lusardi, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerEX32.1 6 f10k2020ex321_rubicon.htm CERTIFICATIONExhibit 32.1Certification Pursuant to Section 906 of The SarbanesOxley Act of 2002,18 U.S.C. Section 1350In connection with the Annual Report of Rubicon Technology, Inc. (the “Company”) on Form 10K for the year ended December 31, 2020, as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Timothy E. Brog, President and Chief Executive Officer of the Company, and I, Kevin T.Lusardi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the SarbanesOxley Act of 2002,that, to my knowledge:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerDate: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerA signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnishedto the Securities and Exchange Commission or its staff upon request. F8Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanthe functional currency of the Company, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in thedetermination of net income (loss) for the period. The Company records these gains and losses in other income.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expenses), in the Consolidated Statements of Operations. Investments in which the Company has the ability and intent, ifnecessary, to liquidate in order to support the current operations are classified as shortterm.The Company reviews its availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on thespecific identification method. The Company considers various factors in determining whether an impairment is otherthantemporary, including the severity andduration of the impairment, changes in underlying credit ratings, forecasted recovery, its ability and intent to hold the investment for a period of time sufficient toallow for any anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When the Company concludesthat an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on theConsolidated Statements of Operations. As of December 31, 2020, and 2019, no impairment was recorded.Purchases of Equity Securities by the IssuerIn November 2018, the Company’s Board of Directors authorized a program to repurchase up to $3 million of its common stock. In July 2020, the Company usedall of the original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time. There can be no assurance as to the number of shares of common stock repurchased. The Company records treasurystock purchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock.Share repurchase activity during the year ended December 31, 2020, was as follows:PeriodsTotalnumber ofsharespurchasedAveragepricepaid pershareTotalnumber ofsharespurchasedas part ofpubliclyannouncedprogramApproximatedollar valueof sharesthat may yetbe purchasedunder theprogram(in thousands)January 1, 2020, to December 31, 2020295,946$8.10295,546$3,000Total295,946$3,000F9Accounts receivableThe majority of the Company’s accounts receivable are due from defense subcontractors, industrial manufacturers, fabricators and resellers. Credit is extendedbased on an evaluation of the customer’s financial condition. Accounts receivable are due based on contract terms and at stated amounts due from customers, netof an allowance for doubtful accounts. Losses from credit sales are provided for in the financial statements.Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number offactors, including the length of time a customer’s account is past due, the customer’s current ability to pay and the condition of the general economy and industryas a whole. The Company writes off accounts receivable when they are deemed uncollectible and such writeoffs, net of payments received, are recorded as areduction to the allowance.The following table shows the activity of the allowance for doubtful accounts:Year endedDecember 31,20202019(in thousands)Beginning balance$40$7Charges to costs and expenses(20)33Account writeoffs, less recoveries(17)—Ending balance$3$40InventoriesInventories are valued at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary course ofbusiness less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis, which includes materials, labor and overhead. The Company reduces the carrying value of itsinventories for differences between the cost and the estimated net realizable value, taking into account usage, expected demand, technological obsolescence andother relevant information.The Company establishes inventory reserves when conditions exist that suggest inventory may be in excess of anticipated demand or is obsolete based oncustomer specifications. The Company evaluates the ability to realize the value of its inventory based on a combination of factors, including forecasted sales,estimated current and future market value and changes in customers’ product specifications. The Company’s method of estimating excess and obsolete inventoryhas remained consistent for all periods presented. The Company also carries a lower of cost or market inventory reserve based on net realizable value using mostrecent sales prices to determine market value. As of December 31, 2020 and 2019, the balance of the lower of cost or market reserve was $51,000 and $72,000,respectively, representing a decrease of $21,000 resulting from sales of related reserved for inventory. In addition, in 2020 we sold inventory that was valued at thelower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $21,000. In 2019 we sold inventorythat was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $35,000.In 2019 and 2020, the Company used some of its previously written down twoinch diameter core material in production of optical and industrial sapphire wafersand did not record any additional adjustments for the years ended December 31, 2019 and December 31, 2020.The Company evaluates the amount of raw material needed for future production based on expected crystal growth production needed to meet anticipatedsales. The Company did not record any writedowns of its raw materials inventory for the years ended December 31, 2019 and December 31, 2020.F10Inventories are composed of the following:As ofDecember 31,20202019(in thousands)Raw materials$468$468Workinprocess614901Finished goods459809$1,541$2,178As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.Other inventory suppliesThe Company’s other inventory supplies include stock of consumable assets and spare parts used in the manufacturing process.Assets held for saleAn asset is considered to be held for sale when all of the following criteria are met: (i) management commits to a plan to sell the asset; (ii) it is unlikely that thedisposal plan will be significantly modified or discontinued; (iii) the asset is available for immediate sale in its present condition; (iv) actions required to complete thesale of the asset have been initiated; (v) sale of the asset is probable and the completed sale is expected to occur within one year; and (vi) the asset is actively beingmarketed for sale at a price that is reasonable given its current market value.A longlived asset classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. If the longlived asset is newlyacquired, the carrying amount of the longlived asset is established based on its fair value less cost to sell at the acquisition date. A longlived asset is notdepreciated or amortized while it is classified as held for sale.In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.F11Property and equipmentProperty and equipment consisted of the following:As ofDecember 31,20202019(in thousands)Machinery, equipment and tooling$3,343$3,341Buildings1,7111,711Information systems835835Land and land improvements594594Furniture and fixtures88Total cost6,4916,489Accumulated depreciation and amortization(4,009)(3,842)Property and equipment, net$2,482$2,647Property and equipment are carried at cost and depreciated over their estimated useful lives using the straightline method. The cost of maintenance and repairsis charged to expense as incurred. Significant renewals and improvements are capitalized. Depreciation expense associated with property and equipment was$167,000 and $169,000 for the years ended December 31, 2020 and 2019, respectively.The estimated useful lives are as follows:Asset descriptionLifeBuildings39 yearsMachinery, equipment and tooling310 yearsFurniture and fixtures7 yearsInformation systems3 yearsWarranty costThe Company’s sales terms include a warranty that its products will meet certain specifications. The Company records a current liability for the expected cost ofwarrantyrelated claims at the time of sale. The warranty reserve is included in accrued and other current liabilities on the Consolidated Balance Sheets.The following table presents changes in the Company’s product warranty liability:Year endedDecember 31,20202019(in thousands)Balance, beginning of period$4$8Charged to cost of sales1831Actual product warranty expenditures(20)(35)Balance, end of period$2$4The Company does not provide maintenance or other services and it does not have sales that involve bill & hold arrangements, multiple elements ordeliverables. However, the Company does provide product warranty for up to 90 days, for which the Company has accrued a warranty reserve of $2,000 and $4,000for the years ended December 31, 2020 and 2019, respectively.Fair value of financial instrumentsThe Company’s financial instruments consist primarily of cash and cash equivalents, shortterm investments, accounts receivable, and accounts payable. Thecarrying values of these assets and liabilities approximate their fair values due to the shortterm nature of these instruments at December 31, 2020 and 2019.F12Concentration of credit risks and other risks and uncertaintiesFinancial instruments that could potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, restrictedcash, shortterm investments and accounts receivable. At December 31, 2020 the Company had no deposits at foreign financial institutions and $1.6 million ondeposit at foreign financial institutions at December 31, 2019. As of December 31, 2020, the Company had $8 million on deposit at financial institutions in excess ofamounts insured by the FDIC. This compares to a $5.7 million as of December 31, 2019. The Company performs a periodic evaluation of these institutions for relativecredit standing. The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant risk of loss on thesebalances.The Company uses third parties for certain finishing functions for its products, including the slicing and polishing of its sapphire crystal inventory. These typesof services are only available from a limited number of third parties. The Company’s ability to successfully outsource these finishing functions will substantiallydepend on its ability to develop, maintain and expand its strategic relationship with these third parties. As a result, the Company may be unable to meet the demandfor its products, which could have a material adverse impact on the Company.Concentration of credit risk related to revenue and accounts receivable is discussed in Note 4.Revenue recognitionRevenues recognized include product sales and billings for costs and fees for government contracts.Product SalesThe Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1,2018. The Company recognizes revenue when performance obligations under a purchase order or signed quotation are satisfied. The Company’s business practicecommits the Company to manufacture and deliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement withthe customer includes specifications of the product to be delivered, price, expected ship date and payment terms. The Company’s agreements generally do notcontain variable, financing, rights of return or noncash components. There are no upfront costs to develop the production process. The performance obligation issatisfied at the point in time (single performance obligation) when the product is manufactured to the customer’s specification, as performance does not create anasset with an alternative use to the Company. Accordingly, the Company recognizes revenue when the product is shipped, and control of the product, title and riskof loss have been transferred to the customer. The Company grants credit terms considering normal collection risk. If there is doubt about collection, full prepaymentfor the order is required. Any payments received prior to shipment are recorded as deferred revenue and included in Advance Payments in the Consolidated BalanceSheets. The Company does not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of the Company’s revenue is denominated in U.S. dollars.Shipping and handling costsThe Company records costs incurred in connection with shipping and handling of products as cost of goods sold. Amounts billed to customers in connectionwith these costs are included in revenue and are not material for any of the periods presented in the accompanying financial statements.Sales taxThe Company collects and remits sales taxes on products sold to customers and reports such amounts under the net method in its Consolidated Statements ofOperations and records a liability until remitted to the respective tax authority.F13Stockbased compensationThe Company requires all sharebased payments to employees, including grants of employee stock options, to be measured at fair value and expensed in theConsolidated Statements of Operations over the service period (generally the vesting period) of the grant. Expense is recognized in the Consolidated Statements ofOperations for these sharebased payments. The Company uses Black Scholes option pricing model in order to determine the fair value of stock option grants.Accounting for uncertainty in income taxesThe Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by thetaxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured basedon the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and/or penalties related to incometax matters in income tax expense. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years endedDecember 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.Income taxesDeferred tax assets and liabilities are provided for temporary differences between financial reporting and income tax bases of assets and liabilities, and aremeasured using the enacted tax rates and laws expected to be in effect when the differences will reverse. Deferred income taxes also arise from the future benefits ofNOL carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Full valuationallowances on net deferred tax assets are maintained until an appropriate level of profitability that generates taxable income is deemed sustainable or until a taxstrategy is developed that would enable the Company to conclude that it is more likely than not that a portion of the deferred tax assets will be realizable. Based onan evaluation in accordance with the accounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. andMalaysia deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all theavailable evidence.Use of estimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at thedate of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.Other comprehensive lossComprehensive loss is defined as the change in equity of a business enterprise from transactions and other events from nonowner sources. Comprehensiveloss includes net loss and other nonowner changes in equity that bypass the statement of operations and are reported in a separate component of equity.Net income (loss) per common shareBasic net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of common shares outstanding duringthe period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of diluted common sharesoutstanding during the period. Diluted shares outstanding are calculated by adding to the weightedaverage shares (a) any outstanding stock options based on thetreasury stock method and (b) restricted stock units (“RSU”).F14Diluted net income per share was the same as basic net income per share for the year ended December 31, 2020, because the effects of potentially dilutivesecurities did not have a material impact on the calculation of diluted net income per share. The Company had outstanding options exercisable into 18,250 shares ofthe Company’s common stock that would have had an antidilutive effect at December 31, 2020.Diluted net loss per common share was the same as basic net loss per common share for the year ended December 31, 2020, because the effects of potentiallydilutive securities were antidilutive.New accounting pronouncements adoptedThe Company has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significantimpact the Company’s consolidated financial statements and related disclosures. 2. SEGMENT INFORMATIONThe Company has determined that it operates in two segments, the sapphire and pharmacy business.Revenue is attributed by geographic region based on shipto location of the Company’s customers. The following table summarizes revenue by geographicregion:Year ended December 31,20202019(in thousands)North America$4,039$3,324Asia406185Other2217Total revenue$4,467$3,526The following table summarizes sales by product type:Year ended December 31,20202019(in thousands)Optical$3,611$3,338Core69Rubicon DTP850179Total revenue$4,467$3,526The following table summarizes assets by geographic region:As ofDecember 31,20202019(in thousands)United States$31,240$29,703Malaysia—5,094Other—4Total assets$31,240$34,801 The total assets of Rubicon DTP were not material to the total assets of the Company as stated on the consolidated balance sheets, as of December 31, 2020and 2019.Rubicon DTP accounted for approximately $340,000 and $447,000 of the Company’s loss for the year ended December 31, 2020 and 2019, respectively. F153. INVESTMENTSThe Company invests available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, commonstock, equity related securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains andlosses recorded in accumulated other comprehensive income/(loss). Investments in equity securities are reported at fair value, with both realized and unrealizedgains and losses recorded as unrealized gain/(loss) on investments and realized gain on investments, in other income/(expense), in the Consolidated Statements ofOperations. Investments in which the Company has the ability and intent, if necessary, to liquidate are classified as shortterm.The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2020:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,748$—$—$14,748Marketable securities————Total shortterm investments$14,748$—$—$14,748The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2019:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,668$—$—$14,668Marketable securities961(171)790Total shortterm investments$15,629$—$(171)$15,458The Company values its investments at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in theprincipal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniquesused to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchybased on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are thefollowing:●Level 1—Quoted prices in active markets for identical assets or liabilities.●Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices inmarkets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assetsor liabilities.●Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.The Company’s fixed income availableforsale securities consist of U.S. Treasury securities, highquality investment grade commercial paper, FDIC guaranteedcertificates of deposit, common stock, equity related securities and corporate notes. The Company values these securities based on pricing from pricing vendors,who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly(Level 2 inputs) in determining fair value. The valuation techniques used to measure the fair value of the Company’s financial instruments having Level 2 inputswere derived from nonbinding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricingmodels, such as discounted cash flow techniques.F16The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2020:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,136$—$—$3,136Investments:Availableforsales securities—current:U.S. Treasury securities—14,748—14,748Total$3,136$14,748$—$17,884The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2019:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,759$—$—$3,759Investments:Availableforsales securities—current:U.S. Treasury securities—14,668—14,668790790Total$4,549$14,668$—$19,217There are no terms or conditions restricting the Company from redeeming any of its investments.In addition to the debt securities noted above, the Company had approximately $8.0 million and $4.9 million of time deposits included in cash and cashequivalents as of December 31, 2020 and 2019, respectively.4. SIGNIFICANT CUSTOMERSFor the year ended December 31, 2020, the Company had four customers that accounted for approximately 21%, 13%, 11% and 10% of its revenue. For the yearended December 31, 2019, the Company had three customers that accounted for approximately 31%, 15% and 12% of its revenue.Customers individually representing more than 10% of trade receivables accounted for approximately 44% and 77% of accounts receivable as of December 31,2020 and 2019, respectively. 5. ASSETS HELD FOR SALE AND LONGLIVED ASSETSWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, the Company performs ananalysis to review the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expectedfuture operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.F17In connection with the Company’s decision in 2016 to limit its focus to the optical and industrial sapphire markets and exit the LED market, the Companydeveloped a plan to close its Malaysia facility, scale down and consolidate remaining operations in the U.S. and sell additional assets that would not be needed. TheCompany evaluated its U.S. and Malaysia asset portfolios to identify assets needed for its current business strategy and excess assets that were no longer needed.The Company determined it had excess machinery, equipment and facilities. Excess U.S. and Malaysia assets were evaluated based on assuming an orderlyliquidation plan, which considers economic obsolescence and sales of comparable equipment, as it is the Company’s intention to sell these assets. Additionally, theCompany evaluated its U.S. assets continuing to be used in operations using a cost and market approach to determine the current fair value. In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.6. STOCKHOLDERS’ EQUITYCommon stockAt the Company’s annual meeting of stockholders held on May 3, 2017, the Company’s stockholders approved amendments to the Company’s Eighth Amendedand Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”) to (i) effect a reverse stock split of the Company’s common stock; and (ii)decrease the Company’s authorized number of shares of common stock to three times the number of shares of the Company’s common stock outstandingimmediately following the reverse stock split. On May 3, 2017, following the annual meeting, the Company filed with the Secretary of State of the State of Delaware aCertificate of Amendment to (a) implement the reverse stock split at a ratio of 1for10; and (b) to reduce the number of authorized shares of common stock from40,000,000 to 8,200,000, consequently reducing the number of total authorized shares from 45,000,000 to 13,200,000. With the completion of the reverse stock split,the Company’s shares began trading above the required $1.00 per share closing bid price, as required by the Listing Qualifications Department of NASDAQ. Theshare information has been retroactively reflected for the effects of this reverse stock split for all periods presented.Preferred stockAt the Company’s annual meeting of stockholders held on May 10, 2018, the Company’s stockholders approved an amendment to the Certificate ofIncorporation to decrease the Company’s authorized number of shares of preferred stock from 5,000,000 shares to 1,000,000 shares. The Company filed with theSecretary of State of the State of Delaware a Certificate of Amendment to decrease the authorized number of preferred shares, consequently reducing the number oftotal authorized shares from 13,200,000 to 9,200,000.Common shares reservedAs of December 31, 2020, the Company had reserved 65,103 shares of common stock for issuance upon the exercise of outstanding common stock options andvesting of RSUs. Also 301,105 shares of the Company’s common stock were reserved for future grants of stock options and RSUs (or other similar equityinstruments) under the Rubicon Technology, Inc. 2016 Stock Incentive Plan (the “2016 Plan”) as of December 31, 2020.F187. STOCKHOLDER RIGHTS AGREEMENT On December 18, 2017, the Company entered into a Section 382 Rights Agreement with American Stock Transfer & Trust Company, LLC, as Rights Agent (the“Rights Agreement”) in an effort to protect stockholder value by attempting to diminish the risk that the Company’s ability to use its net NOLs to reduce potentialfuture federal income tax obligations may become substantially limited. The Company’s ability to utilize its NOLs may be substantially limited if the Companyexperiences an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”). The Rights Agreement isintended to act as a deterrent to any person acquiring beneficial ownership of 4.9% or more of the Company’s outstanding common stock without the approval ofthe Company’s Board of Directors (the “Board”).The Board authorized the issuance of one Right for each outstanding share of common stock, par value $0.001 per share, of the Company, payable tostockholders of record date of the close of business on January 2, 2018. One Right will also be issued together with each share of the Company’s common stockissued after January 2, 2018 but before the Distribution Date (as defined below) and, in certain circumstances, after the Distribution Date. Subject to the terms,provisions and conditions of the Rights Agreement, if the Rights become exercisable, each Right would initially represent the right to purchase from the Companyone onethousandth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company (the “Series A Preferred Stock”) for apurchase price of $40.00. If issued, each onethousandth of a share of Series A Preferred Stock would give the stockholder approximately the same dividend, votingand liquidation rights as does one share of common stock. However, prior to exercise, a Right does not give its holder any rights as a stockholder of the Company,including, without limitation, any dividend, voting or liquidation rights.The Rights will not be exercisable until the earlier of (i) ten business days after a public announcement that a person has become an “Acquiring Person” byacquiring beneficial ownership of 4.9% or more of outstanding common stock (or, in the case of a person that had beneficial ownership of 4.9% or more of theoutstanding common stock as of the close of business on December 18, 2017, by obtaining beneficial ownership of any additional shares of common stockrepresenting 0.5% or more of the shares of common stock then outstanding (other than pursuant to a dividend or distribution paid or made by the Company on theoutstanding shares of the common stock or pursuant to a split or subdivision of the outstanding shares of common stock) at a time such person still beneficiallyowns 4.9% or more of the outstanding common stock), and (ii) ten business days (or such later date as may be specified by the Board prior to such time as anyperson becomes an Acquiring Person) after the commencement of a tender or exchange offer by or on behalf of a person that, if completed, would result in suchperson becoming an Acquiring Person (the “Distribution Date”).Until the Distribution Date, common stock certificates or the ownership statements issued with respect to uncertificated shares of common stock will evidencethe Rights. Any transfer of shares of common stock prior to the Distribution Date will also constitute a transfer of the associated Rights. After the Distribution Date,separate rights certificates will be issued and the Rights may be transferred other than in connection with the transfer of the underlying shares of common stockunless and until the Board has determined to effect an exchange pursuant to the Rights Agreement (as described below).In the event that a person becomes an Acquiring Person, each holder of a Right, other than Rights that are or, under certain circumstances, were beneficiallyowned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right and payment of the purchaseprice, a number of shares of the Company’s common stock (or, in certain circumstances, cash, property or other securities of the Company) having a market valueequal to two times the purchase price. However, Rights are subject to redemption and exchange at the option of the Company.In the event that, at any time following a person becoming an Acquiring Person, (i) the Company engages in a merger or other business combination transactionin which the Company is not the surviving corporation; (ii) the Company engages in a merger or other business combination transaction in which the Company isthe surviving corporation and the common stock is changed or exchanged; or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold ortransferred, each holder of a Right (except Rights which have previously been voided) shall thereafter have the right to receive, upon exercise of the Right, commonstock of the acquiring company having a value equal to two times the purchase price.F19At any time until the earlier of December 18, 2023, and ten calendar days following the first date of public announcement that a person has become an AcquiringPerson or that discloses information which reveals the existence of an Acquiring Person or such earlier date as a majority of the Board becomes aware of theexistence of an Acquiring Person, the Board may redeem the Rights in whole, but not in part, at a price of $0.001 per Right (the “Redemption Price”). The redemptionof the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon anyredemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.At any time after a person becomes an Acquiring Person, the Board may, at its option, exchange the Rights (other than Rights that have become void), in wholeor in part, at an exchange ratio of one share of common stock, or a fractional share of Series A Preferred Stock (or of a share of a similar class or series of theCompany’s preferred stock having similar rights, preferences and privileges) of equivalent value, per Right (subject to adjustment). Immediately upon an exchange ofany Rights, the right to exercise such Rights will terminate and the only right of the holders of Rights will be to receive the number of shares of common stock (orfractional share of Series A Preferred Stock or of a share of a similar class or series of the Company’s preferred stock having similar rights, preferences andprivileges) equal to the number of such Rights held by such holder multiplied by the exchange ratio.Each one onethousandth of a share of Series A Preferred Stock, if issued: (i) will be nonredeemable and junior to any other series of preferred stock theCompany may issue (unless otherwise provided in the terms of such other series), (ii) will entitle holders to preferential cumulative quarterly dividends in an amountper share of Series A Preferred Stock equal to the greater of (a) $1 or (b) 1,000 times the aggregate the dividends, if any, declared on one share of the Company’scommon stock, (iii) will entitle holders upon liquidation (voluntary or otherwise) to receive $1,000 per share of Series A Preferred Stock plus an amount equal toaccrued and unpaid dividends and distributions thereon, whether or not declared, (iv) will have the same voting power as one share of common stock, and (v) willentitle holders to a per share payment equal to the payment made on one share of the Company’s common stock, if shares of the common stock are exchanged viamerger, consolidation, or a similar transaction. Because of the nature of the Series A Preferred Stock’s dividend, liquidation and voting rights, the value of a Unit ofSeries A Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of common stock.The Rights and the Rights Agreement will expire on the earliest of (i) December 18, 2023, (ii) the time at which the Rights are redeemed pursuant to the RightsAgreement, (iii) the time at which the Rights are exchanged in full pursuant to the Rights Agreement, (iv) the date that the Board determines that the RightsAgreement is no longer necessary for the preservation of material valuable Tax Benefits, (v) the beginning of a taxable year of the Company to which the Boarddetermines that no NOL tax benefits may be carried forward, and (vi) a determination by the Board, prior to the time any Person becomes an Acquiring Person, thatthe Rights Agreement and the Rights are no longer in the best interests of the Company and its stockholders.The Board may adjust the purchase price, the number of shares of Series A Preferred Stock or other securities or assets issuable and the number of outstandingRights to prevent dilution that may occur as a result of certain events, including among others, a stock dividend, a stock split or a reclassification of the Series APreferred Stock or common stock. With certain exceptions, no adjustments to the purchase price will be required until cumulative adjustments amount to at least 1%of the purchase price.For so long as the Rights are redeemable, the Board may supplement or amend any provision of the Rights Agreement in any respect without the approval ofthe holders of the Rights. From and after the time the Rights are no longer redeemable, the Board may supplement or amend the Rights Agreement only to cure anambiguity, to alter time period provisions, to correct inconsistent provisions, or to make any additional changes to the Rights Agreement which the Company maydeem necessary or desirable, but only to the extent that those changes do not impair or adversely affect any Rights holder (other than an Acquiring Person or anyAffiliate or Associate of an Acquiring Person or certain of their transferees) and do not result in the Rights again becoming redeemable or the Rights Agreementagain becoming amendable other than in accordance with this sentence.In connection with the adoption of the Rights Agreement and authorization and declaration of the dividend of the Rights, on December 18, 2017, the Companyfiled the Certificate of Designation with the Secretary of State of the State of Delaware. The Certificate of Designation became effective on December 18, 2017.F208. STOCK INCENTIVE PLANSIn August 2007, the Company adopted the Rubicon Technology Inc. 2007 Stock Incentive Plan, which was amended and restated effective in March 2011 (the“2007 Plan”), and which allowed for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, RSUs, performanceawards and bonus shares. The maximum number of shares that could be awarded under the 2007 Plan was 440,769 shares. Options granted under the 2007 Planentitle the holder to purchase shares of the Company’s common stock at the specified option exercise price, which could not be less than the fair market value of thecommon stock on the grant date. On June 24, 2016, the 2007 Plan terminated with the adoption of the Rubicon Technology, Inc. 2016 Stock Incentive Plan, (the “2016Plan”). Any existing awards under the 2007 Plan remain outstanding in accordance with their current terms under the 2007 Plan. In June 2016, the Company’sstockholders approved adoption of the 2016 Plan effective as of March 17, 2016, which allows for the grant of incentive stock options, nonstatutory stock options,stock appreciation rights, restricted stock, RSUs, performance awards and bonus shares. The Compensation Committee of the Board administers the 2016 Plan. Thecommittee determines the type of award to be granted, the fair value, the number of shares covered by the award, and the time when the award vests and may beexercised.Pursuant to the 2016 Plan, 222,980 shares of the Company’s common stock plus any shares subject to outstanding awards under the 2007 Plan thatsubsequently expire unexercised, are forfeited without the delivery of shares or are settled in cash, will be available for issuance under the 2016 Plan. The 2016 Planwill automatically terminate on March 17, 2026, unless the Company terminates it sooner.The following table summarizes the activity of the stock incentive and equity plans:Sharesavailablefor grantNumber ofoptionsoutstandingWeightedaverageoptionexercise priceNumber ofrestrictedstock sharesissuedNumber ofRSUsoutstandingOutstanding at January 1, 2019295,06769,08312.1099,57050,176Granted(60,925)1,000——9,925Exercised/issued—(5,000)——(6,098)Canceled/forfeited42,244(42,244)11.35——Outstanding at December 31, 2019276,38622,83913.4899,57054,003Granted(20,877)———3,597Exercised/issued—(2,250)——(3,597)Canceled/forfeited40,596(489)202.56—(9,000)Outstanding at December 31, 2020296,10520,100$9.7199,57045,003There were no option grants made during 2020. At December 31, 2020, the exercise prices of outstanding options were as follows:Exercise priceNumber ofoptionsoutstandingAverageremainingcontractual life(years)Number ofoptionsexercisable$6.10 $8.3418,2505.7518,250$44.101,8503.941,85020,1004.7320,100F21The aggregate grant date fair value of the options that became vested in the years ended 2020 and 2019 was $30,000 and $77,000, respectively.The following table summarizes the activity of nonvested options:NonvestedoptionsWeightedaverage optionexercisepriceNonvested at January 1, 201921,992$6.86Granted1,0008.34Vested(10,878)7.07Cancelled(7,248)7.25Nonvested at December 31, 20194,8666.10Granted——Vested(4,866)6.10Cancelled——Nonvested at December 31, 2020—$—The Company’s aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of theCompany’s common stock. Based on the fair value of the common stock at December 31, 2020 there was $52,000 of intrinsic value arising from 18,250 stock optionsexercisable or outstanding.The Company used historical stock prices as the basis for its volatility assumptions. The assumed riskfree rates were based on U.S. Treasury rates in effect atthe time of grant with a term consistent with the expected option lives. The expected term for the year ended December 31, 2020, is based upon the Company’smedian average life of its options. The forfeiture rate is based on the past history of forfeited options. The expense is being allocated using the straightline method.For the years ended December 31, 2020 and 2019, the Company recorded $14,000 and $24,000, respectively, of stock option compensation expense. As ofDecember 31, 2020, all outstanding options awarded have been fully vested.For the year ended December 31, 2020, there were no options granted.The following table summarizes the award vesting terms for the RSUs granted in 2019:Number of RSUsTarget price925$7.95The following table summarizes the award vesting terms for the RSUs granted in 2018:Number of restricted stock unitsTarget price902$11.0015,000$12.5015,000$14.00F22The RSUs vest in the amounts set forth below on the first date the 15trading day average closing price of the Company’s common stock equals or exceeds thecorresponding target price for the common stock before May 12, 2021. At the time the negotiation of the terms of the employment agreement began, the closing priceof the common stock was $5.50. On the date of grant, the closing price of the common stock was $6.30. During the twelve months ended December 31, 2017, the firstthree tranches of the grant vested. No additional tranches vested during the years ended December 31, 2020, 2019 and 2018.The Company used Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted because the awards vest based uponachievement of market price targets. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the marketcondition stipulated in the award and calculates the fair value of each RSU. The Company used the following assumptions in determining the fair value of the RSUs:GrantedJanuary2018March2017Daily expected stock price volatility4.2806%4.4237%Daily expected mean return on equity(0.2575)%(0.2226)%Daily expected dividend yield0.0%0.0%Average daily riskfree interest rate0.0078%0.0063%The daily expected stock price volatility is based on a fouryear historical volatility of the Company’s common stock. The daily expected dividend yield is basedon annual expected dividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches iscalculated to have its own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period which is upto four years. The RSUs granted in January 2018 and March 2017 had a grant date fair value of $209,000 and $323,000, respectively. There were no grants with marketprice targets issued in the years ended December 31, 2020 and 2019. A summary of the Company’s RSUs is as follows:RSUsoutstandingWeightedaverageprice attime of grantAggregateintrinsicvalueNonvested RSUs as of January 1, 201950,176$6.31Granted9,9258.32Vested(6,098)7.40Cancelled——Nonvested RSUs as of December 31, 201954,0036.56Granted3,5978.34Vested(3,597)8.34Cancelled(9,000)8.36Nonvested RSUs at December 31, 202045,003$6.20$278,961The fair value of each RSU is the market price on the date of grant and is being recorded as compensation expense ratably over the vesting terms or theexpected achievement of market price targets based on the Monte Carlo simulation model. For the years ended December 31, 2020 and 2019, the Company recorded$38,000 and $7,000 of RSU expense, respectively. The RSUs are forfeited by a participant upon termination for any reason, and there is no proportionate or partialvesting in the periods between the vesting dates. As of December 31, 2020, there was no unrecognized compensation cost related to the nonvested RSUs.For the year ended December 31, 2020 the Company recorded no compensation related to restricted stock compared to $14,000 in the prior year. During the year ended December 31, 2020 the Company awarded approximately 17,000 shares to an officer of the Company with a fair value of $146,000.F239. INCOME TAXESOn December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed theCompany to record provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date ofenactment. The Company has completed its accounting for the tax effects of enactment of the Act. The deemed inclusion from the repatriation tax increased from$3.9 million at the time of provision to $5.0 million at the time the calculation was finalized for the tax return. The increase of the inclusion related primarily to therefinement of Malaysia earnings and profits. As the Company is in a full valuation allowance position, an equal benefit adjustment was recorded for the impact ofthe increase of the deemed repatriation tax.Components of income before income taxes and the income tax provision are as follows:Income (loss) before income taxesYear endedDecember 31,20202019(in thousands)U.S.$(3,060)$(1,142)Foreign2,01817Total$(1,050)$(1,125)Income taxesYear endedDecember 31,20202019(in thousands)CurrentU.S.$—$—State——Foreign1322Total current income tax expense1322DeferredU.S.——State——Foreign——Total deferred income tax expense (benefit)——Total income tax expense (benefit)$13$22The reconciliation of income tax computed at the federal statutory rate to income before taxes is as follows:Year endedDecember 31,20202019U.S. federal statutory rate(21.0)%(21.0)%State taxes net of federal benefit(18.2)(7.6)Foreign rate differential and transactional tax5.90.1Tax credits——Valuation allowance33.328.5Other12.01.0%2.0%F24Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amount of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred income taxes are as follows at December 31:20202019(in thousands)Deferred tax assets:Allowance for doubtful accounts$1$11Inventory reserves3,0963,185Consumables excess reserve167169Accrued liabilities8152Warrant interest expense195196Stock compensation expense789789State net operating loss14,47615,010Net operating loss carryforward41,10540,437Tax credits710740Depreciation1,0001,329Valuation allowance(61,556)(61,869)Total deferred tax assets6449Deferred tax liability:Prepaid expenses(64)(49)Net deferred tax liability$—$—In February 2018, the FASB issued ASU No. 201802 (“ASU 201802), Income StatementReporting Comprehensive Income (Topic 220): Reclassification ofCertain Tax Effects from Accumulated Comprehensive Income. The new guidance allows companies to reclassify stranded tax effects resulting from the Tax Act,from accumulated other comprehensive income to retained earnings. The guidance also requires certain new disclosures regardless of the election. Early adoption ispermitted. The Company’s adoption of ASU 201802 did not have a material impact on its consolidated financial statements.The Company adopted the guidance in ASU No. 201517, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which requires that alldeferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent in the balance sheet. As a result, each jurisdiction has onenet noncurrent deferred tax asset or liability. The new guidance does not change the existing requirement that only permits offsetting within a jurisdiction.Companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The change inaccounting principle did not have an impact on the Company’s results of operations, cash flows or stockholders’ equity. At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.The Company completed an analysis of the utilization of NOLs subject to limits based upon certain ownership changes as of December 31, 2020. The results ofthis analysis indicated no ownership change limiting the utilization of net operating losses and tax credits.F25The Company prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, orexpected to be taken, in a tax return. At December 31, 2020 and 2019, the Company had $1.1 million of unrecognized tax benefits taken or expected to be taken in a taxreturn that have been recorded on the Company’s financial statements as an offset to the valuation allowance related to tax positions taken in 2012. It is notreasonably possible that the amount will change in the next twelve months. There were no material changes to prior year or current year positions taken during theyear ended December 31, 2020.There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company files income tax returns in the United States federal jurisdiction and in a state jurisdiction. During 2009, the Company began foreign operations inMalaysia and is subject to local income taxes in that jurisdiction. The Company’s Malaysia tax returns for the periods ended December 31, 2010 through 2012 havebeen audited by the Malaysia Inland Revenue Board with no changes made to the taxable income for those years. All other tax years in Malaysia are open toexamination by tax authorities.The Company’s federal tax returns for the periods ended December 31, 2010, 2008 and 2007 have been audited by the Internal Revenue Service (IRS) with nochanges made to the Company’s taxable losses for those years. The Company’s state tax returns for the periods ended December 31, 2009 through 2012 have beenaudited by the Illinois Department of Revenue with no changes made to the Company’s taxable losses for those years. Due to the existence of NOL carryforwards,tax years ended December 31, 2001 through 2006, 2008, 2009 and 2011 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOLcarryforwards at the State level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 areopen to examination by the Malaysia Inland Revenue Board.Due to the closing of the Rubicon Malaysia operations, the Company no longer considers the undistributed earnings of Rubicon Malaysia to be indefinitelyreinvested. Upon liquidation of Rubicon Malaysia, it is anticipated any cash left after the liquidation will be brought back to the U.S. via a payment of principaltowards the intercompany loan. A withholding tax may be payable to the Malaysian government on the interest portion of the loan. At December 31, 2020 and 2019,the Company accrued the withholding tax on the interest balance of the loan in the amount of $13,000 and $22,000, respectively, which represents the incremental tax.10. COMMITMENTS AND CONTINGENCIESCOVID19 PandemicIn March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID19) as a pandemic. The full impact of the COVID19outbreak is unknown and cannot be reasonably estimated. The magnitude and duration of the COVID19 outbreak, as well as other factors, could result in a materialimpact to the Company’s financial statements in future reporting periods.Operating LeasesThe Company adopted ASU 201602 in the first quarter of the fiscal year ending December 31, 2019. The adoption of ASU 201602 did not have a material impacton the Company’s consolidated financial statements, as the Company does not have any material lease agreements Rubicon DTP leases a building for itsmanufacturing and offices, however such lease was not considered material to the Company’s financial statements.Direct Dose’s net rent expense under operating leases in 2020 and 2019 amounted to $34,200 and $25,900, respectively. As of December 31, 2020, Direct Dose’soperating lease for its facility was monthtomonth. On January 6, 2021, Direct Dose entered into a one year lease for an aggregate commitment of approximately$35,500.LitigationFrom time to time, the Company experiences routine litigation in the ordinary course of its business.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.11. BENEFIT PLANThe Company sponsors a 401(k) savings plan (the “Plan”). Employees are eligible to participate in the Plan upon reaching 18 years of age. Employees makecontributions to the Plan through payroll deferrals. Employer matching contributions are discretionary. There were no employer matching contributions for the yearsended December 31, 2020 and 2019.12. SUBSEQUENT EVENTSNone.F26EX21.1 2 f10k2020ex211_rubicon.htm SUBSIDIARIES OF THE COMPANYExhibit 21.1Rubicon Technologies, Inc.Subsidiaries of the CompanyName of subsidiaryState (or other jurisdiction of incorporation)Rubicon Technology Worldwide LLCIllinoisRubicon Technology BP LLCDelawareRubicon DTP LLCDelawareEX23.1 3 f10k2020ex231_rubicon.htm CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMExhibit 23.1INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENTWe consent to the incorporation by reference in the Registration Statements of Rubicon Technology, Inc. on Form S3 (File No. 333167272), as amended (File No.333192536) and on Forms S8 (File No. 333147552, File No. 333180211 and File No. 333213025) of our report dated March 22, 2021 with respect to our audits of theconsolidated financial statements of Rubicon Technology, Inc. and Subsidiaries as of December 31, 2020 and 2019 and for each of the two years in the period endedDecember 31, 2020, which report is included in this Annual Report on Form 10K of Rubicon Technology, Inc. and Subsidiaries for the year ended December 31, 2020./s/ Marcum LLPMarcum LLPChicago, IllinoisMarch 22, 2021EX31.1 4 f10k2020ex311_rubicon.htm CERTIFICATIONExhibit 31.1CertificationsCertification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Timothy E. Brog, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerEX31.2 5 f10k2020ex312_rubicon.htm CERTIFICATIONExhibit 31.2Certification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Kevin T. Lusardi, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerEX32.1 6 f10k2020ex321_rubicon.htm CERTIFICATIONExhibit 32.1Certification Pursuant to Section 906 of The SarbanesOxley Act of 2002,18 U.S.C. Section 1350In connection with the Annual Report of Rubicon Technology, Inc. (the “Company”) on Form 10K for the year ended December 31, 2020, as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Timothy E. Brog, President and Chief Executive Officer of the Company, and I, Kevin T.Lusardi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the SarbanesOxley Act of 2002,that, to my knowledge:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerDate: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerA signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnishedto the Securities and Exchange Commission or its staff upon request. F8Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanthe functional currency of the Company, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in thedetermination of net income (loss) for the period. The Company records these gains and losses in other income.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expenses), in the Consolidated Statements of Operations. Investments in which the Company has the ability and intent, ifnecessary, to liquidate in order to support the current operations are classified as shortterm.The Company reviews its availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on thespecific identification method. The Company considers various factors in determining whether an impairment is otherthantemporary, including the severity andduration of the impairment, changes in underlying credit ratings, forecasted recovery, its ability and intent to hold the investment for a period of time sufficient toallow for any anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When the Company concludesthat an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on theConsolidated Statements of Operations. As of December 31, 2020, and 2019, no impairment was recorded.Purchases of Equity Securities by the IssuerIn November 2018, the Company’s Board of Directors authorized a program to repurchase up to $3 million of its common stock. In July 2020, the Company usedall of the original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time. There can be no assurance as to the number of shares of common stock repurchased. The Company records treasurystock purchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock.Share repurchase activity during the year ended December 31, 2020, was as follows:PeriodsTotalnumber ofsharespurchasedAveragepricepaid pershareTotalnumber ofsharespurchasedas part ofpubliclyannouncedprogramApproximatedollar valueof sharesthat may yetbe purchasedunder theprogram(in thousands)January 1, 2020, to December 31, 2020295,946$8.10295,546$3,000Total295,946$3,000F9Accounts receivableThe majority of the Company’s accounts receivable are due from defense subcontractors, industrial manufacturers, fabricators and resellers. Credit is extendedbased on an evaluation of the customer’s financial condition. Accounts receivable are due based on contract terms and at stated amounts due from customers, netof an allowance for doubtful accounts. Losses from credit sales are provided for in the financial statements.Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number offactors, including the length of time a customer’s account is past due, the customer’s current ability to pay and the condition of the general economy and industryas a whole. The Company writes off accounts receivable when they are deemed uncollectible and such writeoffs, net of payments received, are recorded as areduction to the allowance.The following table shows the activity of the allowance for doubtful accounts:Year endedDecember 31,20202019(in thousands)Beginning balance$40$7Charges to costs and expenses(20)33Account writeoffs, less recoveries(17)—Ending balance$3$40InventoriesInventories are valued at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary course ofbusiness less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis, which includes materials, labor and overhead. The Company reduces the carrying value of itsinventories for differences between the cost and the estimated net realizable value, taking into account usage, expected demand, technological obsolescence andother relevant information.The Company establishes inventory reserves when conditions exist that suggest inventory may be in excess of anticipated demand or is obsolete based oncustomer specifications. The Company evaluates the ability to realize the value of its inventory based on a combination of factors, including forecasted sales,estimated current and future market value and changes in customers’ product specifications. The Company’s method of estimating excess and obsolete inventoryhas remained consistent for all periods presented. The Company also carries a lower of cost or market inventory reserve based on net realizable value using mostrecent sales prices to determine market value. As of December 31, 2020 and 2019, the balance of the lower of cost or market reserve was $51,000 and $72,000,respectively, representing a decrease of $21,000 resulting from sales of related reserved for inventory. In addition, in 2020 we sold inventory that was valued at thelower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $21,000. In 2019 we sold inventorythat was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $35,000.In 2019 and 2020, the Company used some of its previously written down twoinch diameter core material in production of optical and industrial sapphire wafersand did not record any additional adjustments for the years ended December 31, 2019 and December 31, 2020.The Company evaluates the amount of raw material needed for future production based on expected crystal growth production needed to meet anticipatedsales. The Company did not record any writedowns of its raw materials inventory for the years ended December 31, 2019 and December 31, 2020.F10Inventories are composed of the following:As ofDecember 31,20202019(in thousands)Raw materials$468$468Workinprocess614901Finished goods459809$1,541$2,178As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.Other inventory suppliesThe Company’s other inventory supplies include stock of consumable assets and spare parts used in the manufacturing process.Assets held for saleAn asset is considered to be held for sale when all of the following criteria are met: (i) management commits to a plan to sell the asset; (ii) it is unlikely that thedisposal plan will be significantly modified or discontinued; (iii) the asset is available for immediate sale in its present condition; (iv) actions required to complete thesale of the asset have been initiated; (v) sale of the asset is probable and the completed sale is expected to occur within one year; and (vi) the asset is actively beingmarketed for sale at a price that is reasonable given its current market value.A longlived asset classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. If the longlived asset is newlyacquired, the carrying amount of the longlived asset is established based on its fair value less cost to sell at the acquisition date. A longlived asset is notdepreciated or amortized while it is classified as held for sale.In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.F11Property and equipmentProperty and equipment consisted of the following:As ofDecember 31,20202019(in thousands)Machinery, equipment and tooling$3,343$3,341Buildings1,7111,711Information systems835835Land and land improvements594594Furniture and fixtures88Total cost6,4916,489Accumulated depreciation and amortization(4,009)(3,842)Property and equipment, net$2,482$2,647Property and equipment are carried at cost and depreciated over their estimated useful lives using the straightline method. The cost of maintenance and repairsis charged to expense as incurred. Significant renewals and improvements are capitalized. Depreciation expense associated with property and equipment was$167,000 and $169,000 for the years ended December 31, 2020 and 2019, respectively.The estimated useful lives are as follows:Asset descriptionLifeBuildings39 yearsMachinery, equipment and tooling310 yearsFurniture and fixtures7 yearsInformation systems3 yearsWarranty costThe Company’s sales terms include a warranty that its products will meet certain specifications. The Company records a current liability for the expected cost ofwarrantyrelated claims at the time of sale. The warranty reserve is included in accrued and other current liabilities on the Consolidated Balance Sheets.The following table presents changes in the Company’s product warranty liability:Year endedDecember 31,20202019(in thousands)Balance, beginning of period$4$8Charged to cost of sales1831Actual product warranty expenditures(20)(35)Balance, end of period$2$4The Company does not provide maintenance or other services and it does not have sales that involve bill & hold arrangements, multiple elements ordeliverables. However, the Company does provide product warranty for up to 90 days, for which the Company has accrued a warranty reserve of $2,000 and $4,000for the years ended December 31, 2020 and 2019, respectively.Fair value of financial instrumentsThe Company’s financial instruments consist primarily of cash and cash equivalents, shortterm investments, accounts receivable, and accounts payable. Thecarrying values of these assets and liabilities approximate their fair values due to the shortterm nature of these instruments at December 31, 2020 and 2019.F12Concentration of credit risks and other risks and uncertaintiesFinancial instruments that could potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, restrictedcash, shortterm investments and accounts receivable. At December 31, 2020 the Company had no deposits at foreign financial institutions and $1.6 million ondeposit at foreign financial institutions at December 31, 2019. As of December 31, 2020, the Company had $8 million on deposit at financial institutions in excess ofamounts insured by the FDIC. This compares to a $5.7 million as of December 31, 2019. The Company performs a periodic evaluation of these institutions for relativecredit standing. The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant risk of loss on thesebalances.The Company uses third parties for certain finishing functions for its products, including the slicing and polishing of its sapphire crystal inventory. These typesof services are only available from a limited number of third parties. The Company’s ability to successfully outsource these finishing functions will substantiallydepend on its ability to develop, maintain and expand its strategic relationship with these third parties. As a result, the Company may be unable to meet the demandfor its products, which could have a material adverse impact on the Company.Concentration of credit risk related to revenue and accounts receivable is discussed in Note 4.Revenue recognitionRevenues recognized include product sales and billings for costs and fees for government contracts.Product SalesThe Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1,2018. The Company recognizes revenue when performance obligations under a purchase order or signed quotation are satisfied. The Company’s business practicecommits the Company to manufacture and deliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement withthe customer includes specifications of the product to be delivered, price, expected ship date and payment terms. The Company’s agreements generally do notcontain variable, financing, rights of return or noncash components. There are no upfront costs to develop the production process. The performance obligation issatisfied at the point in time (single performance obligation) when the product is manufactured to the customer’s specification, as performance does not create anasset with an alternative use to the Company. Accordingly, the Company recognizes revenue when the product is shipped, and control of the product, title and riskof loss have been transferred to the customer. The Company grants credit terms considering normal collection risk. If there is doubt about collection, full prepaymentfor the order is required. Any payments received prior to shipment are recorded as deferred revenue and included in Advance Payments in the Consolidated BalanceSheets. The Company does not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of the Company’s revenue is denominated in U.S. dollars.Shipping and handling costsThe Company records costs incurred in connection with shipping and handling of products as cost of goods sold. Amounts billed to customers in connectionwith these costs are included in revenue and are not material for any of the periods presented in the accompanying financial statements.Sales taxThe Company collects and remits sales taxes on products sold to customers and reports such amounts under the net method in its Consolidated Statements ofOperations and records a liability until remitted to the respective tax authority.F13Stockbased compensationThe Company requires all sharebased payments to employees, including grants of employee stock options, to be measured at fair value and expensed in theConsolidated Statements of Operations over the service period (generally the vesting period) of the grant. Expense is recognized in the Consolidated Statements ofOperations for these sharebased payments. The Company uses Black Scholes option pricing model in order to determine the fair value of stock option grants.Accounting for uncertainty in income taxesThe Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by thetaxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured basedon the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and/or penalties related to incometax matters in income tax expense. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years endedDecember 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.Income taxesDeferred tax assets and liabilities are provided for temporary differences between financial reporting and income tax bases of assets and liabilities, and aremeasured using the enacted tax rates and laws expected to be in effect when the differences will reverse. Deferred income taxes also arise from the future benefits ofNOL carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Full valuationallowances on net deferred tax assets are maintained until an appropriate level of profitability that generates taxable income is deemed sustainable or until a taxstrategy is developed that would enable the Company to conclude that it is more likely than not that a portion of the deferred tax assets will be realizable. Based onan evaluation in accordance with the accounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. andMalaysia deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all theavailable evidence.Use of estimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at thedate of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.Other comprehensive lossComprehensive loss is defined as the change in equity of a business enterprise from transactions and other events from nonowner sources. Comprehensiveloss includes net loss and other nonowner changes in equity that bypass the statement of operations and are reported in a separate component of equity.Net income (loss) per common shareBasic net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of common shares outstanding duringthe period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of diluted common sharesoutstanding during the period. Diluted shares outstanding are calculated by adding to the weightedaverage shares (a) any outstanding stock options based on thetreasury stock method and (b) restricted stock units (“RSU”).F14Diluted net income per share was the same as basic net income per share for the year ended December 31, 2020, because the effects of potentially dilutivesecurities did not have a material impact on the calculation of diluted net income per share. The Company had outstanding options exercisable into 18,250 shares ofthe Company’s common stock that would have had an antidilutive effect at December 31, 2020.Diluted net loss per common share was the same as basic net loss per common share for the year ended December 31, 2020, because the effects of potentiallydilutive securities were antidilutive.New accounting pronouncements adoptedThe Company has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significantimpact the Company’s consolidated financial statements and related disclosures. 2. SEGMENT INFORMATIONThe Company has determined that it operates in two segments, the sapphire and pharmacy business.Revenue is attributed by geographic region based on shipto location of the Company’s customers. The following table summarizes revenue by geographicregion:Year ended December 31,20202019(in thousands)North America$4,039$3,324Asia406185Other2217Total revenue$4,467$3,526The following table summarizes sales by product type:Year ended December 31,20202019(in thousands)Optical$3,611$3,338Core69Rubicon DTP850179Total revenue$4,467$3,526The following table summarizes assets by geographic region:As ofDecember 31,20202019(in thousands)United States$31,240$29,703Malaysia—5,094Other—4Total assets$31,240$34,801 The total assets of Rubicon DTP were not material to the total assets of the Company as stated on the consolidated balance sheets, as of December 31, 2020and 2019.Rubicon DTP accounted for approximately $340,000 and $447,000 of the Company’s loss for the year ended December 31, 2020 and 2019, respectively. F153. INVESTMENTSThe Company invests available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, commonstock, equity related securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains andlosses recorded in accumulated other comprehensive income/(loss). Investments in equity securities are reported at fair value, with both realized and unrealizedgains and losses recorded as unrealized gain/(loss) on investments and realized gain on investments, in other income/(expense), in the Consolidated Statements ofOperations. Investments in which the Company has the ability and intent, if necessary, to liquidate are classified as shortterm.The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2020:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,748$—$—$14,748Marketable securities————Total shortterm investments$14,748$—$—$14,748The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2019:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,668$—$—$14,668Marketable securities961(171)790Total shortterm investments$15,629$—$(171)$15,458The Company values its investments at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in theprincipal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniquesused to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchybased on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are thefollowing:●Level 1—Quoted prices in active markets for identical assets or liabilities.●Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices inmarkets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assetsor liabilities.●Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.The Company’s fixed income availableforsale securities consist of U.S. Treasury securities, highquality investment grade commercial paper, FDIC guaranteedcertificates of deposit, common stock, equity related securities and corporate notes. The Company values these securities based on pricing from pricing vendors,who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly(Level 2 inputs) in determining fair value. The valuation techniques used to measure the fair value of the Company’s financial instruments having Level 2 inputswere derived from nonbinding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricingmodels, such as discounted cash flow techniques.F16The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2020:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,136$—$—$3,136Investments:Availableforsales securities—current:U.S. Treasury securities—14,748—14,748Total$3,136$14,748$—$17,884The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2019:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,759$—$—$3,759Investments:Availableforsales securities—current:U.S. Treasury securities—14,668—14,668790790Total$4,549$14,668$—$19,217There are no terms or conditions restricting the Company from redeeming any of its investments.In addition to the debt securities noted above, the Company had approximately $8.0 million and $4.9 million of time deposits included in cash and cashequivalents as of December 31, 2020 and 2019, respectively.4. SIGNIFICANT CUSTOMERSFor the year ended December 31, 2020, the Company had four customers that accounted for approximately 21%, 13%, 11% and 10% of its revenue. For the yearended December 31, 2019, the Company had three customers that accounted for approximately 31%, 15% and 12% of its revenue.Customers individually representing more than 10% of trade receivables accounted for approximately 44% and 77% of accounts receivable as of December 31,2020 and 2019, respectively. 5. ASSETS HELD FOR SALE AND LONGLIVED ASSETSWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, the Company performs ananalysis to review the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expectedfuture operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.F17In connection with the Company’s decision in 2016 to limit its focus to the optical and industrial sapphire markets and exit the LED market, the Companydeveloped a plan to close its Malaysia facility, scale down and consolidate remaining operations in the U.S. and sell additional assets that would not be needed. TheCompany evaluated its U.S. and Malaysia asset portfolios to identify assets needed for its current business strategy and excess assets that were no longer needed.The Company determined it had excess machinery, equipment and facilities. Excess U.S. and Malaysia assets were evaluated based on assuming an orderlyliquidation plan, which considers economic obsolescence and sales of comparable equipment, as it is the Company’s intention to sell these assets. Additionally, theCompany evaluated its U.S. assets continuing to be used in operations using a cost and market approach to determine the current fair value. In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.6. STOCKHOLDERS’ EQUITYCommon stockAt the Company’s annual meeting of stockholders held on May 3, 2017, the Company’s stockholders approved amendments to the Company’s Eighth Amendedand Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”) to (i) effect a reverse stock split of the Company’s common stock; and (ii)decrease the Company’s authorized number of shares of common stock to three times the number of shares of the Company’s common stock outstandingimmediately following the reverse stock split. On May 3, 2017, following the annual meeting, the Company filed with the Secretary of State of the State of Delaware aCertificate of Amendment to (a) implement the reverse stock split at a ratio of 1for10; and (b) to reduce the number of authorized shares of common stock from40,000,000 to 8,200,000, consequently reducing the number of total authorized shares from 45,000,000 to 13,200,000. With the completion of the reverse stock split,the Company’s shares began trading above the required $1.00 per share closing bid price, as required by the Listing Qualifications Department of NASDAQ. Theshare information has been retroactively reflected for the effects of this reverse stock split for all periods presented.Preferred stockAt the Company’s annual meeting of stockholders held on May 10, 2018, the Company’s stockholders approved an amendment to the Certificate ofIncorporation to decrease the Company’s authorized number of shares of preferred stock from 5,000,000 shares to 1,000,000 shares. The Company filed with theSecretary of State of the State of Delaware a Certificate of Amendment to decrease the authorized number of preferred shares, consequently reducing the number oftotal authorized shares from 13,200,000 to 9,200,000.Common shares reservedAs of December 31, 2020, the Company had reserved 65,103 shares of common stock for issuance upon the exercise of outstanding common stock options andvesting of RSUs. Also 301,105 shares of the Company’s common stock were reserved for future grants of stock options and RSUs (or other similar equityinstruments) under the Rubicon Technology, Inc. 2016 Stock Incentive Plan (the “2016 Plan”) as of December 31, 2020.F187. STOCKHOLDER RIGHTS AGREEMENT On December 18, 2017, the Company entered into a Section 382 Rights Agreement with American Stock Transfer & Trust Company, LLC, as Rights Agent (the“Rights Agreement”) in an effort to protect stockholder value by attempting to diminish the risk that the Company’s ability to use its net NOLs to reduce potentialfuture federal income tax obligations may become substantially limited. The Company’s ability to utilize its NOLs may be substantially limited if the Companyexperiences an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”). The Rights Agreement isintended to act as a deterrent to any person acquiring beneficial ownership of 4.9% or more of the Company’s outstanding common stock without the approval ofthe Company’s Board of Directors (the “Board”).The Board authorized the issuance of one Right for each outstanding share of common stock, par value $0.001 per share, of the Company, payable tostockholders of record date of the close of business on January 2, 2018. One Right will also be issued together with each share of the Company’s common stockissued after January 2, 2018 but before the Distribution Date (as defined below) and, in certain circumstances, after the Distribution Date. Subject to the terms,provisions and conditions of the Rights Agreement, if the Rights become exercisable, each Right would initially represent the right to purchase from the Companyone onethousandth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company (the “Series A Preferred Stock”) for apurchase price of $40.00. If issued, each onethousandth of a share of Series A Preferred Stock would give the stockholder approximately the same dividend, votingand liquidation rights as does one share of common stock. However, prior to exercise, a Right does not give its holder any rights as a stockholder of the Company,including, without limitation, any dividend, voting or liquidation rights.The Rights will not be exercisable until the earlier of (i) ten business days after a public announcement that a person has become an “Acquiring Person” byacquiring beneficial ownership of 4.9% or more of outstanding common stock (or, in the case of a person that had beneficial ownership of 4.9% or more of theoutstanding common stock as of the close of business on December 18, 2017, by obtaining beneficial ownership of any additional shares of common stockrepresenting 0.5% or more of the shares of common stock then outstanding (other than pursuant to a dividend or distribution paid or made by the Company on theoutstanding shares of the common stock or pursuant to a split or subdivision of the outstanding shares of common stock) at a time such person still beneficiallyowns 4.9% or more of the outstanding common stock), and (ii) ten business days (or such later date as may be specified by the Board prior to such time as anyperson becomes an Acquiring Person) after the commencement of a tender or exchange offer by or on behalf of a person that, if completed, would result in suchperson becoming an Acquiring Person (the “Distribution Date”).Until the Distribution Date, common stock certificates or the ownership statements issued with respect to uncertificated shares of common stock will evidencethe Rights. Any transfer of shares of common stock prior to the Distribution Date will also constitute a transfer of the associated Rights. After the Distribution Date,separate rights certificates will be issued and the Rights may be transferred other than in connection with the transfer of the underlying shares of common stockunless and until the Board has determined to effect an exchange pursuant to the Rights Agreement (as described below).In the event that a person becomes an Acquiring Person, each holder of a Right, other than Rights that are or, under certain circumstances, were beneficiallyowned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right and payment of the purchaseprice, a number of shares of the Company’s common stock (or, in certain circumstances, cash, property or other securities of the Company) having a market valueequal to two times the purchase price. However, Rights are subject to redemption and exchange at the option of the Company.In the event that, at any time following a person becoming an Acquiring Person, (i) the Company engages in a merger or other business combination transactionin which the Company is not the surviving corporation; (ii) the Company engages in a merger or other business combination transaction in which the Company isthe surviving corporation and the common stock is changed or exchanged; or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold ortransferred, each holder of a Right (except Rights which have previously been voided) shall thereafter have the right to receive, upon exercise of the Right, commonstock of the acquiring company having a value equal to two times the purchase price.F19At any time until the earlier of December 18, 2023, and ten calendar days following the first date of public announcement that a person has become an AcquiringPerson or that discloses information which reveals the existence of an Acquiring Person or such earlier date as a majority of the Board becomes aware of theexistence of an Acquiring Person, the Board may redeem the Rights in whole, but not in part, at a price of $0.001 per Right (the “Redemption Price”). The redemptionof the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon anyredemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.At any time after a person becomes an Acquiring Person, the Board may, at its option, exchange the Rights (other than Rights that have become void), in wholeor in part, at an exchange ratio of one share of common stock, or a fractional share of Series A Preferred Stock (or of a share of a similar class or series of theCompany’s preferred stock having similar rights, preferences and privileges) of equivalent value, per Right (subject to adjustment). Immediately upon an exchange ofany Rights, the right to exercise such Rights will terminate and the only right of the holders of Rights will be to receive the number of shares of common stock (orfractional share of Series A Preferred Stock or of a share of a similar class or series of the Company’s preferred stock having similar rights, preferences andprivileges) equal to the number of such Rights held by such holder multiplied by the exchange ratio.Each one onethousandth of a share of Series A Preferred Stock, if issued: (i) will be nonredeemable and junior to any other series of preferred stock theCompany may issue (unless otherwise provided in the terms of such other series), (ii) will entitle holders to preferential cumulative quarterly dividends in an amountper share of Series A Preferred Stock equal to the greater of (a) $1 or (b) 1,000 times the aggregate the dividends, if any, declared on one share of the Company’scommon stock, (iii) will entitle holders upon liquidation (voluntary or otherwise) to receive $1,000 per share of Series A Preferred Stock plus an amount equal toaccrued and unpaid dividends and distributions thereon, whether or not declared, (iv) will have the same voting power as one share of common stock, and (v) willentitle holders to a per share payment equal to the payment made on one share of the Company’s common stock, if shares of the common stock are exchanged viamerger, consolidation, or a similar transaction. Because of the nature of the Series A Preferred Stock’s dividend, liquidation and voting rights, the value of a Unit ofSeries A Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of common stock.The Rights and the Rights Agreement will expire on the earliest of (i) December 18, 2023, (ii) the time at which the Rights are redeemed pursuant to the RightsAgreement, (iii) the time at which the Rights are exchanged in full pursuant to the Rights Agreement, (iv) the date that the Board determines that the RightsAgreement is no longer necessary for the preservation of material valuable Tax Benefits, (v) the beginning of a taxable year of the Company to which the Boarddetermines that no NOL tax benefits may be carried forward, and (vi) a determination by the Board, prior to the time any Person becomes an Acquiring Person, thatthe Rights Agreement and the Rights are no longer in the best interests of the Company and its stockholders.The Board may adjust the purchase price, the number of shares of Series A Preferred Stock or other securities or assets issuable and the number of outstandingRights to prevent dilution that may occur as a result of certain events, including among others, a stock dividend, a stock split or a reclassification of the Series APreferred Stock or common stock. With certain exceptions, no adjustments to the purchase price will be required until cumulative adjustments amount to at least 1%of the purchase price.For so long as the Rights are redeemable, the Board may supplement or amend any provision of the Rights Agreement in any respect without the approval ofthe holders of the Rights. From and after the time the Rights are no longer redeemable, the Board may supplement or amend the Rights Agreement only to cure anambiguity, to alter time period provisions, to correct inconsistent provisions, or to make any additional changes to the Rights Agreement which the Company maydeem necessary or desirable, but only to the extent that those changes do not impair or adversely affect any Rights holder (other than an Acquiring Person or anyAffiliate or Associate of an Acquiring Person or certain of their transferees) and do not result in the Rights again becoming redeemable or the Rights Agreementagain becoming amendable other than in accordance with this sentence.In connection with the adoption of the Rights Agreement and authorization and declaration of the dividend of the Rights, on December 18, 2017, the Companyfiled the Certificate of Designation with the Secretary of State of the State of Delaware. The Certificate of Designation became effective on December 18, 2017.F208. STOCK INCENTIVE PLANSIn August 2007, the Company adopted the Rubicon Technology Inc. 2007 Stock Incentive Plan, which was amended and restated effective in March 2011 (the“2007 Plan”), and which allowed for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, RSUs, performanceawards and bonus shares. The maximum number of shares that could be awarded under the 2007 Plan was 440,769 shares. Options granted under the 2007 Planentitle the holder to purchase shares of the Company’s common stock at the specified option exercise price, which could not be less than the fair market value of thecommon stock on the grant date. On June 24, 2016, the 2007 Plan terminated with the adoption of the Rubicon Technology, Inc. 2016 Stock Incentive Plan, (the “2016Plan”). Any existing awards under the 2007 Plan remain outstanding in accordance with their current terms under the 2007 Plan. In June 2016, the Company’sstockholders approved adoption of the 2016 Plan effective as of March 17, 2016, which allows for the grant of incentive stock options, nonstatutory stock options,stock appreciation rights, restricted stock, RSUs, performance awards and bonus shares. The Compensation Committee of the Board administers the 2016 Plan. Thecommittee determines the type of award to be granted, the fair value, the number of shares covered by the award, and the time when the award vests and may beexercised.Pursuant to the 2016 Plan, 222,980 shares of the Company’s common stock plus any shares subject to outstanding awards under the 2007 Plan thatsubsequently expire unexercised, are forfeited without the delivery of shares or are settled in cash, will be available for issuance under the 2016 Plan. The 2016 Planwill automatically terminate on March 17, 2026, unless the Company terminates it sooner.The following table summarizes the activity of the stock incentive and equity plans:Sharesavailablefor grantNumber ofoptionsoutstandingWeightedaverageoptionexercise priceNumber ofrestrictedstock sharesissuedNumber ofRSUsoutstandingOutstanding at January 1, 2019295,06769,08312.1099,57050,176Granted(60,925)1,000——9,925Exercised/issued—(5,000)——(6,098)Canceled/forfeited42,244(42,244)11.35——Outstanding at December 31, 2019276,38622,83913.4899,57054,003Granted(20,877)———3,597Exercised/issued—(2,250)——(3,597)Canceled/forfeited40,596(489)202.56—(9,000)Outstanding at December 31, 2020296,10520,100$9.7199,57045,003There were no option grants made during 2020. At December 31, 2020, the exercise prices of outstanding options were as follows:Exercise priceNumber ofoptionsoutstandingAverageremainingcontractual life(years)Number ofoptionsexercisable$6.10 $8.3418,2505.7518,250$44.101,8503.941,85020,1004.7320,100F21The aggregate grant date fair value of the options that became vested in the years ended 2020 and 2019 was $30,000 and $77,000, respectively.The following table summarizes the activity of nonvested options:NonvestedoptionsWeightedaverage optionexercisepriceNonvested at January 1, 201921,992$6.86Granted1,0008.34Vested(10,878)7.07Cancelled(7,248)7.25Nonvested at December 31, 20194,8666.10Granted——Vested(4,866)6.10Cancelled——Nonvested at December 31, 2020—$—The Company’s aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of theCompany’s common stock. Based on the fair value of the common stock at December 31, 2020 there was $52,000 of intrinsic value arising from 18,250 stock optionsexercisable or outstanding.The Company used historical stock prices as the basis for its volatility assumptions. The assumed riskfree rates were based on U.S. Treasury rates in effect atthe time of grant with a term consistent with the expected option lives. The expected term for the year ended December 31, 2020, is based upon the Company’smedian average life of its options. The forfeiture rate is based on the past history of forfeited options. The expense is being allocated using the straightline method.For the years ended December 31, 2020 and 2019, the Company recorded $14,000 and $24,000, respectively, of stock option compensation expense. As ofDecember 31, 2020, all outstanding options awarded have been fully vested.For the year ended December 31, 2020, there were no options granted.The following table summarizes the award vesting terms for the RSUs granted in 2019:Number of RSUsTarget price925$7.95The following table summarizes the award vesting terms for the RSUs granted in 2018:Number of restricted stock unitsTarget price902$11.0015,000$12.5015,000$14.00F22The RSUs vest in the amounts set forth below on the first date the 15trading day average closing price of the Company’s common stock equals or exceeds thecorresponding target price for the common stock before May 12, 2021. At the time the negotiation of the terms of the employment agreement began, the closing priceof the common stock was $5.50. On the date of grant, the closing price of the common stock was $6.30. During the twelve months ended December 31, 2017, the firstthree tranches of the grant vested. No additional tranches vested during the years ended December 31, 2020, 2019 and 2018.The Company used Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted because the awards vest based uponachievement of market price targets. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the marketcondition stipulated in the award and calculates the fair value of each RSU. The Company used the following assumptions in determining the fair value of the RSUs:GrantedJanuary2018March2017Daily expected stock price volatility4.2806%4.4237%Daily expected mean return on equity(0.2575)%(0.2226)%Daily expected dividend yield0.0%0.0%Average daily riskfree interest rate0.0078%0.0063%The daily expected stock price volatility is based on a fouryear historical volatility of the Company’s common stock. The daily expected dividend yield is basedon annual expected dividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches iscalculated to have its own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period which is upto four years. The RSUs granted in January 2018 and March 2017 had a grant date fair value of $209,000 and $323,000, respectively. There were no grants with marketprice targets issued in the years ended December 31, 2020 and 2019. A summary of the Company’s RSUs is as follows:RSUsoutstandingWeightedaverageprice attime of grantAggregateintrinsicvalueNonvested RSUs as of January 1, 201950,176$6.31Granted9,9258.32Vested(6,098)7.40Cancelled——Nonvested RSUs as of December 31, 201954,0036.56Granted3,5978.34Vested(3,597)8.34Cancelled(9,000)8.36Nonvested RSUs at December 31, 202045,003$6.20$278,961The fair value of each RSU is the market price on the date of grant and is being recorded as compensation expense ratably over the vesting terms or theexpected achievement of market price targets based on the Monte Carlo simulation model. For the years ended December 31, 2020 and 2019, the Company recorded$38,000 and $7,000 of RSU expense, respectively. The RSUs are forfeited by a participant upon termination for any reason, and there is no proportionate or partialvesting in the periods between the vesting dates. As of December 31, 2020, there was no unrecognized compensation cost related to the nonvested RSUs.For the year ended December 31, 2020 the Company recorded no compensation related to restricted stock compared to $14,000 in the prior year. During the year ended December 31, 2020 the Company awarded approximately 17,000 shares to an officer of the Company with a fair value of $146,000.F239. INCOME TAXESOn December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed theCompany to record provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date ofenactment. The Company has completed its accounting for the tax effects of enactment of the Act. The deemed inclusion from the repatriation tax increased from$3.9 million at the time of provision to $5.0 million at the time the calculation was finalized for the tax return. The increase of the inclusion related primarily to therefinement of Malaysia earnings and profits. As the Company is in a full valuation allowance position, an equal benefit adjustment was recorded for the impact ofthe increase of the deemed repatriation tax.Components of income before income taxes and the income tax provision are as follows:Income (loss) before income taxesYear endedDecember 31,20202019(in thousands)U.S.$(3,060)$(1,142)Foreign2,01817Total$(1,050)$(1,125)Income taxesYear endedDecember 31,20202019(in thousands)CurrentU.S.$—$—State——Foreign1322Total current income tax expense1322DeferredU.S.——State——Foreign——Total deferred income tax expense (benefit)——Total income tax expense (benefit)$13$22The reconciliation of income tax computed at the federal statutory rate to income before taxes is as follows:Year endedDecember 31,20202019U.S. federal statutory rate(21.0)%(21.0)%State taxes net of federal benefit(18.2)(7.6)Foreign rate differential and transactional tax5.90.1Tax credits——Valuation allowance33.328.5Other12.01.0%2.0%F24Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amount of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred income taxes are as follows at December 31:20202019(in thousands)Deferred tax assets:Allowance for doubtful accounts$1$11Inventory reserves3,0963,185Consumables excess reserve167169Accrued liabilities8152Warrant interest expense195196Stock compensation expense789789State net operating loss14,47615,010Net operating loss carryforward41,10540,437Tax credits710740Depreciation1,0001,329Valuation allowance(61,556)(61,869)Total deferred tax assets6449Deferred tax liability:Prepaid expenses(64)(49)Net deferred tax liability$—$—In February 2018, the FASB issued ASU No. 201802 (“ASU 201802), Income StatementReporting Comprehensive Income (Topic 220): Reclassification ofCertain Tax Effects from Accumulated Comprehensive Income. The new guidance allows companies to reclassify stranded tax effects resulting from the Tax Act,from accumulated other comprehensive income to retained earnings. The guidance also requires certain new disclosures regardless of the election. Early adoption ispermitted. The Company’s adoption of ASU 201802 did not have a material impact on its consolidated financial statements.The Company adopted the guidance in ASU No. 201517, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which requires that alldeferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent in the balance sheet. As a result, each jurisdiction has onenet noncurrent deferred tax asset or liability. The new guidance does not change the existing requirement that only permits offsetting within a jurisdiction.Companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The change inaccounting principle did not have an impact on the Company’s results of operations, cash flows or stockholders’ equity. At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.The Company completed an analysis of the utilization of NOLs subject to limits based upon certain ownership changes as of December 31, 2020. The results ofthis analysis indicated no ownership change limiting the utilization of net operating losses and tax credits.F25The Company prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, orexpected to be taken, in a tax return. At December 31, 2020 and 2019, the Company had $1.1 million of unrecognized tax benefits taken or expected to be taken in a taxreturn that have been recorded on the Company’s financial statements as an offset to the valuation allowance related to tax positions taken in 2012. It is notreasonably possible that the amount will change in the next twelve months. There were no material changes to prior year or current year positions taken during theyear ended December 31, 2020.There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company files income tax returns in the United States federal jurisdiction and in a state jurisdiction. During 2009, the Company began foreign operations inMalaysia and is subject to local income taxes in that jurisdiction. The Company’s Malaysia tax returns for the periods ended December 31, 2010 through 2012 havebeen audited by the Malaysia Inland Revenue Board with no changes made to the taxable income for those years. All other tax years in Malaysia are open toexamination by tax authorities.The Company’s federal tax returns for the periods ended December 31, 2010, 2008 and 2007 have been audited by the Internal Revenue Service (IRS) with nochanges made to the Company’s taxable losses for those years. The Company’s state tax returns for the periods ended December 31, 2009 through 2012 have beenaudited by the Illinois Department of Revenue with no changes made to the Company’s taxable losses for those years. Due to the existence of NOL carryforwards,tax years ended December 31, 2001 through 2006, 2008, 2009 and 2011 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOLcarryforwards at the State level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 areopen to examination by the Malaysia Inland Revenue Board.Due to the closing of the Rubicon Malaysia operations, the Company no longer considers the undistributed earnings of Rubicon Malaysia to be indefinitelyreinvested. Upon liquidation of Rubicon Malaysia, it is anticipated any cash left after the liquidation will be brought back to the U.S. via a payment of principaltowards the intercompany loan. A withholding tax may be payable to the Malaysian government on the interest portion of the loan. At December 31, 2020 and 2019,the Company accrued the withholding tax on the interest balance of the loan in the amount of $13,000 and $22,000, respectively, which represents the incremental tax.10. COMMITMENTS AND CONTINGENCIESCOVID19 PandemicIn March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID19) as a pandemic. The full impact of the COVID19outbreak is unknown and cannot be reasonably estimated. The magnitude and duration of the COVID19 outbreak, as well as other factors, could result in a materialimpact to the Company’s financial statements in future reporting periods.Operating LeasesThe Company adopted ASU 201602 in the first quarter of the fiscal year ending December 31, 2019. The adoption of ASU 201602 did not have a material impacton the Company’s consolidated financial statements, as the Company does not have any material lease agreements Rubicon DTP leases a building for itsmanufacturing and offices, however such lease was not considered material to the Company’s financial statements.Direct Dose’s net rent expense under operating leases in 2020 and 2019 amounted to $34,200 and $25,900, respectively. As of December 31, 2020, Direct Dose’soperating lease for its facility was monthtomonth. On January 6, 2021, Direct Dose entered into a one year lease for an aggregate commitment of approximately$35,500.LitigationFrom time to time, the Company experiences routine litigation in the ordinary course of its business.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.11. BENEFIT PLANThe Company sponsors a 401(k) savings plan (the “Plan”). Employees are eligible to participate in the Plan upon reaching 18 years of age. Employees makecontributions to the Plan through payroll deferrals. Employer matching contributions are discretionary. There were no employer matching contributions for the yearsended December 31, 2020 and 2019.12. SUBSEQUENT EVENTSNone.F26EX21.1 2 f10k2020ex211_rubicon.htm SUBSIDIARIES OF THE COMPANYExhibit 21.1Rubicon Technologies, Inc.Subsidiaries of the CompanyName of subsidiaryState (or other jurisdiction of incorporation)Rubicon Technology Worldwide LLCIllinoisRubicon Technology BP LLCDelawareRubicon DTP LLCDelawareEX23.1 3 f10k2020ex231_rubicon.htm CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMExhibit 23.1INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENTWe consent to the incorporation by reference in the Registration Statements of Rubicon Technology, Inc. on Form S3 (File No. 333167272), as amended (File No.333192536) and on Forms S8 (File No. 333147552, File No. 333180211 and File No. 333213025) of our report dated March 22, 2021 with respect to our audits of theconsolidated financial statements of Rubicon Technology, Inc. and Subsidiaries as of December 31, 2020 and 2019 and for each of the two years in the period endedDecember 31, 2020, which report is included in this Annual Report on Form 10K of Rubicon Technology, Inc. and Subsidiaries for the year ended December 31, 2020./s/ Marcum LLPMarcum LLPChicago, IllinoisMarch 22, 2021EX31.1 4 f10k2020ex311_rubicon.htm CERTIFICATIONExhibit 31.1CertificationsCertification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Timothy E. Brog, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerEX31.2 5 f10k2020ex312_rubicon.htm CERTIFICATIONExhibit 31.2Certification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Kevin T. Lusardi, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerEX32.1 6 f10k2020ex321_rubicon.htm CERTIFICATIONExhibit 32.1Certification Pursuant to Section 906 of The SarbanesOxley Act of 2002,18 U.S.C. Section 1350In connection with the Annual Report of Rubicon Technology, Inc. (the “Company”) on Form 10K for the year ended December 31, 2020, as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Timothy E. Brog, President and Chief Executive Officer of the Company, and I, Kevin T.Lusardi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the SarbanesOxley Act of 2002,that, to my knowledge:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerDate: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerA signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnishedto the Securities and Exchange Commission or its staff upon request. F8Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanthe functional currency of the Company, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in thedetermination of net income (loss) for the period. The Company records these gains and losses in other income.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expenses), in the Consolidated Statements of Operations. Investments in which the Company has the ability and intent, ifnecessary, to liquidate in order to support the current operations are classified as shortterm.The Company reviews its availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on thespecific identification method. The Company considers various factors in determining whether an impairment is otherthantemporary, including the severity andduration of the impairment, changes in underlying credit ratings, forecasted recovery, its ability and intent to hold the investment for a period of time sufficient toallow for any anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When the Company concludesthat an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on theConsolidated Statements of Operations. As of December 31, 2020, and 2019, no impairment was recorded.Purchases of Equity Securities by the IssuerIn November 2018, the Company’s Board of Directors authorized a program to repurchase up to $3 million of its common stock. In July 2020, the Company usedall of the original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time. There can be no assurance as to the number of shares of common stock repurchased. The Company records treasurystock purchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock.Share repurchase activity during the year ended December 31, 2020, was as follows:PeriodsTotalnumber ofsharespurchasedAveragepricepaid pershareTotalnumber ofsharespurchasedas part ofpubliclyannouncedprogramApproximatedollar valueof sharesthat may yetbe purchasedunder theprogram(in thousands)January 1, 2020, to December 31, 2020295,946$8.10295,546$3,000Total295,946$3,000F9Accounts receivableThe majority of the Company’s accounts receivable are due from defense subcontractors, industrial manufacturers, fabricators and resellers. Credit is extendedbased on an evaluation of the customer’s financial condition. Accounts receivable are due based on contract terms and at stated amounts due from customers, netof an allowance for doubtful accounts. Losses from credit sales are provided for in the financial statements.Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number offactors, including the length of time a customer’s account is past due, the customer’s current ability to pay and the condition of the general economy and industryas a whole. The Company writes off accounts receivable when they are deemed uncollectible and such writeoffs, net of payments received, are recorded as areduction to the allowance.The following table shows the activity of the allowance for doubtful accounts:Year endedDecember 31,20202019(in thousands)Beginning balance$40$7Charges to costs and expenses(20)33Account writeoffs, less recoveries(17)—Ending balance$3$40InventoriesInventories are valued at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary course ofbusiness less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis, which includes materials, labor and overhead. The Company reduces the carrying value of itsinventories for differences between the cost and the estimated net realizable value, taking into account usage, expected demand, technological obsolescence andother relevant information.The Company establishes inventory reserves when conditions exist that suggest inventory may be in excess of anticipated demand or is obsolete based oncustomer specifications. The Company evaluates the ability to realize the value of its inventory based on a combination of factors, including forecasted sales,estimated current and future market value and changes in customers’ product specifications. The Company’s method of estimating excess and obsolete inventoryhas remained consistent for all periods presented. The Company also carries a lower of cost or market inventory reserve based on net realizable value using mostrecent sales prices to determine market value. As of December 31, 2020 and 2019, the balance of the lower of cost or market reserve was $51,000 and $72,000,respectively, representing a decrease of $21,000 resulting from sales of related reserved for inventory. In addition, in 2020 we sold inventory that was valued at thelower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $21,000. In 2019 we sold inventorythat was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $35,000.In 2019 and 2020, the Company used some of its previously written down twoinch diameter core material in production of optical and industrial sapphire wafersand did not record any additional adjustments for the years ended December 31, 2019 and December 31, 2020.The Company evaluates the amount of raw material needed for future production based on expected crystal growth production needed to meet anticipatedsales. The Company did not record any writedowns of its raw materials inventory for the years ended December 31, 2019 and December 31, 2020.F10Inventories are composed of the following:As ofDecember 31,20202019(in thousands)Raw materials$468$468Workinprocess614901Finished goods459809$1,541$2,178As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.Other inventory suppliesThe Company’s other inventory supplies include stock of consumable assets and spare parts used in the manufacturing process.Assets held for saleAn asset is considered to be held for sale when all of the following criteria are met: (i) management commits to a plan to sell the asset; (ii) it is unlikely that thedisposal plan will be significantly modified or discontinued; (iii) the asset is available for immediate sale in its present condition; (iv) actions required to complete thesale of the asset have been initiated; (v) sale of the asset is probable and the completed sale is expected to occur within one year; and (vi) the asset is actively beingmarketed for sale at a price that is reasonable given its current market value.A longlived asset classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. If the longlived asset is newlyacquired, the carrying amount of the longlived asset is established based on its fair value less cost to sell at the acquisition date. A longlived asset is notdepreciated or amortized while it is classified as held for sale.In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.F11Property and equipmentProperty and equipment consisted of the following:As ofDecember 31,20202019(in thousands)Machinery, equipment and tooling$3,343$3,341Buildings1,7111,711Information systems835835Land and land improvements594594Furniture and fixtures88Total cost6,4916,489Accumulated depreciation and amortization(4,009)(3,842)Property and equipment, net$2,482$2,647Property and equipment are carried at cost and depreciated over their estimated useful lives using the straightline method. The cost of maintenance and repairsis charged to expense as incurred. Significant renewals and improvements are capitalized. Depreciation expense associated with property and equipment was$167,000 and $169,000 for the years ended December 31, 2020 and 2019, respectively.The estimated useful lives are as follows:Asset descriptionLifeBuildings39 yearsMachinery, equipment and tooling310 yearsFurniture and fixtures7 yearsInformation systems3 yearsWarranty costThe Company’s sales terms include a warranty that its products will meet certain specifications. The Company records a current liability for the expected cost ofwarrantyrelated claims at the time of sale. The warranty reserve is included in accrued and other current liabilities on the Consolidated Balance Sheets.The following table presents changes in the Company’s product warranty liability:Year endedDecember 31,20202019(in thousands)Balance, beginning of period$4$8Charged to cost of sales1831Actual product warranty expenditures(20)(35)Balance, end of period$2$4The Company does not provide maintenance or other services and it does not have sales that involve bill & hold arrangements, multiple elements ordeliverables. However, the Company does provide product warranty for up to 90 days, for which the Company has accrued a warranty reserve of $2,000 and $4,000for the years ended December 31, 2020 and 2019, respectively.Fair value of financial instrumentsThe Company’s financial instruments consist primarily of cash and cash equivalents, shortterm investments, accounts receivable, and accounts payable. Thecarrying values of these assets and liabilities approximate their fair values due to the shortterm nature of these instruments at December 31, 2020 and 2019.F12Concentration of credit risks and other risks and uncertaintiesFinancial instruments that could potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, restrictedcash, shortterm investments and accounts receivable. At December 31, 2020 the Company had no deposits at foreign financial institutions and $1.6 million ondeposit at foreign financial institutions at December 31, 2019. As of December 31, 2020, the Company had $8 million on deposit at financial institutions in excess ofamounts insured by the FDIC. This compares to a $5.7 million as of December 31, 2019. The Company performs a periodic evaluation of these institutions for relativecredit standing. The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant risk of loss on thesebalances.The Company uses third parties for certain finishing functions for its products, including the slicing and polishing of its sapphire crystal inventory. These typesof services are only available from a limited number of third parties. The Company’s ability to successfully outsource these finishing functions will substantiallydepend on its ability to develop, maintain and expand its strategic relationship with these third parties. As a result, the Company may be unable to meet the demandfor its products, which could have a material adverse impact on the Company.Concentration of credit risk related to revenue and accounts receivable is discussed in Note 4.Revenue recognitionRevenues recognized include product sales and billings for costs and fees for government contracts.Product SalesThe Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1,2018. The Company recognizes revenue when performance obligations under a purchase order or signed quotation are satisfied. The Company’s business practicecommits the Company to manufacture and deliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement withthe customer includes specifications of the product to be delivered, price, expected ship date and payment terms. The Company’s agreements generally do notcontain variable, financing, rights of return or noncash components. There are no upfront costs to develop the production process. The performance obligation issatisfied at the point in time (single performance obligation) when the product is manufactured to the customer’s specification, as performance does not create anasset with an alternative use to the Company. Accordingly, the Company recognizes revenue when the product is shipped, and control of the product, title and riskof loss have been transferred to the customer. The Company grants credit terms considering normal collection risk. If there is doubt about collection, full prepaymentfor the order is required. Any payments received prior to shipment are recorded as deferred revenue and included in Advance Payments in the Consolidated BalanceSheets. The Company does not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of the Company’s revenue is denominated in U.S. dollars.Shipping and handling costsThe Company records costs incurred in connection with shipping and handling of products as cost of goods sold. Amounts billed to customers in connectionwith these costs are included in revenue and are not material for any of the periods presented in the accompanying financial statements.Sales taxThe Company collects and remits sales taxes on products sold to customers and reports such amounts under the net method in its Consolidated Statements ofOperations and records a liability until remitted to the respective tax authority.F13Stockbased compensationThe Company requires all sharebased payments to employees, including grants of employee stock options, to be measured at fair value and expensed in theConsolidated Statements of Operations over the service period (generally the vesting period) of the grant. Expense is recognized in the Consolidated Statements ofOperations for these sharebased payments. The Company uses Black Scholes option pricing model in order to determine the fair value of stock option grants.Accounting for uncertainty in income taxesThe Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by thetaxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured basedon the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and/or penalties related to incometax matters in income tax expense. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years endedDecember 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.Income taxesDeferred tax assets and liabilities are provided for temporary differences between financial reporting and income tax bases of assets and liabilities, and aremeasured using the enacted tax rates and laws expected to be in effect when the differences will reverse. Deferred income taxes also arise from the future benefits ofNOL carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Full valuationallowances on net deferred tax assets are maintained until an appropriate level of profitability that generates taxable income is deemed sustainable or until a taxstrategy is developed that would enable the Company to conclude that it is more likely than not that a portion of the deferred tax assets will be realizable. Based onan evaluation in accordance with the accounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. andMalaysia deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all theavailable evidence.Use of estimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at thedate of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.Other comprehensive lossComprehensive loss is defined as the change in equity of a business enterprise from transactions and other events from nonowner sources. Comprehensiveloss includes net loss and other nonowner changes in equity that bypass the statement of operations and are reported in a separate component of equity.Net income (loss) per common shareBasic net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of common shares outstanding duringthe period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of diluted common sharesoutstanding during the period. Diluted shares outstanding are calculated by adding to the weightedaverage shares (a) any outstanding stock options based on thetreasury stock method and (b) restricted stock units (“RSU”).F14Diluted net income per share was the same as basic net income per share for the year ended December 31, 2020, because the effects of potentially dilutivesecurities did not have a material impact on the calculation of diluted net income per share. The Company had outstanding options exercisable into 18,250 shares ofthe Company’s common stock that would have had an antidilutive effect at December 31, 2020.Diluted net loss per common share was the same as basic net loss per common share for the year ended December 31, 2020, because the effects of potentiallydilutive securities were antidilutive.New accounting pronouncements adoptedThe Company has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significantimpact the Company’s consolidated financial statements and related disclosures. 2. SEGMENT INFORMATIONThe Company has determined that it operates in two segments, the sapphire and pharmacy business.Revenue is attributed by geographic region based on shipto location of the Company’s customers. The following table summarizes revenue by geographicregion:Year ended December 31,20202019(in thousands)North America$4,039$3,324Asia406185Other2217Total revenue$4,467$3,526The following table summarizes sales by product type:Year ended December 31,20202019(in thousands)Optical$3,611$3,338Core69Rubicon DTP850179Total revenue$4,467$3,526The following table summarizes assets by geographic region:As ofDecember 31,20202019(in thousands)United States$31,240$29,703Malaysia—5,094Other—4Total assets$31,240$34,801 The total assets of Rubicon DTP were not material to the total assets of the Company as stated on the consolidated balance sheets, as of December 31, 2020and 2019.Rubicon DTP accounted for approximately $340,000 and $447,000 of the Company’s loss for the year ended December 31, 2020 and 2019, respectively. F153. INVESTMENTSThe Company invests available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, commonstock, equity related securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains andlosses recorded in accumulated other comprehensive income/(loss). Investments in equity securities are reported at fair value, with both realized and unrealizedgains and losses recorded as unrealized gain/(loss) on investments and realized gain on investments, in other income/(expense), in the Consolidated Statements ofOperations. Investments in which the Company has the ability and intent, if necessary, to liquidate are classified as shortterm.The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2020:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,748$—$—$14,748Marketable securities————Total shortterm investments$14,748$—$—$14,748The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2019:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,668$—$—$14,668Marketable securities961(171)790Total shortterm investments$15,629$—$(171)$15,458The Company values its investments at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in theprincipal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniquesused to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchybased on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are thefollowing:●Level 1—Quoted prices in active markets for identical assets or liabilities.●Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices inmarkets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assetsor liabilities.●Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.The Company’s fixed income availableforsale securities consist of U.S. Treasury securities, highquality investment grade commercial paper, FDIC guaranteedcertificates of deposit, common stock, equity related securities and corporate notes. The Company values these securities based on pricing from pricing vendors,who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly(Level 2 inputs) in determining fair value. The valuation techniques used to measure the fair value of the Company’s financial instruments having Level 2 inputswere derived from nonbinding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricingmodels, such as discounted cash flow techniques.F16The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2020:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,136$—$—$3,136Investments:Availableforsales securities—current:U.S. Treasury securities—14,748—14,748Total$3,136$14,748$—$17,884The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2019:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,759$—$—$3,759Investments:Availableforsales securities—current:U.S. Treasury securities—14,668—14,668790790Total$4,549$14,668$—$19,217There are no terms or conditions restricting the Company from redeeming any of its investments.In addition to the debt securities noted above, the Company had approximately $8.0 million and $4.9 million of time deposits included in cash and cashequivalents as of December 31, 2020 and 2019, respectively.4. SIGNIFICANT CUSTOMERSFor the year ended December 31, 2020, the Company had four customers that accounted for approximately 21%, 13%, 11% and 10% of its revenue. For the yearended December 31, 2019, the Company had three customers that accounted for approximately 31%, 15% and 12% of its revenue.Customers individually representing more than 10% of trade receivables accounted for approximately 44% and 77% of accounts receivable as of December 31,2020 and 2019, respectively. 5. ASSETS HELD FOR SALE AND LONGLIVED ASSETSWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, the Company performs ananalysis to review the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expectedfuture operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.F17In connection with the Company’s decision in 2016 to limit its focus to the optical and industrial sapphire markets and exit the LED market, the Companydeveloped a plan to close its Malaysia facility, scale down and consolidate remaining operations in the U.S. and sell additional assets that would not be needed. TheCompany evaluated its U.S. and Malaysia asset portfolios to identify assets needed for its current business strategy and excess assets that were no longer needed.The Company determined it had excess machinery, equipment and facilities. Excess U.S. and Malaysia assets were evaluated based on assuming an orderlyliquidation plan, which considers economic obsolescence and sales of comparable equipment, as it is the Company’s intention to sell these assets. Additionally, theCompany evaluated its U.S. assets continuing to be used in operations using a cost and market approach to determine the current fair value. In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.6. STOCKHOLDERS’ EQUITYCommon stockAt the Company’s annual meeting of stockholders held on May 3, 2017, the Company’s stockholders approved amendments to the Company’s Eighth Amendedand Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”) to (i) effect a reverse stock split of the Company’s common stock; and (ii)decrease the Company’s authorized number of shares of common stock to three times the number of shares of the Company’s common stock outstandingimmediately following the reverse stock split. On May 3, 2017, following the annual meeting, the Company filed with the Secretary of State of the State of Delaware aCertificate of Amendment to (a) implement the reverse stock split at a ratio of 1for10; and (b) to reduce the number of authorized shares of common stock from40,000,000 to 8,200,000, consequently reducing the number of total authorized shares from 45,000,000 to 13,200,000. With the completion of the reverse stock split,the Company’s shares began trading above the required $1.00 per share closing bid price, as required by the Listing Qualifications Department of NASDAQ. Theshare information has been retroactively reflected for the effects of this reverse stock split for all periods presented.Preferred stockAt the Company’s annual meeting of stockholders held on May 10, 2018, the Company’s stockholders approved an amendment to the Certificate ofIncorporation to decrease the Company’s authorized number of shares of preferred stock from 5,000,000 shares to 1,000,000 shares. The Company filed with theSecretary of State of the State of Delaware a Certificate of Amendment to decrease the authorized number of preferred shares, consequently reducing the number oftotal authorized shares from 13,200,000 to 9,200,000.Common shares reservedAs of December 31, 2020, the Company had reserved 65,103 shares of common stock for issuance upon the exercise of outstanding common stock options andvesting of RSUs. Also 301,105 shares of the Company’s common stock were reserved for future grants of stock options and RSUs (or other similar equityinstruments) under the Rubicon Technology, Inc. 2016 Stock Incentive Plan (the “2016 Plan”) as of December 31, 2020.F187. STOCKHOLDER RIGHTS AGREEMENT On December 18, 2017, the Company entered into a Section 382 Rights Agreement with American Stock Transfer & Trust Company, LLC, as Rights Agent (the“Rights Agreement”) in an effort to protect stockholder value by attempting to diminish the risk that the Company’s ability to use its net NOLs to reduce potentialfuture federal income tax obligations may become substantially limited. The Company’s ability to utilize its NOLs may be substantially limited if the Companyexperiences an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”). The Rights Agreement isintended to act as a deterrent to any person acquiring beneficial ownership of 4.9% or more of the Company’s outstanding common stock without the approval ofthe Company’s Board of Directors (the “Board”).The Board authorized the issuance of one Right for each outstanding share of common stock, par value $0.001 per share, of the Company, payable tostockholders of record date of the close of business on January 2, 2018. One Right will also be issued together with each share of the Company’s common stockissued after January 2, 2018 but before the Distribution Date (as defined below) and, in certain circumstances, after the Distribution Date. Subject to the terms,provisions and conditions of the Rights Agreement, if the Rights become exercisable, each Right would initially represent the right to purchase from the Companyone onethousandth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company (the “Series A Preferred Stock”) for apurchase price of $40.00. If issued, each onethousandth of a share of Series A Preferred Stock would give the stockholder approximately the same dividend, votingand liquidation rights as does one share of common stock. However, prior to exercise, a Right does not give its holder any rights as a stockholder of the Company,including, without limitation, any dividend, voting or liquidation rights.The Rights will not be exercisable until the earlier of (i) ten business days after a public announcement that a person has become an “Acquiring Person” byacquiring beneficial ownership of 4.9% or more of outstanding common stock (or, in the case of a person that had beneficial ownership of 4.9% or more of theoutstanding common stock as of the close of business on December 18, 2017, by obtaining beneficial ownership of any additional shares of common stockrepresenting 0.5% or more of the shares of common stock then outstanding (other than pursuant to a dividend or distribution paid or made by the Company on theoutstanding shares of the common stock or pursuant to a split or subdivision of the outstanding shares of common stock) at a time such person still beneficiallyowns 4.9% or more of the outstanding common stock), and (ii) ten business days (or such later date as may be specified by the Board prior to such time as anyperson becomes an Acquiring Person) after the commencement of a tender or exchange offer by or on behalf of a person that, if completed, would result in suchperson becoming an Acquiring Person (the “Distribution Date”).Until the Distribution Date, common stock certificates or the ownership statements issued with respect to uncertificated shares of common stock will evidencethe Rights. Any transfer of shares of common stock prior to the Distribution Date will also constitute a transfer of the associated Rights. After the Distribution Date,separate rights certificates will be issued and the Rights may be transferred other than in connection with the transfer of the underlying shares of common stockunless and until the Board has determined to effect an exchange pursuant to the Rights Agreement (as described below).In the event that a person becomes an Acquiring Person, each holder of a Right, other than Rights that are or, under certain circumstances, were beneficiallyowned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right and payment of the purchaseprice, a number of shares of the Company’s common stock (or, in certain circumstances, cash, property or other securities of the Company) having a market valueequal to two times the purchase price. However, Rights are subject to redemption and exchange at the option of the Company.In the event that, at any time following a person becoming an Acquiring Person, (i) the Company engages in a merger or other business combination transactionin which the Company is not the surviving corporation; (ii) the Company engages in a merger or other business combination transaction in which the Company isthe surviving corporation and the common stock is changed or exchanged; or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold ortransferred, each holder of a Right (except Rights which have previously been voided) shall thereafter have the right to receive, upon exercise of the Right, commonstock of the acquiring company having a value equal to two times the purchase price.F19At any time until the earlier of December 18, 2023, and ten calendar days following the first date of public announcement that a person has become an AcquiringPerson or that discloses information which reveals the existence of an Acquiring Person or such earlier date as a majority of the Board becomes aware of theexistence of an Acquiring Person, the Board may redeem the Rights in whole, but not in part, at a price of $0.001 per Right (the “Redemption Price”). The redemptionof the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon anyredemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.At any time after a person becomes an Acquiring Person, the Board may, at its option, exchange the Rights (other than Rights that have become void), in wholeor in part, at an exchange ratio of one share of common stock, or a fractional share of Series A Preferred Stock (or of a share of a similar class or series of theCompany’s preferred stock having similar rights, preferences and privileges) of equivalent value, per Right (subject to adjustment). Immediately upon an exchange ofany Rights, the right to exercise such Rights will terminate and the only right of the holders of Rights will be to receive the number of shares of common stock (orfractional share of Series A Preferred Stock or of a share of a similar class or series of the Company’s preferred stock having similar rights, preferences andprivileges) equal to the number of such Rights held by such holder multiplied by the exchange ratio.Each one onethousandth of a share of Series A Preferred Stock, if issued: (i) will be nonredeemable and junior to any other series of preferred stock theCompany may issue (unless otherwise provided in the terms of such other series), (ii) will entitle holders to preferential cumulative quarterly dividends in an amountper share of Series A Preferred Stock equal to the greater of (a) $1 or (b) 1,000 times the aggregate the dividends, if any, declared on one share of the Company’scommon stock, (iii) will entitle holders upon liquidation (voluntary or otherwise) to receive $1,000 per share of Series A Preferred Stock plus an amount equal toaccrued and unpaid dividends and distributions thereon, whether or not declared, (iv) will have the same voting power as one share of common stock, and (v) willentitle holders to a per share payment equal to the payment made on one share of the Company’s common stock, if shares of the common stock are exchanged viamerger, consolidation, or a similar transaction. Because of the nature of the Series A Preferred Stock’s dividend, liquidation and voting rights, the value of a Unit ofSeries A Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of common stock.The Rights and the Rights Agreement will expire on the earliest of (i) December 18, 2023, (ii) the time at which the Rights are redeemed pursuant to the RightsAgreement, (iii) the time at which the Rights are exchanged in full pursuant to the Rights Agreement, (iv) the date that the Board determines that the RightsAgreement is no longer necessary for the preservation of material valuable Tax Benefits, (v) the beginning of a taxable year of the Company to which the Boarddetermines that no NOL tax benefits may be carried forward, and (vi) a determination by the Board, prior to the time any Person becomes an Acquiring Person, thatthe Rights Agreement and the Rights are no longer in the best interests of the Company and its stockholders.The Board may adjust the purchase price, the number of shares of Series A Preferred Stock or other securities or assets issuable and the number of outstandingRights to prevent dilution that may occur as a result of certain events, including among others, a stock dividend, a stock split or a reclassification of the Series APreferred Stock or common stock. With certain exceptions, no adjustments to the purchase price will be required until cumulative adjustments amount to at least 1%of the purchase price.For so long as the Rights are redeemable, the Board may supplement or amend any provision of the Rights Agreement in any respect without the approval ofthe holders of the Rights. From and after the time the Rights are no longer redeemable, the Board may supplement or amend the Rights Agreement only to cure anambiguity, to alter time period provisions, to correct inconsistent provisions, or to make any additional changes to the Rights Agreement which the Company maydeem necessary or desirable, but only to the extent that those changes do not impair or adversely affect any Rights holder (other than an Acquiring Person or anyAffiliate or Associate of an Acquiring Person or certain of their transferees) and do not result in the Rights again becoming redeemable or the Rights Agreementagain becoming amendable other than in accordance with this sentence.In connection with the adoption of the Rights Agreement and authorization and declaration of the dividend of the Rights, on December 18, 2017, the Companyfiled the Certificate of Designation with the Secretary of State of the State of Delaware. The Certificate of Designation became effective on December 18, 2017.F208. STOCK INCENTIVE PLANSIn August 2007, the Company adopted the Rubicon Technology Inc. 2007 Stock Incentive Plan, which was amended and restated effective in March 2011 (the“2007 Plan”), and which allowed for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, RSUs, performanceawards and bonus shares. The maximum number of shares that could be awarded under the 2007 Plan was 440,769 shares. Options granted under the 2007 Planentitle the holder to purchase shares of the Company’s common stock at the specified option exercise price, which could not be less than the fair market value of thecommon stock on the grant date. On June 24, 2016, the 2007 Plan terminated with the adoption of the Rubicon Technology, Inc. 2016 Stock Incentive Plan, (the “2016Plan”). Any existing awards under the 2007 Plan remain outstanding in accordance with their current terms under the 2007 Plan. In June 2016, the Company’sstockholders approved adoption of the 2016 Plan effective as of March 17, 2016, which allows for the grant of incentive stock options, nonstatutory stock options,stock appreciation rights, restricted stock, RSUs, performance awards and bonus shares. The Compensation Committee of the Board administers the 2016 Plan. Thecommittee determines the type of award to be granted, the fair value, the number of shares covered by the award, and the time when the award vests and may beexercised.Pursuant to the 2016 Plan, 222,980 shares of the Company’s common stock plus any shares subject to outstanding awards under the 2007 Plan thatsubsequently expire unexercised, are forfeited without the delivery of shares or are settled in cash, will be available for issuance under the 2016 Plan. The 2016 Planwill automatically terminate on March 17, 2026, unless the Company terminates it sooner.The following table summarizes the activity of the stock incentive and equity plans:Sharesavailablefor grantNumber ofoptionsoutstandingWeightedaverageoptionexercise priceNumber ofrestrictedstock sharesissuedNumber ofRSUsoutstandingOutstanding at January 1, 2019295,06769,08312.1099,57050,176Granted(60,925)1,000——9,925Exercised/issued—(5,000)——(6,098)Canceled/forfeited42,244(42,244)11.35——Outstanding at December 31, 2019276,38622,83913.4899,57054,003Granted(20,877)———3,597Exercised/issued—(2,250)——(3,597)Canceled/forfeited40,596(489)202.56—(9,000)Outstanding at December 31, 2020296,10520,100$9.7199,57045,003There were no option grants made during 2020. At December 31, 2020, the exercise prices of outstanding options were as follows:Exercise priceNumber ofoptionsoutstandingAverageremainingcontractual life(years)Number ofoptionsexercisable$6.10 $8.3418,2505.7518,250$44.101,8503.941,85020,1004.7320,100F21The aggregate grant date fair value of the options that became vested in the years ended 2020 and 2019 was $30,000 and $77,000, respectively.The following table summarizes the activity of nonvested options:NonvestedoptionsWeightedaverage optionexercisepriceNonvested at January 1, 201921,992$6.86Granted1,0008.34Vested(10,878)7.07Cancelled(7,248)7.25Nonvested at December 31, 20194,8666.10Granted——Vested(4,866)6.10Cancelled——Nonvested at December 31, 2020—$—The Company’s aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of theCompany’s common stock. Based on the fair value of the common stock at December 31, 2020 there was $52,000 of intrinsic value arising from 18,250 stock optionsexercisable or outstanding.The Company used historical stock prices as the basis for its volatility assumptions. The assumed riskfree rates were based on U.S. Treasury rates in effect atthe time of grant with a term consistent with the expected option lives. The expected term for the year ended December 31, 2020, is based upon the Company’smedian average life of its options. The forfeiture rate is based on the past history of forfeited options. The expense is being allocated using the straightline method.For the years ended December 31, 2020 and 2019, the Company recorded $14,000 and $24,000, respectively, of stock option compensation expense. As ofDecember 31, 2020, all outstanding options awarded have been fully vested.For the year ended December 31, 2020, there were no options granted.The following table summarizes the award vesting terms for the RSUs granted in 2019:Number of RSUsTarget price925$7.95The following table summarizes the award vesting terms for the RSUs granted in 2018:Number of restricted stock unitsTarget price902$11.0015,000$12.5015,000$14.00F22The RSUs vest in the amounts set forth below on the first date the 15trading day average closing price of the Company’s common stock equals or exceeds thecorresponding target price for the common stock before May 12, 2021. At the time the negotiation of the terms of the employment agreement began, the closing priceof the common stock was $5.50. On the date of grant, the closing price of the common stock was $6.30. During the twelve months ended December 31, 2017, the firstthree tranches of the grant vested. No additional tranches vested during the years ended December 31, 2020, 2019 and 2018.The Company used Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted because the awards vest based uponachievement of market price targets. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the marketcondition stipulated in the award and calculates the fair value of each RSU. The Company used the following assumptions in determining the fair value of the RSUs:GrantedJanuary2018March2017Daily expected stock price volatility4.2806%4.4237%Daily expected mean return on equity(0.2575)%(0.2226)%Daily expected dividend yield0.0%0.0%Average daily riskfree interest rate0.0078%0.0063%The daily expected stock price volatility is based on a fouryear historical volatility of the Company’s common stock. The daily expected dividend yield is basedon annual expected dividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches iscalculated to have its own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period which is upto four years. The RSUs granted in January 2018 and March 2017 had a grant date fair value of $209,000 and $323,000, respectively. There were no grants with marketprice targets issued in the years ended December 31, 2020 and 2019. A summary of the Company’s RSUs is as follows:RSUsoutstandingWeightedaverageprice attime of grantAggregateintrinsicvalueNonvested RSUs as of January 1, 201950,176$6.31Granted9,9258.32Vested(6,098)7.40Cancelled——Nonvested RSUs as of December 31, 201954,0036.56Granted3,5978.34Vested(3,597)8.34Cancelled(9,000)8.36Nonvested RSUs at December 31, 202045,003$6.20$278,961The fair value of each RSU is the market price on the date of grant and is being recorded as compensation expense ratably over the vesting terms or theexpected achievement of market price targets based on the Monte Carlo simulation model. For the years ended December 31, 2020 and 2019, the Company recorded$38,000 and $7,000 of RSU expense, respectively. The RSUs are forfeited by a participant upon termination for any reason, and there is no proportionate or partialvesting in the periods between the vesting dates. As of December 31, 2020, there was no unrecognized compensation cost related to the nonvested RSUs.For the year ended December 31, 2020 the Company recorded no compensation related to restricted stock compared to $14,000 in the prior year. During the year ended December 31, 2020 the Company awarded approximately 17,000 shares to an officer of the Company with a fair value of $146,000.F239. INCOME TAXESOn December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed theCompany to record provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date ofenactment. The Company has completed its accounting for the tax effects of enactment of the Act. The deemed inclusion from the repatriation tax increased from$3.9 million at the time of provision to $5.0 million at the time the calculation was finalized for the tax return. The increase of the inclusion related primarily to therefinement of Malaysia earnings and profits. As the Company is in a full valuation allowance position, an equal benefit adjustment was recorded for the impact ofthe increase of the deemed repatriation tax.Components of income before income taxes and the income tax provision are as follows:Income (loss) before income taxesYear endedDecember 31,20202019(in thousands)U.S.$(3,060)$(1,142)Foreign2,01817Total$(1,050)$(1,125)Income taxesYear endedDecember 31,20202019(in thousands)CurrentU.S.$—$—State——Foreign1322Total current income tax expense1322DeferredU.S.——State——Foreign——Total deferred income tax expense (benefit)——Total income tax expense (benefit)$13$22The reconciliation of income tax computed at the federal statutory rate to income before taxes is as follows:Year endedDecember 31,20202019U.S. federal statutory rate(21.0)%(21.0)%State taxes net of federal benefit(18.2)(7.6)Foreign rate differential and transactional tax5.90.1Tax credits——Valuation allowance33.328.5Other12.01.0%2.0%F24Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amount of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred income taxes are as follows at December 31:20202019(in thousands)Deferred tax assets:Allowance for doubtful accounts$1$11Inventory reserves3,0963,185Consumables excess reserve167169Accrued liabilities8152Warrant interest expense195196Stock compensation expense789789State net operating loss14,47615,010Net operating loss carryforward41,10540,437Tax credits710740Depreciation1,0001,329Valuation allowance(61,556)(61,869)Total deferred tax assets6449Deferred tax liability:Prepaid expenses(64)(49)Net deferred tax liability$—$—In February 2018, the FASB issued ASU No. 201802 (“ASU 201802), Income StatementReporting Comprehensive Income (Topic 220): Reclassification ofCertain Tax Effects from Accumulated Comprehensive Income. The new guidance allows companies to reclassify stranded tax effects resulting from the Tax Act,from accumulated other comprehensive income to retained earnings. The guidance also requires certain new disclosures regardless of the election. Early adoption ispermitted. The Company’s adoption of ASU 201802 did not have a material impact on its consolidated financial statements.The Company adopted the guidance in ASU No. 201517, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which requires that alldeferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent in the balance sheet. As a result, each jurisdiction has onenet noncurrent deferred tax asset or liability. The new guidance does not change the existing requirement that only permits offsetting within a jurisdiction.Companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The change inaccounting principle did not have an impact on the Company’s results of operations, cash flows or stockholders’ equity. At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.The Company completed an analysis of the utilization of NOLs subject to limits based upon certain ownership changes as of December 31, 2020. The results ofthis analysis indicated no ownership change limiting the utilization of net operating losses and tax credits.F25The Company prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, orexpected to be taken, in a tax return. At December 31, 2020 and 2019, the Company had $1.1 million of unrecognized tax benefits taken or expected to be taken in a taxreturn that have been recorded on the Company’s financial statements as an offset to the valuation allowance related to tax positions taken in 2012. It is notreasonably possible that the amount will change in the next twelve months. There were no material changes to prior year or current year positions taken during theyear ended December 31, 2020.There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company files income tax returns in the United States federal jurisdiction and in a state jurisdiction. During 2009, the Company began foreign operations inMalaysia and is subject to local income taxes in that jurisdiction. The Company’s Malaysia tax returns for the periods ended December 31, 2010 through 2012 havebeen audited by the Malaysia Inland Revenue Board with no changes made to the taxable income for those years. All other tax years in Malaysia are open toexamination by tax authorities.The Company’s federal tax returns for the periods ended December 31, 2010, 2008 and 2007 have been audited by the Internal Revenue Service (IRS) with nochanges made to the Company’s taxable losses for those years. The Company’s state tax returns for the periods ended December 31, 2009 through 2012 have beenaudited by the Illinois Department of Revenue with no changes made to the Company’s taxable losses for those years. Due to the existence of NOL carryforwards,tax years ended December 31, 2001 through 2006, 2008, 2009 and 2011 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOLcarryforwards at the State level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 areopen to examination by the Malaysia Inland Revenue Board.Due to the closing of the Rubicon Malaysia operations, the Company no longer considers the undistributed earnings of Rubicon Malaysia to be indefinitelyreinvested. Upon liquidation of Rubicon Malaysia, it is anticipated any cash left after the liquidation will be brought back to the U.S. via a payment of principaltowards the intercompany loan. A withholding tax may be payable to the Malaysian government on the interest portion of the loan. At December 31, 2020 and 2019,the Company accrued the withholding tax on the interest balance of the loan in the amount of $13,000 and $22,000, respectively, which represents the incremental tax.10. COMMITMENTS AND CONTINGENCIESCOVID19 PandemicIn March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID19) as a pandemic. The full impact of the COVID19outbreak is unknown and cannot be reasonably estimated. The magnitude and duration of the COVID19 outbreak, as well as other factors, could result in a materialimpact to the Company’s financial statements in future reporting periods.Operating LeasesThe Company adopted ASU 201602 in the first quarter of the fiscal year ending December 31, 2019. The adoption of ASU 201602 did not have a material impacton the Company’s consolidated financial statements, as the Company does not have any material lease agreements Rubicon DTP leases a building for itsmanufacturing and offices, however such lease was not considered material to the Company’s financial statements.Direct Dose’s net rent expense under operating leases in 2020 and 2019 amounted to $34,200 and $25,900, respectively. As of December 31, 2020, Direct Dose’soperating lease for its facility was monthtomonth. On January 6, 2021, Direct Dose entered into a one year lease for an aggregate commitment of approximately$35,500.LitigationFrom time to time, the Company experiences routine litigation in the ordinary course of its business.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.11. BENEFIT PLANThe Company sponsors a 401(k) savings plan (the “Plan”). Employees are eligible to participate in the Plan upon reaching 18 years of age. Employees makecontributions to the Plan through payroll deferrals. Employer matching contributions are discretionary. There were no employer matching contributions for the yearsended December 31, 2020 and 2019.12. SUBSEQUENT EVENTSNone.F26EX21.1 2 f10k2020ex211_rubicon.htm SUBSIDIARIES OF THE COMPANYExhibit 21.1Rubicon Technologies, Inc.Subsidiaries of the CompanyName of subsidiaryState (or other jurisdiction of incorporation)Rubicon Technology Worldwide LLCIllinoisRubicon Technology BP LLCDelawareRubicon DTP LLCDelawareEX23.1 3 f10k2020ex231_rubicon.htm CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMExhibit 23.1INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENTWe consent to the incorporation by reference in the Registration Statements of Rubicon Technology, Inc. on Form S3 (File No. 333167272), as amended (File No.333192536) and on Forms S8 (File No. 333147552, File No. 333180211 and File No. 333213025) of our report dated March 22, 2021 with respect to our audits of theconsolidated financial statements of Rubicon Technology, Inc. and Subsidiaries as of December 31, 2020 and 2019 and for each of the two years in the period endedDecember 31, 2020, which report is included in this Annual Report on Form 10K of Rubicon Technology, Inc. and Subsidiaries for the year ended December 31, 2020./s/ Marcum LLPMarcum LLPChicago, IllinoisMarch 22, 2021EX31.1 4 f10k2020ex311_rubicon.htm CERTIFICATIONExhibit 31.1CertificationsCertification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Timothy E. Brog, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerEX31.2 5 f10k2020ex312_rubicon.htm CERTIFICATIONExhibit 31.2Certification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Kevin T. Lusardi, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerEX32.1 6 f10k2020ex321_rubicon.htm CERTIFICATIONExhibit 32.1Certification Pursuant to Section 906 of The SarbanesOxley Act of 2002,18 U.S.C. Section 1350In connection with the Annual Report of Rubicon Technology, Inc. (the “Company”) on Form 10K for the year ended December 31, 2020, as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Timothy E. Brog, President and Chief Executive Officer of the Company, and I, Kevin T.Lusardi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the SarbanesOxley Act of 2002,that, to my knowledge:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerDate: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerA signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnishedto the Securities and Exchange Commission or its staff upon request. F8Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanthe functional currency of the Company, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in thedetermination of net income (loss) for the period. The Company records these gains and losses in other income.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expenses), in the Consolidated Statements of Operations. Investments in which the Company has the ability and intent, ifnecessary, to liquidate in order to support the current operations are classified as shortterm.The Company reviews its availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on thespecific identification method. The Company considers various factors in determining whether an impairment is otherthantemporary, including the severity andduration of the impairment, changes in underlying credit ratings, forecasted recovery, its ability and intent to hold the investment for a period of time sufficient toallow for any anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When the Company concludesthat an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on theConsolidated Statements of Operations. As of December 31, 2020, and 2019, no impairment was recorded.Purchases of Equity Securities by the IssuerIn November 2018, the Company’s Board of Directors authorized a program to repurchase up to $3 million of its common stock. In July 2020, the Company usedall of the original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time. There can be no assurance as to the number of shares of common stock repurchased. The Company records treasurystock purchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock.Share repurchase activity during the year ended December 31, 2020, was as follows:PeriodsTotalnumber ofsharespurchasedAveragepricepaid pershareTotalnumber ofsharespurchasedas part ofpubliclyannouncedprogramApproximatedollar valueof sharesthat may yetbe purchasedunder theprogram(in thousands)January 1, 2020, to December 31, 2020295,946$8.10295,546$3,000Total295,946$3,000F9Accounts receivableThe majority of the Company’s accounts receivable are due from defense subcontractors, industrial manufacturers, fabricators and resellers. Credit is extendedbased on an evaluation of the customer’s financial condition. Accounts receivable are due based on contract terms and at stated amounts due from customers, netof an allowance for doubtful accounts. Losses from credit sales are provided for in the financial statements.Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number offactors, including the length of time a customer’s account is past due, the customer’s current ability to pay and the condition of the general economy and industryas a whole. The Company writes off accounts receivable when they are deemed uncollectible and such writeoffs, net of payments received, are recorded as areduction to the allowance.The following table shows the activity of the allowance for doubtful accounts:Year endedDecember 31,20202019(in thousands)Beginning balance$40$7Charges to costs and expenses(20)33Account writeoffs, less recoveries(17)—Ending balance$3$40InventoriesInventories are valued at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary course ofbusiness less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis, which includes materials, labor and overhead. The Company reduces the carrying value of itsinventories for differences between the cost and the estimated net realizable value, taking into account usage, expected demand, technological obsolescence andother relevant information.The Company establishes inventory reserves when conditions exist that suggest inventory may be in excess of anticipated demand or is obsolete based oncustomer specifications. The Company evaluates the ability to realize the value of its inventory based on a combination of factors, including forecasted sales,estimated current and future market value and changes in customers’ product specifications. The Company’s method of estimating excess and obsolete inventoryhas remained consistent for all periods presented. The Company also carries a lower of cost or market inventory reserve based on net realizable value using mostrecent sales prices to determine market value. As of December 31, 2020 and 2019, the balance of the lower of cost or market reserve was $51,000 and $72,000,respectively, representing a decrease of $21,000 resulting from sales of related reserved for inventory. In addition, in 2020 we sold inventory that was valued at thelower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $21,000. In 2019 we sold inventorythat was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $35,000.In 2019 and 2020, the Company used some of its previously written down twoinch diameter core material in production of optical and industrial sapphire wafersand did not record any additional adjustments for the years ended December 31, 2019 and December 31, 2020.The Company evaluates the amount of raw material needed for future production based on expected crystal growth production needed to meet anticipatedsales. The Company did not record any writedowns of its raw materials inventory for the years ended December 31, 2019 and December 31, 2020.F10Inventories are composed of the following:As ofDecember 31,20202019(in thousands)Raw materials$468$468Workinprocess614901Finished goods459809$1,541$2,178As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.Other inventory suppliesThe Company’s other inventory supplies include stock of consumable assets and spare parts used in the manufacturing process.Assets held for saleAn asset is considered to be held for sale when all of the following criteria are met: (i) management commits to a plan to sell the asset; (ii) it is unlikely that thedisposal plan will be significantly modified or discontinued; (iii) the asset is available for immediate sale in its present condition; (iv) actions required to complete thesale of the asset have been initiated; (v) sale of the asset is probable and the completed sale is expected to occur within one year; and (vi) the asset is actively beingmarketed for sale at a price that is reasonable given its current market value.A longlived asset classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. If the longlived asset is newlyacquired, the carrying amount of the longlived asset is established based on its fair value less cost to sell at the acquisition date. A longlived asset is notdepreciated or amortized while it is classified as held for sale.In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.F11Property and equipmentProperty and equipment consisted of the following:As ofDecember 31,20202019(in thousands)Machinery, equipment and tooling$3,343$3,341Buildings1,7111,711Information systems835835Land and land improvements594594Furniture and fixtures88Total cost6,4916,489Accumulated depreciation and amortization(4,009)(3,842)Property and equipment, net$2,482$2,647Property and equipment are carried at cost and depreciated over their estimated useful lives using the straightline method. The cost of maintenance and repairsis charged to expense as incurred. Significant renewals and improvements are capitalized. Depreciation expense associated with property and equipment was$167,000 and $169,000 for the years ended December 31, 2020 and 2019, respectively.The estimated useful lives are as follows:Asset descriptionLifeBuildings39 yearsMachinery, equipment and tooling310 yearsFurniture and fixtures7 yearsInformation systems3 yearsWarranty costThe Company’s sales terms include a warranty that its products will meet certain specifications. The Company records a current liability for the expected cost ofwarrantyrelated claims at the time of sale. The warranty reserve is included in accrued and other current liabilities on the Consolidated Balance Sheets.The following table presents changes in the Company’s product warranty liability:Year endedDecember 31,20202019(in thousands)Balance, beginning of period$4$8Charged to cost of sales1831Actual product warranty expenditures(20)(35)Balance, end of period$2$4The Company does not provide maintenance or other services and it does not have sales that involve bill & hold arrangements, multiple elements ordeliverables. However, the Company does provide product warranty for up to 90 days, for which the Company has accrued a warranty reserve of $2,000 and $4,000for the years ended December 31, 2020 and 2019, respectively.Fair value of financial instrumentsThe Company’s financial instruments consist primarily of cash and cash equivalents, shortterm investments, accounts receivable, and accounts payable. Thecarrying values of these assets and liabilities approximate their fair values due to the shortterm nature of these instruments at December 31, 2020 and 2019.F12Concentration of credit risks and other risks and uncertaintiesFinancial instruments that could potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, restrictedcash, shortterm investments and accounts receivable. At December 31, 2020 the Company had no deposits at foreign financial institutions and $1.6 million ondeposit at foreign financial institutions at December 31, 2019. As of December 31, 2020, the Company had $8 million on deposit at financial institutions in excess ofamounts insured by the FDIC. This compares to a $5.7 million as of December 31, 2019. The Company performs a periodic evaluation of these institutions for relativecredit standing. The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant risk of loss on thesebalances.The Company uses third parties for certain finishing functions for its products, including the slicing and polishing of its sapphire crystal inventory. These typesof services are only available from a limited number of third parties. The Company’s ability to successfully outsource these finishing functions will substantiallydepend on its ability to develop, maintain and expand its strategic relationship with these third parties. As a result, the Company may be unable to meet the demandfor its products, which could have a material adverse impact on the Company.Concentration of credit risk related to revenue and accounts receivable is discussed in Note 4.Revenue recognitionRevenues recognized include product sales and billings for costs and fees for government contracts.Product SalesThe Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1,2018. The Company recognizes revenue when performance obligations under a purchase order or signed quotation are satisfied. The Company’s business practicecommits the Company to manufacture and deliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement withthe customer includes specifications of the product to be delivered, price, expected ship date and payment terms. The Company’s agreements generally do notcontain variable, financing, rights of return or noncash components. There are no upfront costs to develop the production process. The performance obligation issatisfied at the point in time (single performance obligation) when the product is manufactured to the customer’s specification, as performance does not create anasset with an alternative use to the Company. Accordingly, the Company recognizes revenue when the product is shipped, and control of the product, title and riskof loss have been transferred to the customer. The Company grants credit terms considering normal collection risk. If there is doubt about collection, full prepaymentfor the order is required. Any payments received prior to shipment are recorded as deferred revenue and included in Advance Payments in the Consolidated BalanceSheets. The Company does not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of the Company’s revenue is denominated in U.S. dollars.Shipping and handling costsThe Company records costs incurred in connection with shipping and handling of products as cost of goods sold. Amounts billed to customers in connectionwith these costs are included in revenue and are not material for any of the periods presented in the accompanying financial statements.Sales taxThe Company collects and remits sales taxes on products sold to customers and reports such amounts under the net method in its Consolidated Statements ofOperations and records a liability until remitted to the respective tax authority.F13Stockbased compensationThe Company requires all sharebased payments to employees, including grants of employee stock options, to be measured at fair value and expensed in theConsolidated Statements of Operations over the service period (generally the vesting period) of the grant. Expense is recognized in the Consolidated Statements ofOperations for these sharebased payments. The Company uses Black Scholes option pricing model in order to determine the fair value of stock option grants.Accounting for uncertainty in income taxesThe Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by thetaxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured basedon the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and/or penalties related to incometax matters in income tax expense. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years endedDecember 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.Income taxesDeferred tax assets and liabilities are provided for temporary differences between financial reporting and income tax bases of assets and liabilities, and aremeasured using the enacted tax rates and laws expected to be in effect when the differences will reverse. Deferred income taxes also arise from the future benefits ofNOL carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Full valuationallowances on net deferred tax assets are maintained until an appropriate level of profitability that generates taxable income is deemed sustainable or until a taxstrategy is developed that would enable the Company to conclude that it is more likely than not that a portion of the deferred tax assets will be realizable. Based onan evaluation in accordance with the accounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. andMalaysia deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all theavailable evidence.Use of estimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at thedate of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.Other comprehensive lossComprehensive loss is defined as the change in equity of a business enterprise from transactions and other events from nonowner sources. Comprehensiveloss includes net loss and other nonowner changes in equity that bypass the statement of operations and are reported in a separate component of equity.Net income (loss) per common shareBasic net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of common shares outstanding duringthe period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of diluted common sharesoutstanding during the period. Diluted shares outstanding are calculated by adding to the weightedaverage shares (a) any outstanding stock options based on thetreasury stock method and (b) restricted stock units (“RSU”).F14Diluted net income per share was the same as basic net income per share for the year ended December 31, 2020, because the effects of potentially dilutivesecurities did not have a material impact on the calculation of diluted net income per share. The Company had outstanding options exercisable into 18,250 shares ofthe Company’s common stock that would have had an antidilutive effect at December 31, 2020.Diluted net loss per common share was the same as basic net loss per common share for the year ended December 31, 2020, because the effects of potentiallydilutive securities were antidilutive.New accounting pronouncements adoptedThe Company has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significantimpact the Company’s consolidated financial statements and related disclosures. 2. SEGMENT INFORMATIONThe Company has determined that it operates in two segments, the sapphire and pharmacy business.Revenue is attributed by geographic region based on shipto location of the Company’s customers. The following table summarizes revenue by geographicregion:Year ended December 31,20202019(in thousands)North America$4,039$3,324Asia406185Other2217Total revenue$4,467$3,526The following table summarizes sales by product type:Year ended December 31,20202019(in thousands)Optical$3,611$3,338Core69Rubicon DTP850179Total revenue$4,467$3,526The following table summarizes assets by geographic region:As ofDecember 31,20202019(in thousands)United States$31,240$29,703Malaysia—5,094Other—4Total assets$31,240$34,801 The total assets of Rubicon DTP were not material to the total assets of the Company as stated on the consolidated balance sheets, as of December 31, 2020and 2019.Rubicon DTP accounted for approximately $340,000 and $447,000 of the Company’s loss for the year ended December 31, 2020 and 2019, respectively. F153. INVESTMENTSThe Company invests available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, commonstock, equity related securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains andlosses recorded in accumulated other comprehensive income/(loss). Investments in equity securities are reported at fair value, with both realized and unrealizedgains and losses recorded as unrealized gain/(loss) on investments and realized gain on investments, in other income/(expense), in the Consolidated Statements ofOperations. Investments in which the Company has the ability and intent, if necessary, to liquidate are classified as shortterm.The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2020:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,748$—$—$14,748Marketable securities————Total shortterm investments$14,748$—$—$14,748The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2019:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,668$—$—$14,668Marketable securities961(171)790Total shortterm investments$15,629$—$(171)$15,458The Company values its investments at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in theprincipal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniquesused to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchybased on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are thefollowing:●Level 1—Quoted prices in active markets for identical assets or liabilities.●Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices inmarkets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assetsor liabilities.●Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.The Company’s fixed income availableforsale securities consist of U.S. Treasury securities, highquality investment grade commercial paper, FDIC guaranteedcertificates of deposit, common stock, equity related securities and corporate notes. The Company values these securities based on pricing from pricing vendors,who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly(Level 2 inputs) in determining fair value. The valuation techniques used to measure the fair value of the Company’s financial instruments having Level 2 inputswere derived from nonbinding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricingmodels, such as discounted cash flow techniques.F16The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2020:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,136$—$—$3,136Investments:Availableforsales securities—current:U.S. Treasury securities—14,748—14,748Total$3,136$14,748$—$17,884The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2019:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,759$—$—$3,759Investments:Availableforsales securities—current:U.S. Treasury securities—14,668—14,668790790Total$4,549$14,668$—$19,217There are no terms or conditions restricting the Company from redeeming any of its investments.In addition to the debt securities noted above, the Company had approximately $8.0 million and $4.9 million of time deposits included in cash and cashequivalents as of December 31, 2020 and 2019, respectively.4. SIGNIFICANT CUSTOMERSFor the year ended December 31, 2020, the Company had four customers that accounted for approximately 21%, 13%, 11% and 10% of its revenue. For the yearended December 31, 2019, the Company had three customers that accounted for approximately 31%, 15% and 12% of its revenue.Customers individually representing more than 10% of trade receivables accounted for approximately 44% and 77% of accounts receivable as of December 31,2020 and 2019, respectively. 5. ASSETS HELD FOR SALE AND LONGLIVED ASSETSWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, the Company performs ananalysis to review the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expectedfuture operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.F17In connection with the Company’s decision in 2016 to limit its focus to the optical and industrial sapphire markets and exit the LED market, the Companydeveloped a plan to close its Malaysia facility, scale down and consolidate remaining operations in the U.S. and sell additional assets that would not be needed. TheCompany evaluated its U.S. and Malaysia asset portfolios to identify assets needed for its current business strategy and excess assets that were no longer needed.The Company determined it had excess machinery, equipment and facilities. Excess U.S. and Malaysia assets were evaluated based on assuming an orderlyliquidation plan, which considers economic obsolescence and sales of comparable equipment, as it is the Company’s intention to sell these assets. Additionally, theCompany evaluated its U.S. assets continuing to be used in operations using a cost and market approach to determine the current fair value. In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.6. STOCKHOLDERS’ EQUITYCommon stockAt the Company’s annual meeting of stockholders held on May 3, 2017, the Company’s stockholders approved amendments to the Company’s Eighth Amendedand Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”) to (i) effect a reverse stock split of the Company’s common stock; and (ii)decrease the Company’s authorized number of shares of common stock to three times the number of shares of the Company’s common stock outstandingimmediately following the reverse stock split. On May 3, 2017, following the annual meeting, the Company filed with the Secretary of State of the State of Delaware aCertificate of Amendment to (a) implement the reverse stock split at a ratio of 1for10; and (b) to reduce the number of authorized shares of common stock from40,000,000 to 8,200,000, consequently reducing the number of total authorized shares from 45,000,000 to 13,200,000. With the completion of the reverse stock split,the Company’s shares began trading above the required $1.00 per share closing bid price, as required by the Listing Qualifications Department of NASDAQ. Theshare information has been retroactively reflected for the effects of this reverse stock split for all periods presented.Preferred stockAt the Company’s annual meeting of stockholders held on May 10, 2018, the Company’s stockholders approved an amendment to the Certificate ofIncorporation to decrease the Company’s authorized number of shares of preferred stock from 5,000,000 shares to 1,000,000 shares. The Company filed with theSecretary of State of the State of Delaware a Certificate of Amendment to decrease the authorized number of preferred shares, consequently reducing the number oftotal authorized shares from 13,200,000 to 9,200,000.Common shares reservedAs of December 31, 2020, the Company had reserved 65,103 shares of common stock for issuance upon the exercise of outstanding common stock options andvesting of RSUs. Also 301,105 shares of the Company’s common stock were reserved for future grants of stock options and RSUs (or other similar equityinstruments) under the Rubicon Technology, Inc. 2016 Stock Incentive Plan (the “2016 Plan”) as of December 31, 2020.F187. STOCKHOLDER RIGHTS AGREEMENT On December 18, 2017, the Company entered into a Section 382 Rights Agreement with American Stock Transfer & Trust Company, LLC, as Rights Agent (the“Rights Agreement”) in an effort to protect stockholder value by attempting to diminish the risk that the Company’s ability to use its net NOLs to reduce potentialfuture federal income tax obligations may become substantially limited. The Company’s ability to utilize its NOLs may be substantially limited if the Companyexperiences an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”). The Rights Agreement isintended to act as a deterrent to any person acquiring beneficial ownership of 4.9% or more of the Company’s outstanding common stock without the approval ofthe Company’s Board of Directors (the “Board”).The Board authorized the issuance of one Right for each outstanding share of common stock, par value $0.001 per share, of the Company, payable tostockholders of record date of the close of business on January 2, 2018. One Right will also be issued together with each share of the Company’s common stockissued after January 2, 2018 but before the Distribution Date (as defined below) and, in certain circumstances, after the Distribution Date. Subject to the terms,provisions and conditions of the Rights Agreement, if the Rights become exercisable, each Right would initially represent the right to purchase from the Companyone onethousandth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company (the “Series A Preferred Stock”) for apurchase price of $40.00. If issued, each onethousandth of a share of Series A Preferred Stock would give the stockholder approximately the same dividend, votingand liquidation rights as does one share of common stock. However, prior to exercise, a Right does not give its holder any rights as a stockholder of the Company,including, without limitation, any dividend, voting or liquidation rights.The Rights will not be exercisable until the earlier of (i) ten business days after a public announcement that a person has become an “Acquiring Person” byacquiring beneficial ownership of 4.9% or more of outstanding common stock (or, in the case of a person that had beneficial ownership of 4.9% or more of theoutstanding common stock as of the close of business on December 18, 2017, by obtaining beneficial ownership of any additional shares of common stockrepresenting 0.5% or more of the shares of common stock then outstanding (other than pursuant to a dividend or distribution paid or made by the Company on theoutstanding shares of the common stock or pursuant to a split or subdivision of the outstanding shares of common stock) at a time such person still beneficiallyowns 4.9% or more of the outstanding common stock), and (ii) ten business days (or such later date as may be specified by the Board prior to such time as anyperson becomes an Acquiring Person) after the commencement of a tender or exchange offer by or on behalf of a person that, if completed, would result in suchperson becoming an Acquiring Person (the “Distribution Date”).Until the Distribution Date, common stock certificates or the ownership statements issued with respect to uncertificated shares of common stock will evidencethe Rights. Any transfer of shares of common stock prior to the Distribution Date will also constitute a transfer of the associated Rights. After the Distribution Date,separate rights certificates will be issued and the Rights may be transferred other than in connection with the transfer of the underlying shares of common stockunless and until the Board has determined to effect an exchange pursuant to the Rights Agreement (as described below).In the event that a person becomes an Acquiring Person, each holder of a Right, other than Rights that are or, under certain circumstances, were beneficiallyowned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right and payment of the purchaseprice, a number of shares of the Company’s common stock (or, in certain circumstances, cash, property or other securities of the Company) having a market valueequal to two times the purchase price. However, Rights are subject to redemption and exchange at the option of the Company.In the event that, at any time following a person becoming an Acquiring Person, (i) the Company engages in a merger or other business combination transactionin which the Company is not the surviving corporation; (ii) the Company engages in a merger or other business combination transaction in which the Company isthe surviving corporation and the common stock is changed or exchanged; or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold ortransferred, each holder of a Right (except Rights which have previously been voided) shall thereafter have the right to receive, upon exercise of the Right, commonstock of the acquiring company having a value equal to two times the purchase price.F19At any time until the earlier of December 18, 2023, and ten calendar days following the first date of public announcement that a person has become an AcquiringPerson or that discloses information which reveals the existence of an Acquiring Person or such earlier date as a majority of the Board becomes aware of theexistence of an Acquiring Person, the Board may redeem the Rights in whole, but not in part, at a price of $0.001 per Right (the “Redemption Price”). The redemptionof the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon anyredemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.At any time after a person becomes an Acquiring Person, the Board may, at its option, exchange the Rights (other than Rights that have become void), in wholeor in part, at an exchange ratio of one share of common stock, or a fractional share of Series A Preferred Stock (or of a share of a similar class or series of theCompany’s preferred stock having similar rights, preferences and privileges) of equivalent value, per Right (subject to adjustment). Immediately upon an exchange ofany Rights, the right to exercise such Rights will terminate and the only right of the holders of Rights will be to receive the number of shares of common stock (orfractional share of Series A Preferred Stock or of a share of a similar class or series of the Company’s preferred stock having similar rights, preferences andprivileges) equal to the number of such Rights held by such holder multiplied by the exchange ratio.Each one onethousandth of a share of Series A Preferred Stock, if issued: (i) will be nonredeemable and junior to any other series of preferred stock theCompany may issue (unless otherwise provided in the terms of such other series), (ii) will entitle holders to preferential cumulative quarterly dividends in an amountper share of Series A Preferred Stock equal to the greater of (a) $1 or (b) 1,000 times the aggregate the dividends, if any, declared on one share of the Company’scommon stock, (iii) will entitle holders upon liquidation (voluntary or otherwise) to receive $1,000 per share of Series A Preferred Stock plus an amount equal toaccrued and unpaid dividends and distributions thereon, whether or not declared, (iv) will have the same voting power as one share of common stock, and (v) willentitle holders to a per share payment equal to the payment made on one share of the Company’s common stock, if shares of the common stock are exchanged viamerger, consolidation, or a similar transaction. Because of the nature of the Series A Preferred Stock’s dividend, liquidation and voting rights, the value of a Unit ofSeries A Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of common stock.The Rights and the Rights Agreement will expire on the earliest of (i) December 18, 2023, (ii) the time at which the Rights are redeemed pursuant to the RightsAgreement, (iii) the time at which the Rights are exchanged in full pursuant to the Rights Agreement, (iv) the date that the Board determines that the RightsAgreement is no longer necessary for the preservation of material valuable Tax Benefits, (v) the beginning of a taxable year of the Company to which the Boarddetermines that no NOL tax benefits may be carried forward, and (vi) a determination by the Board, prior to the time any Person becomes an Acquiring Person, thatthe Rights Agreement and the Rights are no longer in the best interests of the Company and its stockholders.The Board may adjust the purchase price, the number of shares of Series A Preferred Stock or other securities or assets issuable and the number of outstandingRights to prevent dilution that may occur as a result of certain events, including among others, a stock dividend, a stock split or a reclassification of the Series APreferred Stock or common stock. With certain exceptions, no adjustments to the purchase price will be required until cumulative adjustments amount to at least 1%of the purchase price.For so long as the Rights are redeemable, the Board may supplement or amend any provision of the Rights Agreement in any respect without the approval ofthe holders of the Rights. From and after the time the Rights are no longer redeemable, the Board may supplement or amend the Rights Agreement only to cure anambiguity, to alter time period provisions, to correct inconsistent provisions, or to make any additional changes to the Rights Agreement which the Company maydeem necessary or desirable, but only to the extent that those changes do not impair or adversely affect any Rights holder (other than an Acquiring Person or anyAffiliate or Associate of an Acquiring Person or certain of their transferees) and do not result in the Rights again becoming redeemable or the Rights Agreementagain becoming amendable other than in accordance with this sentence.In connection with the adoption of the Rights Agreement and authorization and declaration of the dividend of the Rights, on December 18, 2017, the Companyfiled the Certificate of Designation with the Secretary of State of the State of Delaware. The Certificate of Designation became effective on December 18, 2017.F208. STOCK INCENTIVE PLANSIn August 2007, the Company adopted the Rubicon Technology Inc. 2007 Stock Incentive Plan, which was amended and restated effective in March 2011 (the“2007 Plan”), and which allowed for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, RSUs, performanceawards and bonus shares. The maximum number of shares that could be awarded under the 2007 Plan was 440,769 shares. Options granted under the 2007 Planentitle the holder to purchase shares of the Company’s common stock at the specified option exercise price, which could not be less than the fair market value of thecommon stock on the grant date. On June 24, 2016, the 2007 Plan terminated with the adoption of the Rubicon Technology, Inc. 2016 Stock Incentive Plan, (the “2016Plan”). Any existing awards under the 2007 Plan remain outstanding in accordance with their current terms under the 2007 Plan. In June 2016, the Company’sstockholders approved adoption of the 2016 Plan effective as of March 17, 2016, which allows for the grant of incentive stock options, nonstatutory stock options,stock appreciation rights, restricted stock, RSUs, performance awards and bonus shares. The Compensation Committee of the Board administers the 2016 Plan. Thecommittee determines the type of award to be granted, the fair value, the number of shares covered by the award, and the time when the award vests and may beexercised.Pursuant to the 2016 Plan, 222,980 shares of the Company’s common stock plus any shares subject to outstanding awards under the 2007 Plan thatsubsequently expire unexercised, are forfeited without the delivery of shares or are settled in cash, will be available for issuance under the 2016 Plan. The 2016 Planwill automatically terminate on March 17, 2026, unless the Company terminates it sooner.The following table summarizes the activity of the stock incentive and equity plans:Sharesavailablefor grantNumber ofoptionsoutstandingWeightedaverageoptionexercise priceNumber ofrestrictedstock sharesissuedNumber ofRSUsoutstandingOutstanding at January 1, 2019295,06769,08312.1099,57050,176Granted(60,925)1,000——9,925Exercised/issued—(5,000)——(6,098)Canceled/forfeited42,244(42,244)11.35——Outstanding at December 31, 2019276,38622,83913.4899,57054,003Granted(20,877)———3,597Exercised/issued—(2,250)——(3,597)Canceled/forfeited40,596(489)202.56—(9,000)Outstanding at December 31, 2020296,10520,100$9.7199,57045,003There were no option grants made during 2020. At December 31, 2020, the exercise prices of outstanding options were as follows:Exercise priceNumber ofoptionsoutstandingAverageremainingcontractual life(years)Number ofoptionsexercisable$6.10 $8.3418,2505.7518,250$44.101,8503.941,85020,1004.7320,100F21The aggregate grant date fair value of the options that became vested in the years ended 2020 and 2019 was $30,000 and $77,000, respectively.The following table summarizes the activity of nonvested options:NonvestedoptionsWeightedaverage optionexercisepriceNonvested at January 1, 201921,992$6.86Granted1,0008.34Vested(10,878)7.07Cancelled(7,248)7.25Nonvested at December 31, 20194,8666.10Granted——Vested(4,866)6.10Cancelled——Nonvested at December 31, 2020—$—The Company’s aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of theCompany’s common stock. Based on the fair value of the common stock at December 31, 2020 there was $52,000 of intrinsic value arising from 18,250 stock optionsexercisable or outstanding.The Company used historical stock prices as the basis for its volatility assumptions. The assumed riskfree rates were based on U.S. Treasury rates in effect atthe time of grant with a term consistent with the expected option lives. The expected term for the year ended December 31, 2020, is based upon the Company’smedian average life of its options. The forfeiture rate is based on the past history of forfeited options. The expense is being allocated using the straightline method.For the years ended December 31, 2020 and 2019, the Company recorded $14,000 and $24,000, respectively, of stock option compensation expense. As ofDecember 31, 2020, all outstanding options awarded have been fully vested.For the year ended December 31, 2020, there were no options granted.The following table summarizes the award vesting terms for the RSUs granted in 2019:Number of RSUsTarget price925$7.95The following table summarizes the award vesting terms for the RSUs granted in 2018:Number of restricted stock unitsTarget price902$11.0015,000$12.5015,000$14.00F22The RSUs vest in the amounts set forth below on the first date the 15trading day average closing price of the Company’s common stock equals or exceeds thecorresponding target price for the common stock before May 12, 2021. At the time the negotiation of the terms of the employment agreement began, the closing priceof the common stock was $5.50. On the date of grant, the closing price of the common stock was $6.30. During the twelve months ended December 31, 2017, the firstthree tranches of the grant vested. No additional tranches vested during the years ended December 31, 2020, 2019 and 2018.The Company used Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted because the awards vest based uponachievement of market price targets. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the marketcondition stipulated in the award and calculates the fair value of each RSU. The Company used the following assumptions in determining the fair value of the RSUs:GrantedJanuary2018March2017Daily expected stock price volatility4.2806%4.4237%Daily expected mean return on equity(0.2575)%(0.2226)%Daily expected dividend yield0.0%0.0%Average daily riskfree interest rate0.0078%0.0063%The daily expected stock price volatility is based on a fouryear historical volatility of the Company’s common stock. The daily expected dividend yield is basedon annual expected dividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches iscalculated to have its own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period which is upto four years. The RSUs granted in January 2018 and March 2017 had a grant date fair value of $209,000 and $323,000, respectively. There were no grants with marketprice targets issued in the years ended December 31, 2020 and 2019. A summary of the Company’s RSUs is as follows:RSUsoutstandingWeightedaverageprice attime of grantAggregateintrinsicvalueNonvested RSUs as of January 1, 201950,176$6.31Granted9,9258.32Vested(6,098)7.40Cancelled——Nonvested RSUs as of December 31, 201954,0036.56Granted3,5978.34Vested(3,597)8.34Cancelled(9,000)8.36Nonvested RSUs at December 31, 202045,003$6.20$278,961The fair value of each RSU is the market price on the date of grant and is being recorded as compensation expense ratably over the vesting terms or theexpected achievement of market price targets based on the Monte Carlo simulation model. For the years ended December 31, 2020 and 2019, the Company recorded$38,000 and $7,000 of RSU expense, respectively. The RSUs are forfeited by a participant upon termination for any reason, and there is no proportionate or partialvesting in the periods between the vesting dates. As of December 31, 2020, there was no unrecognized compensation cost related to the nonvested RSUs.For the year ended December 31, 2020 the Company recorded no compensation related to restricted stock compared to $14,000 in the prior year. During the year ended December 31, 2020 the Company awarded approximately 17,000 shares to an officer of the Company with a fair value of $146,000.F239. INCOME TAXESOn December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed theCompany to record provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date ofenactment. The Company has completed its accounting for the tax effects of enactment of the Act. The deemed inclusion from the repatriation tax increased from$3.9 million at the time of provision to $5.0 million at the time the calculation was finalized for the tax return. The increase of the inclusion related primarily to therefinement of Malaysia earnings and profits. As the Company is in a full valuation allowance position, an equal benefit adjustment was recorded for the impact ofthe increase of the deemed repatriation tax.Components of income before income taxes and the income tax provision are as follows:Income (loss) before income taxesYear endedDecember 31,20202019(in thousands)U.S.$(3,060)$(1,142)Foreign2,01817Total$(1,050)$(1,125)Income taxesYear endedDecember 31,20202019(in thousands)CurrentU.S.$—$—State——Foreign1322Total current income tax expense1322DeferredU.S.——State——Foreign——Total deferred income tax expense (benefit)——Total income tax expense (benefit)$13$22The reconciliation of income tax computed at the federal statutory rate to income before taxes is as follows:Year endedDecember 31,20202019U.S. federal statutory rate(21.0)%(21.0)%State taxes net of federal benefit(18.2)(7.6)Foreign rate differential and transactional tax5.90.1Tax credits——Valuation allowance33.328.5Other12.01.0%2.0%F24Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amount of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred income taxes are as follows at December 31:20202019(in thousands)Deferred tax assets:Allowance for doubtful accounts$1$11Inventory reserves3,0963,185Consumables excess reserve167169Accrued liabilities8152Warrant interest expense195196Stock compensation expense789789State net operating loss14,47615,010Net operating loss carryforward41,10540,437Tax credits710740Depreciation1,0001,329Valuation allowance(61,556)(61,869)Total deferred tax assets6449Deferred tax liability:Prepaid expenses(64)(49)Net deferred tax liability$—$—In February 2018, the FASB issued ASU No. 201802 (“ASU 201802), Income StatementReporting Comprehensive Income (Topic 220): Reclassification ofCertain Tax Effects from Accumulated Comprehensive Income. The new guidance allows companies to reclassify stranded tax effects resulting from the Tax Act,from accumulated other comprehensive income to retained earnings. The guidance also requires certain new disclosures regardless of the election. Early adoption ispermitted. The Company’s adoption of ASU 201802 did not have a material impact on its consolidated financial statements.The Company adopted the guidance in ASU No. 201517, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which requires that alldeferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent in the balance sheet. As a result, each jurisdiction has onenet noncurrent deferred tax asset or liability. The new guidance does not change the existing requirement that only permits offsetting within a jurisdiction.Companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The change inaccounting principle did not have an impact on the Company’s results of operations, cash flows or stockholders’ equity. At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.The Company completed an analysis of the utilization of NOLs subject to limits based upon certain ownership changes as of December 31, 2020. The results ofthis analysis indicated no ownership change limiting the utilization of net operating losses and tax credits.F25The Company prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, orexpected to be taken, in a tax return. At December 31, 2020 and 2019, the Company had $1.1 million of unrecognized tax benefits taken or expected to be taken in a taxreturn that have been recorded on the Company’s financial statements as an offset to the valuation allowance related to tax positions taken in 2012. It is notreasonably possible that the amount will change in the next twelve months. There were no material changes to prior year or current year positions taken during theyear ended December 31, 2020.There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company files income tax returns in the United States federal jurisdiction and in a state jurisdiction. During 2009, the Company began foreign operations inMalaysia and is subject to local income taxes in that jurisdiction. The Company’s Malaysia tax returns for the periods ended December 31, 2010 through 2012 havebeen audited by the Malaysia Inland Revenue Board with no changes made to the taxable income for those years. All other tax years in Malaysia are open toexamination by tax authorities.The Company’s federal tax returns for the periods ended December 31, 2010, 2008 and 2007 have been audited by the Internal Revenue Service (IRS) with nochanges made to the Company’s taxable losses for those years. The Company’s state tax returns for the periods ended December 31, 2009 through 2012 have beenaudited by the Illinois Department of Revenue with no changes made to the Company’s taxable losses for those years. Due to the existence of NOL carryforwards,tax years ended December 31, 2001 through 2006, 2008, 2009 and 2011 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOLcarryforwards at the State level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 areopen to examination by the Malaysia Inland Revenue Board.Due to the closing of the Rubicon Malaysia operations, the Company no longer considers the undistributed earnings of Rubicon Malaysia to be indefinitelyreinvested. Upon liquidation of Rubicon Malaysia, it is anticipated any cash left after the liquidation will be brought back to the U.S. via a payment of principaltowards the intercompany loan. A withholding tax may be payable to the Malaysian government on the interest portion of the loan. At December 31, 2020 and 2019,the Company accrued the withholding tax on the interest balance of the loan in the amount of $13,000 and $22,000, respectively, which represents the incremental tax.10. COMMITMENTS AND CONTINGENCIESCOVID19 PandemicIn March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID19) as a pandemic. The full impact of the COVID19outbreak is unknown and cannot be reasonably estimated. The magnitude and duration of the COVID19 outbreak, as well as other factors, could result in a materialimpact to the Company’s financial statements in future reporting periods.Operating LeasesThe Company adopted ASU 201602 in the first quarter of the fiscal year ending December 31, 2019. The adoption of ASU 201602 did not have a material impacton the Company’s consolidated financial statements, as the Company does not have any material lease agreements Rubicon DTP leases a building for itsmanufacturing and offices, however such lease was not considered material to the Company’s financial statements.Direct Dose’s net rent expense under operating leases in 2020 and 2019 amounted to $34,200 and $25,900, respectively. As of December 31, 2020, Direct Dose’soperating lease for its facility was monthtomonth. On January 6, 2021, Direct Dose entered into a one year lease for an aggregate commitment of approximately$35,500.LitigationFrom time to time, the Company experiences routine litigation in the ordinary course of its business.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.11. BENEFIT PLANThe Company sponsors a 401(k) savings plan (the “Plan”). Employees are eligible to participate in the Plan upon reaching 18 years of age. Employees makecontributions to the Plan through payroll deferrals. Employer matching contributions are discretionary. There were no employer matching contributions for the yearsended December 31, 2020 and 2019.12. SUBSEQUENT EVENTSNone.F26EX21.1 2 f10k2020ex211_rubicon.htm SUBSIDIARIES OF THE COMPANYExhibit 21.1Rubicon Technologies, Inc.Subsidiaries of the CompanyName of subsidiaryState (or other jurisdiction of incorporation)Rubicon Technology Worldwide LLCIllinoisRubicon Technology BP LLCDelawareRubicon DTP LLCDelawareEX23.1 3 f10k2020ex231_rubicon.htm CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMExhibit 23.1INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENTWe consent to the incorporation by reference in the Registration Statements of Rubicon Technology, Inc. on Form S3 (File No. 333167272), as amended (File No.333192536) and on Forms S8 (File No. 333147552, File No. 333180211 and File No. 333213025) of our report dated March 22, 2021 with respect to our audits of theconsolidated financial statements of Rubicon Technology, Inc. and Subsidiaries as of December 31, 2020 and 2019 and for each of the two years in the period endedDecember 31, 2020, which report is included in this Annual Report on Form 10K of Rubicon Technology, Inc. and Subsidiaries for the year ended December 31, 2020./s/ Marcum LLPMarcum LLPChicago, IllinoisMarch 22, 2021EX31.1 4 f10k2020ex311_rubicon.htm CERTIFICATIONExhibit 31.1CertificationsCertification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Timothy E. Brog, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerEX31.2 5 f10k2020ex312_rubicon.htm CERTIFICATIONExhibit 31.2Certification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Kevin T. Lusardi, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerEX32.1 6 f10k2020ex321_rubicon.htm CERTIFICATIONExhibit 32.1Certification Pursuant to Section 906 of The SarbanesOxley Act of 2002,18 U.S.C. Section 1350In connection with the Annual Report of Rubicon Technology, Inc. (the “Company”) on Form 10K for the year ended December 31, 2020, as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Timothy E. Brog, President and Chief Executive Officer of the Company, and I, Kevin T.Lusardi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the SarbanesOxley Act of 2002,that, to my knowledge:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerDate: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerA signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnishedto the Securities and Exchange Commission or its staff upon request. F8Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanthe functional currency of the Company, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in thedetermination of net income (loss) for the period. The Company records these gains and losses in other income.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expenses), in the Consolidated Statements of Operations. Investments in which the Company has the ability and intent, ifnecessary, to liquidate in order to support the current operations are classified as shortterm.The Company reviews its availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on thespecific identification method. The Company considers various factors in determining whether an impairment is otherthantemporary, including the severity andduration of the impairment, changes in underlying credit ratings, forecasted recovery, its ability and intent to hold the investment for a period of time sufficient toallow for any anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When the Company concludesthat an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on theConsolidated Statements of Operations. As of December 31, 2020, and 2019, no impairment was recorded.Purchases of Equity Securities by the IssuerIn November 2018, the Company’s Board of Directors authorized a program to repurchase up to $3 million of its common stock. In July 2020, the Company usedall of the original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time. There can be no assurance as to the number of shares of common stock repurchased. The Company records treasurystock purchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock.Share repurchase activity during the year ended December 31, 2020, was as follows:PeriodsTotalnumber ofsharespurchasedAveragepricepaid pershareTotalnumber ofsharespurchasedas part ofpubliclyannouncedprogramApproximatedollar valueof sharesthat may yetbe purchasedunder theprogram(in thousands)January 1, 2020, to December 31, 2020295,946$8.10295,546$3,000Total295,946$3,000F9Accounts receivableThe majority of the Company’s accounts receivable are due from defense subcontractors, industrial manufacturers, fabricators and resellers. Credit is extendedbased on an evaluation of the customer’s financial condition. Accounts receivable are due based on contract terms and at stated amounts due from customers, netof an allowance for doubtful accounts. Losses from credit sales are provided for in the financial statements.Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number offactors, including the length of time a customer’s account is past due, the customer’s current ability to pay and the condition of the general economy and industryas a whole. The Company writes off accounts receivable when they are deemed uncollectible and such writeoffs, net of payments received, are recorded as areduction to the allowance.The following table shows the activity of the allowance for doubtful accounts:Year endedDecember 31,20202019(in thousands)Beginning balance$40$7Charges to costs and expenses(20)33Account writeoffs, less recoveries(17)—Ending balance$3$40InventoriesInventories are valued at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary course ofbusiness less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis, which includes materials, labor and overhead. The Company reduces the carrying value of itsinventories for differences between the cost and the estimated net realizable value, taking into account usage, expected demand, technological obsolescence andother relevant information.The Company establishes inventory reserves when conditions exist that suggest inventory may be in excess of anticipated demand or is obsolete based oncustomer specifications. The Company evaluates the ability to realize the value of its inventory based on a combination of factors, including forecasted sales,estimated current and future market value and changes in customers’ product specifications. The Company’s method of estimating excess and obsolete inventoryhas remained consistent for all periods presented. The Company also carries a lower of cost or market inventory reserve based on net realizable value using mostrecent sales prices to determine market value. As of December 31, 2020 and 2019, the balance of the lower of cost or market reserve was $51,000 and $72,000,respectively, representing a decrease of $21,000 resulting from sales of related reserved for inventory. In addition, in 2020 we sold inventory that was valued at thelower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $21,000. In 2019 we sold inventorythat was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $35,000.In 2019 and 2020, the Company used some of its previously written down twoinch diameter core material in production of optical and industrial sapphire wafersand did not record any additional adjustments for the years ended December 31, 2019 and December 31, 2020.The Company evaluates the amount of raw material needed for future production based on expected crystal growth production needed to meet anticipatedsales. The Company did not record any writedowns of its raw materials inventory for the years ended December 31, 2019 and December 31, 2020.F10Inventories are composed of the following:As ofDecember 31,20202019(in thousands)Raw materials$468$468Workinprocess614901Finished goods459809$1,541$2,178As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.Other inventory suppliesThe Company’s other inventory supplies include stock of consumable assets and spare parts used in the manufacturing process.Assets held for saleAn asset is considered to be held for sale when all of the following criteria are met: (i) management commits to a plan to sell the asset; (ii) it is unlikely that thedisposal plan will be significantly modified or discontinued; (iii) the asset is available for immediate sale in its present condition; (iv) actions required to complete thesale of the asset have been initiated; (v) sale of the asset is probable and the completed sale is expected to occur within one year; and (vi) the asset is actively beingmarketed for sale at a price that is reasonable given its current market value.A longlived asset classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. If the longlived asset is newlyacquired, the carrying amount of the longlived asset is established based on its fair value less cost to sell at the acquisition date. A longlived asset is notdepreciated or amortized while it is classified as held for sale.In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.F11Property and equipmentProperty and equipment consisted of the following:As ofDecember 31,20202019(in thousands)Machinery, equipment and tooling$3,343$3,341Buildings1,7111,711Information systems835835Land and land improvements594594Furniture and fixtures88Total cost6,4916,489Accumulated depreciation and amortization(4,009)(3,842)Property and equipment, net$2,482$2,647Property and equipment are carried at cost and depreciated over their estimated useful lives using the straightline method. The cost of maintenance and repairsis charged to expense as incurred. Significant renewals and improvements are capitalized. Depreciation expense associated with property and equipment was$167,000 and $169,000 for the years ended December 31, 2020 and 2019, respectively.The estimated useful lives are as follows:Asset descriptionLifeBuildings39 yearsMachinery, equipment and tooling310 yearsFurniture and fixtures7 yearsInformation systems3 yearsWarranty costThe Company’s sales terms include a warranty that its products will meet certain specifications. The Company records a current liability for the expected cost ofwarrantyrelated claims at the time of sale. The warranty reserve is included in accrued and other current liabilities on the Consolidated Balance Sheets.The following table presents changes in the Company’s product warranty liability:Year endedDecember 31,20202019(in thousands)Balance, beginning of period$4$8Charged to cost of sales1831Actual product warranty expenditures(20)(35)Balance, end of period$2$4The Company does not provide maintenance or other services and it does not have sales that involve bill & hold arrangements, multiple elements ordeliverables. However, the Company does provide product warranty for up to 90 days, for which the Company has accrued a warranty reserve of $2,000 and $4,000for the years ended December 31, 2020 and 2019, respectively.Fair value of financial instrumentsThe Company’s financial instruments consist primarily of cash and cash equivalents, shortterm investments, accounts receivable, and accounts payable. Thecarrying values of these assets and liabilities approximate their fair values due to the shortterm nature of these instruments at December 31, 2020 and 2019.F12Concentration of credit risks and other risks and uncertaintiesFinancial instruments that could potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, restrictedcash, shortterm investments and accounts receivable. At December 31, 2020 the Company had no deposits at foreign financial institutions and $1.6 million ondeposit at foreign financial institutions at December 31, 2019. As of December 31, 2020, the Company had $8 million on deposit at financial institutions in excess ofamounts insured by the FDIC. This compares to a $5.7 million as of December 31, 2019. The Company performs a periodic evaluation of these institutions for relativecredit standing. The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant risk of loss on thesebalances.The Company uses third parties for certain finishing functions for its products, including the slicing and polishing of its sapphire crystal inventory. These typesof services are only available from a limited number of third parties. The Company’s ability to successfully outsource these finishing functions will substantiallydepend on its ability to develop, maintain and expand its strategic relationship with these third parties. As a result, the Company may be unable to meet the demandfor its products, which could have a material adverse impact on the Company.Concentration of credit risk related to revenue and accounts receivable is discussed in Note 4.Revenue recognitionRevenues recognized include product sales and billings for costs and fees for government contracts.Product SalesThe Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1,2018. The Company recognizes revenue when performance obligations under a purchase order or signed quotation are satisfied. The Company’s business practicecommits the Company to manufacture and deliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement withthe customer includes specifications of the product to be delivered, price, expected ship date and payment terms. The Company’s agreements generally do notcontain variable, financing, rights of return or noncash components. There are no upfront costs to develop the production process. The performance obligation issatisfied at the point in time (single performance obligation) when the product is manufactured to the customer’s specification, as performance does not create anasset with an alternative use to the Company. Accordingly, the Company recognizes revenue when the product is shipped, and control of the product, title and riskof loss have been transferred to the customer. The Company grants credit terms considering normal collection risk. If there is doubt about collection, full prepaymentfor the order is required. Any payments received prior to shipment are recorded as deferred revenue and included in Advance Payments in the Consolidated BalanceSheets. The Company does not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of the Company’s revenue is denominated in U.S. dollars.Shipping and handling costsThe Company records costs incurred in connection with shipping and handling of products as cost of goods sold. Amounts billed to customers in connectionwith these costs are included in revenue and are not material for any of the periods presented in the accompanying financial statements.Sales taxThe Company collects and remits sales taxes on products sold to customers and reports such amounts under the net method in its Consolidated Statements ofOperations and records a liability until remitted to the respective tax authority.F13Stockbased compensationThe Company requires all sharebased payments to employees, including grants of employee stock options, to be measured at fair value and expensed in theConsolidated Statements of Operations over the service period (generally the vesting period) of the grant. Expense is recognized in the Consolidated Statements ofOperations for these sharebased payments. The Company uses Black Scholes option pricing model in order to determine the fair value of stock option grants.Accounting for uncertainty in income taxesThe Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by thetaxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured basedon the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and/or penalties related to incometax matters in income tax expense. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years endedDecember 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.Income taxesDeferred tax assets and liabilities are provided for temporary differences between financial reporting and income tax bases of assets and liabilities, and aremeasured using the enacted tax rates and laws expected to be in effect when the differences will reverse. Deferred income taxes also arise from the future benefits ofNOL carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Full valuationallowances on net deferred tax assets are maintained until an appropriate level of profitability that generates taxable income is deemed sustainable or until a taxstrategy is developed that would enable the Company to conclude that it is more likely than not that a portion of the deferred tax assets will be realizable. Based onan evaluation in accordance with the accounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. andMalaysia deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all theavailable evidence.Use of estimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at thedate of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.Other comprehensive lossComprehensive loss is defined as the change in equity of a business enterprise from transactions and other events from nonowner sources. Comprehensiveloss includes net loss and other nonowner changes in equity that bypass the statement of operations and are reported in a separate component of equity.Net income (loss) per common shareBasic net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of common shares outstanding duringthe period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of diluted common sharesoutstanding during the period. Diluted shares outstanding are calculated by adding to the weightedaverage shares (a) any outstanding stock options based on thetreasury stock method and (b) restricted stock units (“RSU”).F14Diluted net income per share was the same as basic net income per share for the year ended December 31, 2020, because the effects of potentially dilutivesecurities did not have a material impact on the calculation of diluted net income per share. The Company had outstanding options exercisable into 18,250 shares ofthe Company’s common stock that would have had an antidilutive effect at December 31, 2020.Diluted net loss per common share was the same as basic net loss per common share for the year ended December 31, 2020, because the effects of potentiallydilutive securities were antidilutive.New accounting pronouncements adoptedThe Company has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significantimpact the Company’s consolidated financial statements and related disclosures. 2. SEGMENT INFORMATIONThe Company has determined that it operates in two segments, the sapphire and pharmacy business.Revenue is attributed by geographic region based on shipto location of the Company’s customers. The following table summarizes revenue by geographicregion:Year ended December 31,20202019(in thousands)North America$4,039$3,324Asia406185Other2217Total revenue$4,467$3,526The following table summarizes sales by product type:Year ended December 31,20202019(in thousands)Optical$3,611$3,338Core69Rubicon DTP850179Total revenue$4,467$3,526The following table summarizes assets by geographic region:As ofDecember 31,20202019(in thousands)United States$31,240$29,703Malaysia—5,094Other—4Total assets$31,240$34,801 The total assets of Rubicon DTP were not material to the total assets of the Company as stated on the consolidated balance sheets, as of December 31, 2020and 2019.Rubicon DTP accounted for approximately $340,000 and $447,000 of the Company’s loss for the year ended December 31, 2020 and 2019, respectively. F153. INVESTMENTSThe Company invests available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, commonstock, equity related securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains andlosses recorded in accumulated other comprehensive income/(loss). Investments in equity securities are reported at fair value, with both realized and unrealizedgains and losses recorded as unrealized gain/(loss) on investments and realized gain on investments, in other income/(expense), in the Consolidated Statements ofOperations. Investments in which the Company has the ability and intent, if necessary, to liquidate are classified as shortterm.The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2020:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,748$—$—$14,748Marketable securities————Total shortterm investments$14,748$—$—$14,748The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2019:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,668$—$—$14,668Marketable securities961(171)790Total shortterm investments$15,629$—$(171)$15,458The Company values its investments at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in theprincipal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniquesused to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchybased on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are thefollowing:●Level 1—Quoted prices in active markets for identical assets or liabilities.●Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices inmarkets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assetsor liabilities.●Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.The Company’s fixed income availableforsale securities consist of U.S. Treasury securities, highquality investment grade commercial paper, FDIC guaranteedcertificates of deposit, common stock, equity related securities and corporate notes. The Company values these securities based on pricing from pricing vendors,who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly(Level 2 inputs) in determining fair value. The valuation techniques used to measure the fair value of the Company’s financial instruments having Level 2 inputswere derived from nonbinding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricingmodels, such as discounted cash flow techniques.F16The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2020:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,136$—$—$3,136Investments:Availableforsales securities—current:U.S. Treasury securities—14,748—14,748Total$3,136$14,748$—$17,884The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2019:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,759$—$—$3,759Investments:Availableforsales securities—current:U.S. Treasury securities—14,668—14,668790790Total$4,549$14,668$—$19,217There are no terms or conditions restricting the Company from redeeming any of its investments.In addition to the debt securities noted above, the Company had approximately $8.0 million and $4.9 million of time deposits included in cash and cashequivalents as of December 31, 2020 and 2019, respectively.4. SIGNIFICANT CUSTOMERSFor the year ended December 31, 2020, the Company had four customers that accounted for approximately 21%, 13%, 11% and 10% of its revenue. For the yearended December 31, 2019, the Company had three customers that accounted for approximately 31%, 15% and 12% of its revenue.Customers individually representing more than 10% of trade receivables accounted for approximately 44% and 77% of accounts receivable as of December 31,2020 and 2019, respectively. 5. ASSETS HELD FOR SALE AND LONGLIVED ASSETSWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, the Company performs ananalysis to review the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expectedfuture operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.F17In connection with the Company’s decision in 2016 to limit its focus to the optical and industrial sapphire markets and exit the LED market, the Companydeveloped a plan to close its Malaysia facility, scale down and consolidate remaining operations in the U.S. and sell additional assets that would not be needed. TheCompany evaluated its U.S. and Malaysia asset portfolios to identify assets needed for its current business strategy and excess assets that were no longer needed.The Company determined it had excess machinery, equipment and facilities. Excess U.S. and Malaysia assets were evaluated based on assuming an orderlyliquidation plan, which considers economic obsolescence and sales of comparable equipment, as it is the Company’s intention to sell these assets. Additionally, theCompany evaluated its U.S. assets continuing to be used in operations using a cost and market approach to determine the current fair value. In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.6. STOCKHOLDERS’ EQUITYCommon stockAt the Company’s annual meeting of stockholders held on May 3, 2017, the Company’s stockholders approved amendments to the Company’s Eighth Amendedand Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”) to (i) effect a reverse stock split of the Company’s common stock; and (ii)decrease the Company’s authorized number of shares of common stock to three times the number of shares of the Company’s common stock outstandingimmediately following the reverse stock split. On May 3, 2017, following the annual meeting, the Company filed with the Secretary of State of the State of Delaware aCertificate of Amendment to (a) implement the reverse stock split at a ratio of 1for10; and (b) to reduce the number of authorized shares of common stock from40,000,000 to 8,200,000, consequently reducing the number of total authorized shares from 45,000,000 to 13,200,000. With the completion of the reverse stock split,the Company’s shares began trading above the required $1.00 per share closing bid price, as required by the Listing Qualifications Department of NASDAQ. Theshare information has been retroactively reflected for the effects of this reverse stock split for all periods presented.Preferred stockAt the Company’s annual meeting of stockholders held on May 10, 2018, the Company’s stockholders approved an amendment to the Certificate ofIncorporation to decrease the Company’s authorized number of shares of preferred stock from 5,000,000 shares to 1,000,000 shares. The Company filed with theSecretary of State of the State of Delaware a Certificate of Amendment to decrease the authorized number of preferred shares, consequently reducing the number oftotal authorized shares from 13,200,000 to 9,200,000.Common shares reservedAs of December 31, 2020, the Company had reserved 65,103 shares of common stock for issuance upon the exercise of outstanding common stock options andvesting of RSUs. Also 301,105 shares of the Company’s common stock were reserved for future grants of stock options and RSUs (or other similar equityinstruments) under the Rubicon Technology, Inc. 2016 Stock Incentive Plan (the “2016 Plan”) as of December 31, 2020.F187. STOCKHOLDER RIGHTS AGREEMENT On December 18, 2017, the Company entered into a Section 382 Rights Agreement with American Stock Transfer & Trust Company, LLC, as Rights Agent (the“Rights Agreement”) in an effort to protect stockholder value by attempting to diminish the risk that the Company’s ability to use its net NOLs to reduce potentialfuture federal income tax obligations may become substantially limited. The Company’s ability to utilize its NOLs may be substantially limited if the Companyexperiences an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”). The Rights Agreement isintended to act as a deterrent to any person acquiring beneficial ownership of 4.9% or more of the Company’s outstanding common stock without the approval ofthe Company’s Board of Directors (the “Board”).The Board authorized the issuance of one Right for each outstanding share of common stock, par value $0.001 per share, of the Company, payable tostockholders of record date of the close of business on January 2, 2018. One Right will also be issued together with each share of the Company’s common stockissued after January 2, 2018 but before the Distribution Date (as defined below) and, in certain circumstances, after the Distribution Date. Subject to the terms,provisions and conditions of the Rights Agreement, if the Rights become exercisable, each Right would initially represent the right to purchase from the Companyone onethousandth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company (the “Series A Preferred Stock”) for apurchase price of $40.00. If issued, each onethousandth of a share of Series A Preferred Stock would give the stockholder approximately the same dividend, votingand liquidation rights as does one share of common stock. However, prior to exercise, a Right does not give its holder any rights as a stockholder of the Company,including, without limitation, any dividend, voting or liquidation rights.The Rights will not be exercisable until the earlier of (i) ten business days after a public announcement that a person has become an “Acquiring Person” byacquiring beneficial ownership of 4.9% or more of outstanding common stock (or, in the case of a person that had beneficial ownership of 4.9% or more of theoutstanding common stock as of the close of business on December 18, 2017, by obtaining beneficial ownership of any additional shares of common stockrepresenting 0.5% or more of the shares of common stock then outstanding (other than pursuant to a dividend or distribution paid or made by the Company on theoutstanding shares of the common stock or pursuant to a split or subdivision of the outstanding shares of common stock) at a time such person still beneficiallyowns 4.9% or more of the outstanding common stock), and (ii) ten business days (or such later date as may be specified by the Board prior to such time as anyperson becomes an Acquiring Person) after the commencement of a tender or exchange offer by or on behalf of a person that, if completed, would result in suchperson becoming an Acquiring Person (the “Distribution Date”).Until the Distribution Date, common stock certificates or the ownership statements issued with respect to uncertificated shares of common stock will evidencethe Rights. Any transfer of shares of common stock prior to the Distribution Date will also constitute a transfer of the associated Rights. After the Distribution Date,separate rights certificates will be issued and the Rights may be transferred other than in connection with the transfer of the underlying shares of common stockunless and until the Board has determined to effect an exchange pursuant to the Rights Agreement (as described below).In the event that a person becomes an Acquiring Person, each holder of a Right, other than Rights that are or, under certain circumstances, were beneficiallyowned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right and payment of the purchaseprice, a number of shares of the Company’s common stock (or, in certain circumstances, cash, property or other securities of the Company) having a market valueequal to two times the purchase price. However, Rights are subject to redemption and exchange at the option of the Company.In the event that, at any time following a person becoming an Acquiring Person, (i) the Company engages in a merger or other business combination transactionin which the Company is not the surviving corporation; (ii) the Company engages in a merger or other business combination transaction in which the Company isthe surviving corporation and the common stock is changed or exchanged; or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold ortransferred, each holder of a Right (except Rights which have previously been voided) shall thereafter have the right to receive, upon exercise of the Right, commonstock of the acquiring company having a value equal to two times the purchase price.F19At any time until the earlier of December 18, 2023, and ten calendar days following the first date of public announcement that a person has become an AcquiringPerson or that discloses information which reveals the existence of an Acquiring Person or such earlier date as a majority of the Board becomes aware of theexistence of an Acquiring Person, the Board may redeem the Rights in whole, but not in part, at a price of $0.001 per Right (the “Redemption Price”). The redemptionof the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon anyredemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.At any time after a person becomes an Acquiring Person, the Board may, at its option, exchange the Rights (other than Rights that have become void), in wholeor in part, at an exchange ratio of one share of common stock, or a fractional share of Series A Preferred Stock (or of a share of a similar class or series of theCompany’s preferred stock having similar rights, preferences and privileges) of equivalent value, per Right (subject to adjustment). Immediately upon an exchange ofany Rights, the right to exercise such Rights will terminate and the only right of the holders of Rights will be to receive the number of shares of common stock (orfractional share of Series A Preferred Stock or of a share of a similar class or series of the Company’s preferred stock having similar rights, preferences andprivileges) equal to the number of such Rights held by such holder multiplied by the exchange ratio.Each one onethousandth of a share of Series A Preferred Stock, if issued: (i) will be nonredeemable and junior to any other series of preferred stock theCompany may issue (unless otherwise provided in the terms of such other series), (ii) will entitle holders to preferential cumulative quarterly dividends in an amountper share of Series A Preferred Stock equal to the greater of (a) $1 or (b) 1,000 times the aggregate the dividends, if any, declared on one share of the Company’scommon stock, (iii) will entitle holders upon liquidation (voluntary or otherwise) to receive $1,000 per share of Series A Preferred Stock plus an amount equal toaccrued and unpaid dividends and distributions thereon, whether or not declared, (iv) will have the same voting power as one share of common stock, and (v) willentitle holders to a per share payment equal to the payment made on one share of the Company’s common stock, if shares of the common stock are exchanged viamerger, consolidation, or a similar transaction. Because of the nature of the Series A Preferred Stock’s dividend, liquidation and voting rights, the value of a Unit ofSeries A Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of common stock.The Rights and the Rights Agreement will expire on the earliest of (i) December 18, 2023, (ii) the time at which the Rights are redeemed pursuant to the RightsAgreement, (iii) the time at which the Rights are exchanged in full pursuant to the Rights Agreement, (iv) the date that the Board determines that the RightsAgreement is no longer necessary for the preservation of material valuable Tax Benefits, (v) the beginning of a taxable year of the Company to which the Boarddetermines that no NOL tax benefits may be carried forward, and (vi) a determination by the Board, prior to the time any Person becomes an Acquiring Person, thatthe Rights Agreement and the Rights are no longer in the best interests of the Company and its stockholders.The Board may adjust the purchase price, the number of shares of Series A Preferred Stock or other securities or assets issuable and the number of outstandingRights to prevent dilution that may occur as a result of certain events, including among others, a stock dividend, a stock split or a reclassification of the Series APreferred Stock or common stock. With certain exceptions, no adjustments to the purchase price will be required until cumulative adjustments amount to at least 1%of the purchase price.For so long as the Rights are redeemable, the Board may supplement or amend any provision of the Rights Agreement in any respect without the approval ofthe holders of the Rights. From and after the time the Rights are no longer redeemable, the Board may supplement or amend the Rights Agreement only to cure anambiguity, to alter time period provisions, to correct inconsistent provisions, or to make any additional changes to the Rights Agreement which the Company maydeem necessary or desirable, but only to the extent that those changes do not impair or adversely affect any Rights holder (other than an Acquiring Person or anyAffiliate or Associate of an Acquiring Person or certain of their transferees) and do not result in the Rights again becoming redeemable or the Rights Agreementagain becoming amendable other than in accordance with this sentence.In connection with the adoption of the Rights Agreement and authorization and declaration of the dividend of the Rights, on December 18, 2017, the Companyfiled the Certificate of Designation with the Secretary of State of the State of Delaware. The Certificate of Designation became effective on December 18, 2017.F208. STOCK INCENTIVE PLANSIn August 2007, the Company adopted the Rubicon Technology Inc. 2007 Stock Incentive Plan, which was amended and restated effective in March 2011 (the“2007 Plan”), and which allowed for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, RSUs, performanceawards and bonus shares. The maximum number of shares that could be awarded under the 2007 Plan was 440,769 shares. Options granted under the 2007 Planentitle the holder to purchase shares of the Company’s common stock at the specified option exercise price, which could not be less than the fair market value of thecommon stock on the grant date. On June 24, 2016, the 2007 Plan terminated with the adoption of the Rubicon Technology, Inc. 2016 Stock Incentive Plan, (the “2016Plan”). Any existing awards under the 2007 Plan remain outstanding in accordance with their current terms under the 2007 Plan. In June 2016, the Company’sstockholders approved adoption of the 2016 Plan effective as of March 17, 2016, which allows for the grant of incentive stock options, nonstatutory stock options,stock appreciation rights, restricted stock, RSUs, performance awards and bonus shares. The Compensation Committee of the Board administers the 2016 Plan. Thecommittee determines the type of award to be granted, the fair value, the number of shares covered by the award, and the time when the award vests and may beexercised.Pursuant to the 2016 Plan, 222,980 shares of the Company’s common stock plus any shares subject to outstanding awards under the 2007 Plan thatsubsequently expire unexercised, are forfeited without the delivery of shares or are settled in cash, will be available for issuance under the 2016 Plan. The 2016 Planwill automatically terminate on March 17, 2026, unless the Company terminates it sooner.The following table summarizes the activity of the stock incentive and equity plans:Sharesavailablefor grantNumber ofoptionsoutstandingWeightedaverageoptionexercise priceNumber ofrestrictedstock sharesissuedNumber ofRSUsoutstandingOutstanding at January 1, 2019295,06769,08312.1099,57050,176Granted(60,925)1,000——9,925Exercised/issued—(5,000)——(6,098)Canceled/forfeited42,244(42,244)11.35——Outstanding at December 31, 2019276,38622,83913.4899,57054,003Granted(20,877)———3,597Exercised/issued—(2,250)——(3,597)Canceled/forfeited40,596(489)202.56—(9,000)Outstanding at December 31, 2020296,10520,100$9.7199,57045,003There were no option grants made during 2020. At December 31, 2020, the exercise prices of outstanding options were as follows:Exercise priceNumber ofoptionsoutstandingAverageremainingcontractual life(years)Number ofoptionsexercisable$6.10 $8.3418,2505.7518,250$44.101,8503.941,85020,1004.7320,100F21The aggregate grant date fair value of the options that became vested in the years ended 2020 and 2019 was $30,000 and $77,000, respectively.The following table summarizes the activity of nonvested options:NonvestedoptionsWeightedaverage optionexercisepriceNonvested at January 1, 201921,992$6.86Granted1,0008.34Vested(10,878)7.07Cancelled(7,248)7.25Nonvested at December 31, 20194,8666.10Granted——Vested(4,866)6.10Cancelled——Nonvested at December 31, 2020—$—The Company’s aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of theCompany’s common stock. Based on the fair value of the common stock at December 31, 2020 there was $52,000 of intrinsic value arising from 18,250 stock optionsexercisable or outstanding.The Company used historical stock prices as the basis for its volatility assumptions. The assumed riskfree rates were based on U.S. Treasury rates in effect atthe time of grant with a term consistent with the expected option lives. The expected term for the year ended December 31, 2020, is based upon the Company’smedian average life of its options. The forfeiture rate is based on the past history of forfeited options. The expense is being allocated using the straightline method.For the years ended December 31, 2020 and 2019, the Company recorded $14,000 and $24,000, respectively, of stock option compensation expense. As ofDecember 31, 2020, all outstanding options awarded have been fully vested.For the year ended December 31, 2020, there were no options granted.The following table summarizes the award vesting terms for the RSUs granted in 2019:Number of RSUsTarget price925$7.95The following table summarizes the award vesting terms for the RSUs granted in 2018:Number of restricted stock unitsTarget price902$11.0015,000$12.5015,000$14.00F22The RSUs vest in the amounts set forth below on the first date the 15trading day average closing price of the Company’s common stock equals or exceeds thecorresponding target price for the common stock before May 12, 2021. At the time the negotiation of the terms of the employment agreement began, the closing priceof the common stock was $5.50. On the date of grant, the closing price of the common stock was $6.30. During the twelve months ended December 31, 2017, the firstthree tranches of the grant vested. No additional tranches vested during the years ended December 31, 2020, 2019 and 2018.The Company used Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted because the awards vest based uponachievement of market price targets. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the marketcondition stipulated in the award and calculates the fair value of each RSU. The Company used the following assumptions in determining the fair value of the RSUs:GrantedJanuary2018March2017Daily expected stock price volatility4.2806%4.4237%Daily expected mean return on equity(0.2575)%(0.2226)%Daily expected dividend yield0.0%0.0%Average daily riskfree interest rate0.0078%0.0063%The daily expected stock price volatility is based on a fouryear historical volatility of the Company’s common stock. The daily expected dividend yield is basedon annual expected dividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches iscalculated to have its own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period which is upto four years. The RSUs granted in January 2018 and March 2017 had a grant date fair value of $209,000 and $323,000, respectively. There were no grants with marketprice targets issued in the years ended December 31, 2020 and 2019. A summary of the Company’s RSUs is as follows:RSUsoutstandingWeightedaverageprice attime of grantAggregateintrinsicvalueNonvested RSUs as of January 1, 201950,176$6.31Granted9,9258.32Vested(6,098)7.40Cancelled——Nonvested RSUs as of December 31, 201954,0036.56Granted3,5978.34Vested(3,597)8.34Cancelled(9,000)8.36Nonvested RSUs at December 31, 202045,003$6.20$278,961The fair value of each RSU is the market price on the date of grant and is being recorded as compensation expense ratably over the vesting terms or theexpected achievement of market price targets based on the Monte Carlo simulation model. For the years ended December 31, 2020 and 2019, the Company recorded$38,000 and $7,000 of RSU expense, respectively. The RSUs are forfeited by a participant upon termination for any reason, and there is no proportionate or partialvesting in the periods between the vesting dates. As of December 31, 2020, there was no unrecognized compensation cost related to the nonvested RSUs.For the year ended December 31, 2020 the Company recorded no compensation related to restricted stock compared to $14,000 in the prior year. During the year ended December 31, 2020 the Company awarded approximately 17,000 shares to an officer of the Company with a fair value of $146,000.F239. INCOME TAXESOn December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed theCompany to record provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date ofenactment. The Company has completed its accounting for the tax effects of enactment of the Act. The deemed inclusion from the repatriation tax increased from$3.9 million at the time of provision to $5.0 million at the time the calculation was finalized for the tax return. The increase of the inclusion related primarily to therefinement of Malaysia earnings and profits. As the Company is in a full valuation allowance position, an equal benefit adjustment was recorded for the impact ofthe increase of the deemed repatriation tax.Components of income before income taxes and the income tax provision are as follows:Income (loss) before income taxesYear endedDecember 31,20202019(in thousands)U.S.$(3,060)$(1,142)Foreign2,01817Total$(1,050)$(1,125)Income taxesYear endedDecember 31,20202019(in thousands)CurrentU.S.$—$—State——Foreign1322Total current income tax expense1322DeferredU.S.——State——Foreign——Total deferred income tax expense (benefit)——Total income tax expense (benefit)$13$22The reconciliation of income tax computed at the federal statutory rate to income before taxes is as follows:Year endedDecember 31,20202019U.S. federal statutory rate(21.0)%(21.0)%State taxes net of federal benefit(18.2)(7.6)Foreign rate differential and transactional tax5.90.1Tax credits——Valuation allowance33.328.5Other12.01.0%2.0%F24Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amount of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred income taxes are as follows at December 31:20202019(in thousands)Deferred tax assets:Allowance for doubtful accounts$1$11Inventory reserves3,0963,185Consumables excess reserve167169Accrued liabilities8152Warrant interest expense195196Stock compensation expense789789State net operating loss14,47615,010Net operating loss carryforward41,10540,437Tax credits710740Depreciation1,0001,329Valuation allowance(61,556)(61,869)Total deferred tax assets6449Deferred tax liability:Prepaid expenses(64)(49)Net deferred tax liability$—$—In February 2018, the FASB issued ASU No. 201802 (“ASU 201802), Income StatementReporting Comprehensive Income (Topic 220): Reclassification ofCertain Tax Effects from Accumulated Comprehensive Income. The new guidance allows companies to reclassify stranded tax effects resulting from the Tax Act,from accumulated other comprehensive income to retained earnings. The guidance also requires certain new disclosures regardless of the election. Early adoption ispermitted. The Company’s adoption of ASU 201802 did not have a material impact on its consolidated financial statements.The Company adopted the guidance in ASU No. 201517, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which requires that alldeferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent in the balance sheet. As a result, each jurisdiction has onenet noncurrent deferred tax asset or liability. The new guidance does not change the existing requirement that only permits offsetting within a jurisdiction.Companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The change inaccounting principle did not have an impact on the Company’s results of operations, cash flows or stockholders’ equity. At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.The Company completed an analysis of the utilization of NOLs subject to limits based upon certain ownership changes as of December 31, 2020. The results ofthis analysis indicated no ownership change limiting the utilization of net operating losses and tax credits.F25The Company prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, orexpected to be taken, in a tax return. At December 31, 2020 and 2019, the Company had $1.1 million of unrecognized tax benefits taken or expected to be taken in a taxreturn that have been recorded on the Company’s financial statements as an offset to the valuation allowance related to tax positions taken in 2012. It is notreasonably possible that the amount will change in the next twelve months. There were no material changes to prior year or current year positions taken during theyear ended December 31, 2020.There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company files income tax returns in the United States federal jurisdiction and in a state jurisdiction. During 2009, the Company began foreign operations inMalaysia and is subject to local income taxes in that jurisdiction. The Company’s Malaysia tax returns for the periods ended December 31, 2010 through 2012 havebeen audited by the Malaysia Inland Revenue Board with no changes made to the taxable income for those years. All other tax years in Malaysia are open toexamination by tax authorities.The Company’s federal tax returns for the periods ended December 31, 2010, 2008 and 2007 have been audited by the Internal Revenue Service (IRS) with nochanges made to the Company’s taxable losses for those years. The Company’s state tax returns for the periods ended December 31, 2009 through 2012 have beenaudited by the Illinois Department of Revenue with no changes made to the Company’s taxable losses for those years. Due to the existence of NOL carryforwards,tax years ended December 31, 2001 through 2006, 2008, 2009 and 2011 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOLcarryforwards at the State level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 areopen to examination by the Malaysia Inland Revenue Board.Due to the closing of the Rubicon Malaysia operations, the Company no longer considers the undistributed earnings of Rubicon Malaysia to be indefinitelyreinvested. Upon liquidation of Rubicon Malaysia, it is anticipated any cash left after the liquidation will be brought back to the U.S. via a payment of principaltowards the intercompany loan. A withholding tax may be payable to the Malaysian government on the interest portion of the loan. At December 31, 2020 and 2019,the Company accrued the withholding tax on the interest balance of the loan in the amount of $13,000 and $22,000, respectively, which represents the incremental tax.10. COMMITMENTS AND CONTINGENCIESCOVID19 PandemicIn March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID19) as a pandemic. The full impact of the COVID19outbreak is unknown and cannot be reasonably estimated. The magnitude and duration of the COVID19 outbreak, as well as other factors, could result in a materialimpact to the Company’s financial statements in future reporting periods.Operating LeasesThe Company adopted ASU 201602 in the first quarter of the fiscal year ending December 31, 2019. The adoption of ASU 201602 did not have a material impacton the Company’s consolidated financial statements, as the Company does not have any material lease agreements Rubicon DTP leases a building for itsmanufacturing and offices, however such lease was not considered material to the Company’s financial statements.Direct Dose’s net rent expense under operating leases in 2020 and 2019 amounted to $34,200 and $25,900, respectively. As of December 31, 2020, Direct Dose’soperating lease for its facility was monthtomonth. On January 6, 2021, Direct Dose entered into a one year lease for an aggregate commitment of approximately$35,500.LitigationFrom time to time, the Company experiences routine litigation in the ordinary course of its business.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.11. BENEFIT PLANThe Company sponsors a 401(k) savings plan (the “Plan”). Employees are eligible to participate in the Plan upon reaching 18 years of age. Employees makecontributions to the Plan through payroll deferrals. Employer matching contributions are discretionary. There were no employer matching contributions for the yearsended December 31, 2020 and 2019.12. SUBSEQUENT EVENTSNone.F26EX21.1 2 f10k2020ex211_rubicon.htm SUBSIDIARIES OF THE COMPANYExhibit 21.1Rubicon Technologies, Inc.Subsidiaries of the CompanyName of subsidiaryState (or other jurisdiction of incorporation)Rubicon Technology Worldwide LLCIllinoisRubicon Technology BP LLCDelawareRubicon DTP LLCDelawareEX23.1 3 f10k2020ex231_rubicon.htm CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMExhibit 23.1INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENTWe consent to the incorporation by reference in the Registration Statements of Rubicon Technology, Inc. on Form S3 (File No. 333167272), as amended (File No.333192536) and on Forms S8 (File No. 333147552, File No. 333180211 and File No. 333213025) of our report dated March 22, 2021 with respect to our audits of theconsolidated financial statements of Rubicon Technology, Inc. and Subsidiaries as of December 31, 2020 and 2019 and for each of the two years in the period endedDecember 31, 2020, which report is included in this Annual Report on Form 10K of Rubicon Technology, Inc. and Subsidiaries for the year ended December 31, 2020./s/ Marcum LLPMarcum LLPChicago, IllinoisMarch 22, 2021EX31.1 4 f10k2020ex311_rubicon.htm CERTIFICATIONExhibit 31.1CertificationsCertification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Timothy E. Brog, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerEX31.2 5 f10k2020ex312_rubicon.htm CERTIFICATIONExhibit 31.2Certification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Kevin T. Lusardi, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerEX32.1 6 f10k2020ex321_rubicon.htm CERTIFICATIONExhibit 32.1Certification Pursuant to Section 906 of The SarbanesOxley Act of 2002,18 U.S.C. Section 1350In connection with the Annual Report of Rubicon Technology, Inc. (the “Company”) on Form 10K for the year ended December 31, 2020, as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Timothy E. Brog, President and Chief Executive Officer of the Company, and I, Kevin T.Lusardi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the SarbanesOxley Act of 2002,that, to my knowledge:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerDate: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerA signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnishedto the Securities and Exchange Commission or its staff upon request. F8Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanthe functional currency of the Company, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in thedetermination of net income (loss) for the period. The Company records these gains and losses in other income.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expenses), in the Consolidated Statements of Operations. Investments in which the Company has the ability and intent, ifnecessary, to liquidate in order to support the current operations are classified as shortterm.The Company reviews its availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on thespecific identification method. The Company considers various factors in determining whether an impairment is otherthantemporary, including the severity andduration of the impairment, changes in underlying credit ratings, forecasted recovery, its ability and intent to hold the investment for a period of time sufficient toallow for any anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When the Company concludesthat an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on theConsolidated Statements of Operations. As of December 31, 2020, and 2019, no impairment was recorded.Purchases of Equity Securities by the IssuerIn November 2018, the Company’s Board of Directors authorized a program to repurchase up to $3 million of its common stock. In July 2020, the Company usedall of the original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time. There can be no assurance as to the number of shares of common stock repurchased. The Company records treasurystock purchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock.Share repurchase activity during the year ended December 31, 2020, was as follows:PeriodsTotalnumber ofsharespurchasedAveragepricepaid pershareTotalnumber ofsharespurchasedas part ofpubliclyannouncedprogramApproximatedollar valueof sharesthat may yetbe purchasedunder theprogram(in thousands)January 1, 2020, to December 31, 2020295,946$8.10295,546$3,000Total295,946$3,000F9Accounts receivableThe majority of the Company’s accounts receivable are due from defense subcontractors, industrial manufacturers, fabricators and resellers. Credit is extendedbased on an evaluation of the customer’s financial condition. Accounts receivable are due based on contract terms and at stated amounts due from customers, netof an allowance for doubtful accounts. Losses from credit sales are provided for in the financial statements.Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number offactors, including the length of time a customer’s account is past due, the customer’s current ability to pay and the condition of the general economy and industryas a whole. The Company writes off accounts receivable when they are deemed uncollectible and such writeoffs, net of payments received, are recorded as areduction to the allowance.The following table shows the activity of the allowance for doubtful accounts:Year endedDecember 31,20202019(in thousands)Beginning balance$40$7Charges to costs and expenses(20)33Account writeoffs, less recoveries(17)—Ending balance$3$40InventoriesInventories are valued at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary course ofbusiness less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis, which includes materials, labor and overhead. The Company reduces the carrying value of itsinventories for differences between the cost and the estimated net realizable value, taking into account usage, expected demand, technological obsolescence andother relevant information.The Company establishes inventory reserves when conditions exist that suggest inventory may be in excess of anticipated demand or is obsolete based oncustomer specifications. The Company evaluates the ability to realize the value of its inventory based on a combination of factors, including forecasted sales,estimated current and future market value and changes in customers’ product specifications. The Company’s method of estimating excess and obsolete inventoryhas remained consistent for all periods presented. The Company also carries a lower of cost or market inventory reserve based on net realizable value using mostrecent sales prices to determine market value. As of December 31, 2020 and 2019, the balance of the lower of cost or market reserve was $51,000 and $72,000,respectively, representing a decrease of $21,000 resulting from sales of related reserved for inventory. In addition, in 2020 we sold inventory that was valued at thelower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $21,000. In 2019 we sold inventorythat was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $35,000.In 2019 and 2020, the Company used some of its previously written down twoinch diameter core material in production of optical and industrial sapphire wafersand did not record any additional adjustments for the years ended December 31, 2019 and December 31, 2020.The Company evaluates the amount of raw material needed for future production based on expected crystal growth production needed to meet anticipatedsales. The Company did not record any writedowns of its raw materials inventory for the years ended December 31, 2019 and December 31, 2020.F10Inventories are composed of the following:As ofDecember 31,20202019(in thousands)Raw materials$468$468Workinprocess614901Finished goods459809$1,541$2,178As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.Other inventory suppliesThe Company’s other inventory supplies include stock of consumable assets and spare parts used in the manufacturing process.Assets held for saleAn asset is considered to be held for sale when all of the following criteria are met: (i) management commits to a plan to sell the asset; (ii) it is unlikely that thedisposal plan will be significantly modified or discontinued; (iii) the asset is available for immediate sale in its present condition; (iv) actions required to complete thesale of the asset have been initiated; (v) sale of the asset is probable and the completed sale is expected to occur within one year; and (vi) the asset is actively beingmarketed for sale at a price that is reasonable given its current market value.A longlived asset classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. If the longlived asset is newlyacquired, the carrying amount of the longlived asset is established based on its fair value less cost to sell at the acquisition date. A longlived asset is notdepreciated or amortized while it is classified as held for sale.In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.F11Property and equipmentProperty and equipment consisted of the following:As ofDecember 31,20202019(in thousands)Machinery, equipment and tooling$3,343$3,341Buildings1,7111,711Information systems835835Land and land improvements594594Furniture and fixtures88Total cost6,4916,489Accumulated depreciation and amortization(4,009)(3,842)Property and equipment, net$2,482$2,647Property and equipment are carried at cost and depreciated over their estimated useful lives using the straightline method. The cost of maintenance and repairsis charged to expense as incurred. Significant renewals and improvements are capitalized. Depreciation expense associated with property and equipment was$167,000 and $169,000 for the years ended December 31, 2020 and 2019, respectively.The estimated useful lives are as follows:Asset descriptionLifeBuildings39 yearsMachinery, equipment and tooling310 yearsFurniture and fixtures7 yearsInformation systems3 yearsWarranty costThe Company’s sales terms include a warranty that its products will meet certain specifications. The Company records a current liability for the expected cost ofwarrantyrelated claims at the time of sale. The warranty reserve is included in accrued and other current liabilities on the Consolidated Balance Sheets.The following table presents changes in the Company’s product warranty liability:Year endedDecember 31,20202019(in thousands)Balance, beginning of period$4$8Charged to cost of sales1831Actual product warranty expenditures(20)(35)Balance, end of period$2$4The Company does not provide maintenance or other services and it does not have sales that involve bill & hold arrangements, multiple elements ordeliverables. However, the Company does provide product warranty for up to 90 days, for which the Company has accrued a warranty reserve of $2,000 and $4,000for the years ended December 31, 2020 and 2019, respectively.Fair value of financial instrumentsThe Company’s financial instruments consist primarily of cash and cash equivalents, shortterm investments, accounts receivable, and accounts payable. Thecarrying values of these assets and liabilities approximate their fair values due to the shortterm nature of these instruments at December 31, 2020 and 2019.F12Concentration of credit risks and other risks and uncertaintiesFinancial instruments that could potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, restrictedcash, shortterm investments and accounts receivable. At December 31, 2020 the Company had no deposits at foreign financial institutions and $1.6 million ondeposit at foreign financial institutions at December 31, 2019. As of December 31, 2020, the Company had $8 million on deposit at financial institutions in excess ofamounts insured by the FDIC. This compares to a $5.7 million as of December 31, 2019. The Company performs a periodic evaluation of these institutions for relativecredit standing. The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant risk of loss on thesebalances.The Company uses third parties for certain finishing functions for its products, including the slicing and polishing of its sapphire crystal inventory. These typesof services are only available from a limited number of third parties. The Company’s ability to successfully outsource these finishing functions will substantiallydepend on its ability to develop, maintain and expand its strategic relationship with these third parties. As a result, the Company may be unable to meet the demandfor its products, which could have a material adverse impact on the Company.Concentration of credit risk related to revenue and accounts receivable is discussed in Note 4.Revenue recognitionRevenues recognized include product sales and billings for costs and fees for government contracts.Product SalesThe Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1,2018. The Company recognizes revenue when performance obligations under a purchase order or signed quotation are satisfied. The Company’s business practicecommits the Company to manufacture and deliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement withthe customer includes specifications of the product to be delivered, price, expected ship date and payment terms. The Company’s agreements generally do notcontain variable, financing, rights of return or noncash components. There are no upfront costs to develop the production process. The performance obligation issatisfied at the point in time (single performance obligation) when the product is manufactured to the customer’s specification, as performance does not create anasset with an alternative use to the Company. Accordingly, the Company recognizes revenue when the product is shipped, and control of the product, title and riskof loss have been transferred to the customer. The Company grants credit terms considering normal collection risk. If there is doubt about collection, full prepaymentfor the order is required. Any payments received prior to shipment are recorded as deferred revenue and included in Advance Payments in the Consolidated BalanceSheets. The Company does not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of the Company’s revenue is denominated in U.S. dollars.Shipping and handling costsThe Company records costs incurred in connection with shipping and handling of products as cost of goods sold. Amounts billed to customers in connectionwith these costs are included in revenue and are not material for any of the periods presented in the accompanying financial statements.Sales taxThe Company collects and remits sales taxes on products sold to customers and reports such amounts under the net method in its Consolidated Statements ofOperations and records a liability until remitted to the respective tax authority.F13Stockbased compensationThe Company requires all sharebased payments to employees, including grants of employee stock options, to be measured at fair value and expensed in theConsolidated Statements of Operations over the service period (generally the vesting period) of the grant. Expense is recognized in the Consolidated Statements ofOperations for these sharebased payments. The Company uses Black Scholes option pricing model in order to determine the fair value of stock option grants.Accounting for uncertainty in income taxesThe Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by thetaxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured basedon the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and/or penalties related to incometax matters in income tax expense. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years endedDecember 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.Income taxesDeferred tax assets and liabilities are provided for temporary differences between financial reporting and income tax bases of assets and liabilities, and aremeasured using the enacted tax rates and laws expected to be in effect when the differences will reverse. Deferred income taxes also arise from the future benefits ofNOL carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Full valuationallowances on net deferred tax assets are maintained until an appropriate level of profitability that generates taxable income is deemed sustainable or until a taxstrategy is developed that would enable the Company to conclude that it is more likely than not that a portion of the deferred tax assets will be realizable. Based onan evaluation in accordance with the accounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. andMalaysia deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all theavailable evidence.Use of estimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at thedate of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.Other comprehensive lossComprehensive loss is defined as the change in equity of a business enterprise from transactions and other events from nonowner sources. Comprehensiveloss includes net loss and other nonowner changes in equity that bypass the statement of operations and are reported in a separate component of equity.Net income (loss) per common shareBasic net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of common shares outstanding duringthe period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of diluted common sharesoutstanding during the period. Diluted shares outstanding are calculated by adding to the weightedaverage shares (a) any outstanding stock options based on thetreasury stock method and (b) restricted stock units (“RSU”).F14Diluted net income per share was the same as basic net income per share for the year ended December 31, 2020, because the effects of potentially dilutivesecurities did not have a material impact on the calculation of diluted net income per share. The Company had outstanding options exercisable into 18,250 shares ofthe Company’s common stock that would have had an antidilutive effect at December 31, 2020.Diluted net loss per common share was the same as basic net loss per common share for the year ended December 31, 2020, because the effects of potentiallydilutive securities were antidilutive.New accounting pronouncements adoptedThe Company has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significantimpact the Company’s consolidated financial statements and related disclosures. 2. SEGMENT INFORMATIONThe Company has determined that it operates in two segments, the sapphire and pharmacy business.Revenue is attributed by geographic region based on shipto location of the Company’s customers. The following table summarizes revenue by geographicregion:Year ended December 31,20202019(in thousands)North America$4,039$3,324Asia406185Other2217Total revenue$4,467$3,526The following table summarizes sales by product type:Year ended December 31,20202019(in thousands)Optical$3,611$3,338Core69Rubicon DTP850179Total revenue$4,467$3,526The following table summarizes assets by geographic region:As ofDecember 31,20202019(in thousands)United States$31,240$29,703Malaysia—5,094Other—4Total assets$31,240$34,801 The total assets of Rubicon DTP were not material to the total assets of the Company as stated on the consolidated balance sheets, as of December 31, 2020and 2019.Rubicon DTP accounted for approximately $340,000 and $447,000 of the Company’s loss for the year ended December 31, 2020 and 2019, respectively. F153. INVESTMENTSThe Company invests available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, commonstock, equity related securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains andlosses recorded in accumulated other comprehensive income/(loss). Investments in equity securities are reported at fair value, with both realized and unrealizedgains and losses recorded as unrealized gain/(loss) on investments and realized gain on investments, in other income/(expense), in the Consolidated Statements ofOperations. Investments in which the Company has the ability and intent, if necessary, to liquidate are classified as shortterm.The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2020:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,748$—$—$14,748Marketable securities————Total shortterm investments$14,748$—$—$14,748The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2019:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,668$—$—$14,668Marketable securities961(171)790Total shortterm investments$15,629$—$(171)$15,458The Company values its investments at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in theprincipal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniquesused to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchybased on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are thefollowing:●Level 1—Quoted prices in active markets for identical assets or liabilities.●Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices inmarkets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assetsor liabilities.●Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.The Company’s fixed income availableforsale securities consist of U.S. Treasury securities, highquality investment grade commercial paper, FDIC guaranteedcertificates of deposit, common stock, equity related securities and corporate notes. The Company values these securities based on pricing from pricing vendors,who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly(Level 2 inputs) in determining fair value. The valuation techniques used to measure the fair value of the Company’s financial instruments having Level 2 inputswere derived from nonbinding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricingmodels, such as discounted cash flow techniques.F16The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2020:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,136$—$—$3,136Investments:Availableforsales securities—current:U.S. Treasury securities—14,748—14,748Total$3,136$14,748$—$17,884The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2019:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,759$—$—$3,759Investments:Availableforsales securities—current:U.S. Treasury securities—14,668—14,668790790Total$4,549$14,668$—$19,217There are no terms or conditions restricting the Company from redeeming any of its investments.In addition to the debt securities noted above, the Company had approximately $8.0 million and $4.9 million of time deposits included in cash and cashequivalents as of December 31, 2020 and 2019, respectively.4. SIGNIFICANT CUSTOMERSFor the year ended December 31, 2020, the Company had four customers that accounted for approximately 21%, 13%, 11% and 10% of its revenue. For the yearended December 31, 2019, the Company had three customers that accounted for approximately 31%, 15% and 12% of its revenue.Customers individually representing more than 10% of trade receivables accounted for approximately 44% and 77% of accounts receivable as of December 31,2020 and 2019, respectively. 5. ASSETS HELD FOR SALE AND LONGLIVED ASSETSWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, the Company performs ananalysis to review the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expectedfuture operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.F17In connection with the Company’s decision in 2016 to limit its focus to the optical and industrial sapphire markets and exit the LED market, the Companydeveloped a plan to close its Malaysia facility, scale down and consolidate remaining operations in the U.S. and sell additional assets that would not be needed. TheCompany evaluated its U.S. and Malaysia asset portfolios to identify assets needed for its current business strategy and excess assets that were no longer needed.The Company determined it had excess machinery, equipment and facilities. Excess U.S. and Malaysia assets were evaluated based on assuming an orderlyliquidation plan, which considers economic obsolescence and sales of comparable equipment, as it is the Company’s intention to sell these assets. Additionally, theCompany evaluated its U.S. assets continuing to be used in operations using a cost and market approach to determine the current fair value. In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.6. STOCKHOLDERS’ EQUITYCommon stockAt the Company’s annual meeting of stockholders held on May 3, 2017, the Company’s stockholders approved amendments to the Company’s Eighth Amendedand Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”) to (i) effect a reverse stock split of the Company’s common stock; and (ii)decrease the Company’s authorized number of shares of common stock to three times the number of shares of the Company’s common stock outstandingimmediately following the reverse stock split. On May 3, 2017, following the annual meeting, the Company filed with the Secretary of State of the State of Delaware aCertificate of Amendment to (a) implement the reverse stock split at a ratio of 1for10; and (b) to reduce the number of authorized shares of common stock from40,000,000 to 8,200,000, consequently reducing the number of total authorized shares from 45,000,000 to 13,200,000. With the completion of the reverse stock split,the Company’s shares began trading above the required $1.00 per share closing bid price, as required by the Listing Qualifications Department of NASDAQ. Theshare information has been retroactively reflected for the effects of this reverse stock split for all periods presented.Preferred stockAt the Company’s annual meeting of stockholders held on May 10, 2018, the Company’s stockholders approved an amendment to the Certificate ofIncorporation to decrease the Company’s authorized number of shares of preferred stock from 5,000,000 shares to 1,000,000 shares. The Company filed with theSecretary of State of the State of Delaware a Certificate of Amendment to decrease the authorized number of preferred shares, consequently reducing the number oftotal authorized shares from 13,200,000 to 9,200,000.Common shares reservedAs of December 31, 2020, the Company had reserved 65,103 shares of common stock for issuance upon the exercise of outstanding common stock options andvesting of RSUs. Also 301,105 shares of the Company’s common stock were reserved for future grants of stock options and RSUs (or other similar equityinstruments) under the Rubicon Technology, Inc. 2016 Stock Incentive Plan (the “2016 Plan”) as of December 31, 2020.F187. STOCKHOLDER RIGHTS AGREEMENT On December 18, 2017, the Company entered into a Section 382 Rights Agreement with American Stock Transfer & Trust Company, LLC, as Rights Agent (the“Rights Agreement”) in an effort to protect stockholder value by attempting to diminish the risk that the Company’s ability to use its net NOLs to reduce potentialfuture federal income tax obligations may become substantially limited. The Company’s ability to utilize its NOLs may be substantially limited if the Companyexperiences an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”). The Rights Agreement isintended to act as a deterrent to any person acquiring beneficial ownership of 4.9% or more of the Company’s outstanding common stock without the approval ofthe Company’s Board of Directors (the “Board”).The Board authorized the issuance of one Right for each outstanding share of common stock, par value $0.001 per share, of the Company, payable tostockholders of record date of the close of business on January 2, 2018. One Right will also be issued together with each share of the Company’s common stockissued after January 2, 2018 but before the Distribution Date (as defined below) and, in certain circumstances, after the Distribution Date. Subject to the terms,provisions and conditions of the Rights Agreement, if the Rights become exercisable, each Right would initially represent the right to purchase from the Companyone onethousandth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company (the “Series A Preferred Stock”) for apurchase price of $40.00. If issued, each onethousandth of a share of Series A Preferred Stock would give the stockholder approximately the same dividend, votingand liquidation rights as does one share of common stock. However, prior to exercise, a Right does not give its holder any rights as a stockholder of the Company,including, without limitation, any dividend, voting or liquidation rights.The Rights will not be exercisable until the earlier of (i) ten business days after a public announcement that a person has become an “Acquiring Person” byacquiring beneficial ownership of 4.9% or more of outstanding common stock (or, in the case of a person that had beneficial ownership of 4.9% or more of theoutstanding common stock as of the close of business on December 18, 2017, by obtaining beneficial ownership of any additional shares of common stockrepresenting 0.5% or more of the shares of common stock then outstanding (other than pursuant to a dividend or distribution paid or made by the Company on theoutstanding shares of the common stock or pursuant to a split or subdivision of the outstanding shares of common stock) at a time such person still beneficiallyowns 4.9% or more of the outstanding common stock), and (ii) ten business days (or such later date as may be specified by the Board prior to such time as anyperson becomes an Acquiring Person) after the commencement of a tender or exchange offer by or on behalf of a person that, if completed, would result in suchperson becoming an Acquiring Person (the “Distribution Date”).Until the Distribution Date, common stock certificates or the ownership statements issued with respect to uncertificated shares of common stock will evidencethe Rights. Any transfer of shares of common stock prior to the Distribution Date will also constitute a transfer of the associated Rights. After the Distribution Date,separate rights certificates will be issued and the Rights may be transferred other than in connection with the transfer of the underlying shares of common stockunless and until the Board has determined to effect an exchange pursuant to the Rights Agreement (as described below).In the event that a person becomes an Acquiring Person, each holder of a Right, other than Rights that are or, under certain circumstances, were beneficiallyowned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right and payment of the purchaseprice, a number of shares of the Company’s common stock (or, in certain circumstances, cash, property or other securities of the Company) having a market valueequal to two times the purchase price. However, Rights are subject to redemption and exchange at the option of the Company.In the event that, at any time following a person becoming an Acquiring Person, (i) the Company engages in a merger or other business combination transactionin which the Company is not the surviving corporation; (ii) the Company engages in a merger or other business combination transaction in which the Company isthe surviving corporation and the common stock is changed or exchanged; or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold ortransferred, each holder of a Right (except Rights which have previously been voided) shall thereafter have the right to receive, upon exercise of the Right, commonstock of the acquiring company having a value equal to two times the purchase price.F19At any time until the earlier of December 18, 2023, and ten calendar days following the first date of public announcement that a person has become an AcquiringPerson or that discloses information which reveals the existence of an Acquiring Person or such earlier date as a majority of the Board becomes aware of theexistence of an Acquiring Person, the Board may redeem the Rights in whole, but not in part, at a price of $0.001 per Right (the “Redemption Price”). The redemptionof the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon anyredemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.At any time after a person becomes an Acquiring Person, the Board may, at its option, exchange the Rights (other than Rights that have become void), in wholeor in part, at an exchange ratio of one share of common stock, or a fractional share of Series A Preferred Stock (or of a share of a similar class or series of theCompany’s preferred stock having similar rights, preferences and privileges) of equivalent value, per Right (subject to adjustment). Immediately upon an exchange ofany Rights, the right to exercise such Rights will terminate and the only right of the holders of Rights will be to receive the number of shares of common stock (orfractional share of Series A Preferred Stock or of a share of a similar class or series of the Company’s preferred stock having similar rights, preferences andprivileges) equal to the number of such Rights held by such holder multiplied by the exchange ratio.Each one onethousandth of a share of Series A Preferred Stock, if issued: (i) will be nonredeemable and junior to any other series of preferred stock theCompany may issue (unless otherwise provided in the terms of such other series), (ii) will entitle holders to preferential cumulative quarterly dividends in an amountper share of Series A Preferred Stock equal to the greater of (a) $1 or (b) 1,000 times the aggregate the dividends, if any, declared on one share of the Company’scommon stock, (iii) will entitle holders upon liquidation (voluntary or otherwise) to receive $1,000 per share of Series A Preferred Stock plus an amount equal toaccrued and unpaid dividends and distributions thereon, whether or not declared, (iv) will have the same voting power as one share of common stock, and (v) willentitle holders to a per share payment equal to the payment made on one share of the Company’s common stock, if shares of the common stock are exchanged viamerger, consolidation, or a similar transaction. Because of the nature of the Series A Preferred Stock’s dividend, liquidation and voting rights, the value of a Unit ofSeries A Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of common stock.The Rights and the Rights Agreement will expire on the earliest of (i) December 18, 2023, (ii) the time at which the Rights are redeemed pursuant to the RightsAgreement, (iii) the time at which the Rights are exchanged in full pursuant to the Rights Agreement, (iv) the date that the Board determines that the RightsAgreement is no longer necessary for the preservation of material valuable Tax Benefits, (v) the beginning of a taxable year of the Company to which the Boarddetermines that no NOL tax benefits may be carried forward, and (vi) a determination by the Board, prior to the time any Person becomes an Acquiring Person, thatthe Rights Agreement and the Rights are no longer in the best interests of the Company and its stockholders.The Board may adjust the purchase price, the number of shares of Series A Preferred Stock or other securities or assets issuable and the number of outstandingRights to prevent dilution that may occur as a result of certain events, including among others, a stock dividend, a stock split or a reclassification of the Series APreferred Stock or common stock. With certain exceptions, no adjustments to the purchase price will be required until cumulative adjustments amount to at least 1%of the purchase price.For so long as the Rights are redeemable, the Board may supplement or amend any provision of the Rights Agreement in any respect without the approval ofthe holders of the Rights. From and after the time the Rights are no longer redeemable, the Board may supplement or amend the Rights Agreement only to cure anambiguity, to alter time period provisions, to correct inconsistent provisions, or to make any additional changes to the Rights Agreement which the Company maydeem necessary or desirable, but only to the extent that those changes do not impair or adversely affect any Rights holder (other than an Acquiring Person or anyAffiliate or Associate of an Acquiring Person or certain of their transferees) and do not result in the Rights again becoming redeemable or the Rights Agreementagain becoming amendable other than in accordance with this sentence.In connection with the adoption of the Rights Agreement and authorization and declaration of the dividend of the Rights, on December 18, 2017, the Companyfiled the Certificate of Designation with the Secretary of State of the State of Delaware. The Certificate of Designation became effective on December 18, 2017.F208. STOCK INCENTIVE PLANSIn August 2007, the Company adopted the Rubicon Technology Inc. 2007 Stock Incentive Plan, which was amended and restated effective in March 2011 (the“2007 Plan”), and which allowed for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, RSUs, performanceawards and bonus shares. The maximum number of shares that could be awarded under the 2007 Plan was 440,769 shares. Options granted under the 2007 Planentitle the holder to purchase shares of the Company’s common stock at the specified option exercise price, which could not be less than the fair market value of thecommon stock on the grant date. On June 24, 2016, the 2007 Plan terminated with the adoption of the Rubicon Technology, Inc. 2016 Stock Incentive Plan, (the “2016Plan”). Any existing awards under the 2007 Plan remain outstanding in accordance with their current terms under the 2007 Plan. In June 2016, the Company’sstockholders approved adoption of the 2016 Plan effective as of March 17, 2016, which allows for the grant of incentive stock options, nonstatutory stock options,stock appreciation rights, restricted stock, RSUs, performance awards and bonus shares. The Compensation Committee of the Board administers the 2016 Plan. Thecommittee determines the type of award to be granted, the fair value, the number of shares covered by the award, and the time when the award vests and may beexercised.Pursuant to the 2016 Plan, 222,980 shares of the Company’s common stock plus any shares subject to outstanding awards under the 2007 Plan thatsubsequently expire unexercised, are forfeited without the delivery of shares or are settled in cash, will be available for issuance under the 2016 Plan. The 2016 Planwill automatically terminate on March 17, 2026, unless the Company terminates it sooner.The following table summarizes the activity of the stock incentive and equity plans:Sharesavailablefor grantNumber ofoptionsoutstandingWeightedaverageoptionexercise priceNumber ofrestrictedstock sharesissuedNumber ofRSUsoutstandingOutstanding at January 1, 2019295,06769,08312.1099,57050,176Granted(60,925)1,000——9,925Exercised/issued—(5,000)——(6,098)Canceled/forfeited42,244(42,244)11.35——Outstanding at December 31, 2019276,38622,83913.4899,57054,003Granted(20,877)———3,597Exercised/issued—(2,250)——(3,597)Canceled/forfeited40,596(489)202.56—(9,000)Outstanding at December 31, 2020296,10520,100$9.7199,57045,003There were no option grants made during 2020. At December 31, 2020, the exercise prices of outstanding options were as follows:Exercise priceNumber ofoptionsoutstandingAverageremainingcontractual life(years)Number ofoptionsexercisable$6.10 $8.3418,2505.7518,250$44.101,8503.941,85020,1004.7320,100F21The aggregate grant date fair value of the options that became vested in the years ended 2020 and 2019 was $30,000 and $77,000, respectively.The following table summarizes the activity of nonvested options:NonvestedoptionsWeightedaverage optionexercisepriceNonvested at January 1, 201921,992$6.86Granted1,0008.34Vested(10,878)7.07Cancelled(7,248)7.25Nonvested at December 31, 20194,8666.10Granted——Vested(4,866)6.10Cancelled——Nonvested at December 31, 2020—$—The Company’s aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of theCompany’s common stock. Based on the fair value of the common stock at December 31, 2020 there was $52,000 of intrinsic value arising from 18,250 stock optionsexercisable or outstanding.The Company used historical stock prices as the basis for its volatility assumptions. The assumed riskfree rates were based on U.S. Treasury rates in effect atthe time of grant with a term consistent with the expected option lives. The expected term for the year ended December 31, 2020, is based upon the Company’smedian average life of its options. The forfeiture rate is based on the past history of forfeited options. The expense is being allocated using the straightline method.For the years ended December 31, 2020 and 2019, the Company recorded $14,000 and $24,000, respectively, of stock option compensation expense. As ofDecember 31, 2020, all outstanding options awarded have been fully vested.For the year ended December 31, 2020, there were no options granted.The following table summarizes the award vesting terms for the RSUs granted in 2019:Number of RSUsTarget price925$7.95The following table summarizes the award vesting terms for the RSUs granted in 2018:Number of restricted stock unitsTarget price902$11.0015,000$12.5015,000$14.00F22The RSUs vest in the amounts set forth below on the first date the 15trading day average closing price of the Company’s common stock equals or exceeds thecorresponding target price for the common stock before May 12, 2021. At the time the negotiation of the terms of the employment agreement began, the closing priceof the common stock was $5.50. On the date of grant, the closing price of the common stock was $6.30. During the twelve months ended December 31, 2017, the firstthree tranches of the grant vested. No additional tranches vested during the years ended December 31, 2020, 2019 and 2018.The Company used Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted because the awards vest based uponachievement of market price targets. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the marketcondition stipulated in the award and calculates the fair value of each RSU. The Company used the following assumptions in determining the fair value of the RSUs:GrantedJanuary2018March2017Daily expected stock price volatility4.2806%4.4237%Daily expected mean return on equity(0.2575)%(0.2226)%Daily expected dividend yield0.0%0.0%Average daily riskfree interest rate0.0078%0.0063%The daily expected stock price volatility is based on a fouryear historical volatility of the Company’s common stock. The daily expected dividend yield is basedon annual expected dividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches iscalculated to have its own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period which is upto four years. The RSUs granted in January 2018 and March 2017 had a grant date fair value of $209,000 and $323,000, respectively. There were no grants with marketprice targets issued in the years ended December 31, 2020 and 2019. A summary of the Company’s RSUs is as follows:RSUsoutstandingWeightedaverageprice attime of grantAggregateintrinsicvalueNonvested RSUs as of January 1, 201950,176$6.31Granted9,9258.32Vested(6,098)7.40Cancelled——Nonvested RSUs as of December 31, 201954,0036.56Granted3,5978.34Vested(3,597)8.34Cancelled(9,000)8.36Nonvested RSUs at December 31, 202045,003$6.20$278,961The fair value of each RSU is the market price on the date of grant and is being recorded as compensation expense ratably over the vesting terms or theexpected achievement of market price targets based on the Monte Carlo simulation model. For the years ended December 31, 2020 and 2019, the Company recorded$38,000 and $7,000 of RSU expense, respectively. The RSUs are forfeited by a participant upon termination for any reason, and there is no proportionate or partialvesting in the periods between the vesting dates. As of December 31, 2020, there was no unrecognized compensation cost related to the nonvested RSUs.For the year ended December 31, 2020 the Company recorded no compensation related to restricted stock compared to $14,000 in the prior year. During the year ended December 31, 2020 the Company awarded approximately 17,000 shares to an officer of the Company with a fair value of $146,000.F239. INCOME TAXESOn December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed theCompany to record provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date ofenactment. The Company has completed its accounting for the tax effects of enactment of the Act. The deemed inclusion from the repatriation tax increased from$3.9 million at the time of provision to $5.0 million at the time the calculation was finalized for the tax return. The increase of the inclusion related primarily to therefinement of Malaysia earnings and profits. As the Company is in a full valuation allowance position, an equal benefit adjustment was recorded for the impact ofthe increase of the deemed repatriation tax.Components of income before income taxes and the income tax provision are as follows:Income (loss) before income taxesYear endedDecember 31,20202019(in thousands)U.S.$(3,060)$(1,142)Foreign2,01817Total$(1,050)$(1,125)Income taxesYear endedDecember 31,20202019(in thousands)CurrentU.S.$—$—State——Foreign1322Total current income tax expense1322DeferredU.S.——State——Foreign——Total deferred income tax expense (benefit)——Total income tax expense (benefit)$13$22The reconciliation of income tax computed at the federal statutory rate to income before taxes is as follows:Year endedDecember 31,20202019U.S. federal statutory rate(21.0)%(21.0)%State taxes net of federal benefit(18.2)(7.6)Foreign rate differential and transactional tax5.90.1Tax credits——Valuation allowance33.328.5Other12.01.0%2.0%F24Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amount of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred income taxes are as follows at December 31:20202019(in thousands)Deferred tax assets:Allowance for doubtful accounts$1$11Inventory reserves3,0963,185Consumables excess reserve167169Accrued liabilities8152Warrant interest expense195196Stock compensation expense789789State net operating loss14,47615,010Net operating loss carryforward41,10540,437Tax credits710740Depreciation1,0001,329Valuation allowance(61,556)(61,869)Total deferred tax assets6449Deferred tax liability:Prepaid expenses(64)(49)Net deferred tax liability$—$—In February 2018, the FASB issued ASU No. 201802 (“ASU 201802), Income StatementReporting Comprehensive Income (Topic 220): Reclassification ofCertain Tax Effects from Accumulated Comprehensive Income. The new guidance allows companies to reclassify stranded tax effects resulting from the Tax Act,from accumulated other comprehensive income to retained earnings. The guidance also requires certain new disclosures regardless of the election. Early adoption ispermitted. The Company’s adoption of ASU 201802 did not have a material impact on its consolidated financial statements.The Company adopted the guidance in ASU No. 201517, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which requires that alldeferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent in the balance sheet. As a result, each jurisdiction has onenet noncurrent deferred tax asset or liability. The new guidance does not change the existing requirement that only permits offsetting within a jurisdiction.Companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The change inaccounting principle did not have an impact on the Company’s results of operations, cash flows or stockholders’ equity. At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.The Company completed an analysis of the utilization of NOLs subject to limits based upon certain ownership changes as of December 31, 2020. The results ofthis analysis indicated no ownership change limiting the utilization of net operating losses and tax credits.F25The Company prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, orexpected to be taken, in a tax return. At December 31, 2020 and 2019, the Company had $1.1 million of unrecognized tax benefits taken or expected to be taken in a taxreturn that have been recorded on the Company’s financial statements as an offset to the valuation allowance related to tax positions taken in 2012. It is notreasonably possible that the amount will change in the next twelve months. There were no material changes to prior year or current year positions taken during theyear ended December 31, 2020.There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company files income tax returns in the United States federal jurisdiction and in a state jurisdiction. During 2009, the Company began foreign operations inMalaysia and is subject to local income taxes in that jurisdiction. The Company’s Malaysia tax returns for the periods ended December 31, 2010 through 2012 havebeen audited by the Malaysia Inland Revenue Board with no changes made to the taxable income for those years. All other tax years in Malaysia are open toexamination by tax authorities.The Company’s federal tax returns for the periods ended December 31, 2010, 2008 and 2007 have been audited by the Internal Revenue Service (IRS) with nochanges made to the Company’s taxable losses for those years. The Company’s state tax returns for the periods ended December 31, 2009 through 2012 have beenaudited by the Illinois Department of Revenue with no changes made to the Company’s taxable losses for those years. Due to the existence of NOL carryforwards,tax years ended December 31, 2001 through 2006, 2008, 2009 and 2011 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOLcarryforwards at the State level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 areopen to examination by the Malaysia Inland Revenue Board.Due to the closing of the Rubicon Malaysia operations, the Company no longer considers the undistributed earnings of Rubicon Malaysia to be indefinitelyreinvested. Upon liquidation of Rubicon Malaysia, it is anticipated any cash left after the liquidation will be brought back to the U.S. via a payment of principaltowards the intercompany loan. A withholding tax may be payable to the Malaysian government on the interest portion of the loan. At December 31, 2020 and 2019,the Company accrued the withholding tax on the interest balance of the loan in the amount of $13,000 and $22,000, respectively, which represents the incremental tax.10. COMMITMENTS AND CONTINGENCIESCOVID19 PandemicIn March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID19) as a pandemic. The full impact of the COVID19outbreak is unknown and cannot be reasonably estimated. The magnitude and duration of the COVID19 outbreak, as well as other factors, could result in a materialimpact to the Company’s financial statements in future reporting periods.Operating LeasesThe Company adopted ASU 201602 in the first quarter of the fiscal year ending December 31, 2019. The adoption of ASU 201602 did not have a material impacton the Company’s consolidated financial statements, as the Company does not have any material lease agreements Rubicon DTP leases a building for itsmanufacturing and offices, however such lease was not considered material to the Company’s financial statements.Direct Dose’s net rent expense under operating leases in 2020 and 2019 amounted to $34,200 and $25,900, respectively. As of December 31, 2020, Direct Dose’soperating lease for its facility was monthtomonth. On January 6, 2021, Direct Dose entered into a one year lease for an aggregate commitment of approximately$35,500.LitigationFrom time to time, the Company experiences routine litigation in the ordinary course of its business.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.11. BENEFIT PLANThe Company sponsors a 401(k) savings plan (the “Plan”). Employees are eligible to participate in the Plan upon reaching 18 years of age. Employees makecontributions to the Plan through payroll deferrals. Employer matching contributions are discretionary. There were no employer matching contributions for the yearsended December 31, 2020 and 2019.12. SUBSEQUENT EVENTSNone.F26EX21.1 2 f10k2020ex211_rubicon.htm SUBSIDIARIES OF THE COMPANYExhibit 21.1Rubicon Technologies, Inc.Subsidiaries of the CompanyName of subsidiaryState (or other jurisdiction of incorporation)Rubicon Technology Worldwide LLCIllinoisRubicon Technology BP LLCDelawareRubicon DTP LLCDelawareEX23.1 3 f10k2020ex231_rubicon.htm CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMExhibit 23.1INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENTWe consent to the incorporation by reference in the Registration Statements of Rubicon Technology, Inc. on Form S3 (File No. 333167272), as amended (File No.333192536) and on Forms S8 (File No. 333147552, File No. 333180211 and File No. 333213025) of our report dated March 22, 2021 with respect to our audits of theconsolidated financial statements of Rubicon Technology, Inc. and Subsidiaries as of December 31, 2020 and 2019 and for each of the two years in the period endedDecember 31, 2020, which report is included in this Annual Report on Form 10K of Rubicon Technology, Inc. and Subsidiaries for the year ended December 31, 2020./s/ Marcum LLPMarcum LLPChicago, IllinoisMarch 22, 2021EX31.1 4 f10k2020ex311_rubicon.htm CERTIFICATIONExhibit 31.1CertificationsCertification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Timothy E. Brog, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerEX31.2 5 f10k2020ex312_rubicon.htm CERTIFICATIONExhibit 31.2Certification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Kevin T. Lusardi, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerEX32.1 6 f10k2020ex321_rubicon.htm CERTIFICATIONExhibit 32.1Certification Pursuant to Section 906 of The SarbanesOxley Act of 2002,18 U.S.C. Section 1350In connection with the Annual Report of Rubicon Technology, Inc. (the “Company”) on Form 10K for the year ended December 31, 2020, as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Timothy E. Brog, President and Chief Executive Officer of the Company, and I, Kevin T.Lusardi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the SarbanesOxley Act of 2002,that, to my knowledge:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerDate: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerA signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnishedto the Securities and Exchange Commission or its staff upon request. F8Foreign currency transaction gains and losses are generated from the effects of exchange rate changes on transactions denominated in a currency other thanthe functional currency of the Company, which is the U.S. dollar. Gains and losses on foreign currency transactions are generally required to be recognized in thedetermination of net income (loss) for the period. The Company records these gains and losses in other income.InvestmentsWe invest our available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock,equityrelated securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains and lossesrecorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains andlosses recorded in other income (expenses), in the Consolidated Statements of Operations. Investments in which the Company has the ability and intent, ifnecessary, to liquidate in order to support the current operations are classified as shortterm.The Company reviews its availableforsale debt securities investments at the end of each quarter for otherthantemporary declines in fair value based on thespecific identification method. The Company considers various factors in determining whether an impairment is otherthantemporary, including the severity andduration of the impairment, changes in underlying credit ratings, forecasted recovery, its ability and intent to hold the investment for a period of time sufficient toallow for any anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When the Company concludesthat an otherthantemporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on theConsolidated Statements of Operations. As of December 31, 2020, and 2019, no impairment was recorded.Purchases of Equity Securities by the IssuerIn November 2018, the Company’s Board of Directors authorized a program to repurchase up to $3 million of its common stock. In July 2020, the Company usedall of the original authorized $3 million.On December 14, 2020, Rubicon’s Board of Directors authorized an additional $3 million for the repurchase of the Company’s common stock. The timing, priceand volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time,through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b51 plan. The program may beterminated, suspended or modified at any time. There can be no assurance as to the number of shares of common stock repurchased. The Company records treasurystock purchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock.Share repurchase activity during the year ended December 31, 2020, was as follows:PeriodsTotalnumber ofsharespurchasedAveragepricepaid pershareTotalnumber ofsharespurchasedas part ofpubliclyannouncedprogramApproximatedollar valueof sharesthat may yetbe purchasedunder theprogram(in thousands)January 1, 2020, to December 31, 2020295,946$8.10295,546$3,000Total295,946$3,000F9Accounts receivableThe majority of the Company’s accounts receivable are due from defense subcontractors, industrial manufacturers, fabricators and resellers. Credit is extendedbased on an evaluation of the customer’s financial condition. Accounts receivable are due based on contract terms and at stated amounts due from customers, netof an allowance for doubtful accounts. Losses from credit sales are provided for in the financial statements.Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number offactors, including the length of time a customer’s account is past due, the customer’s current ability to pay and the condition of the general economy and industryas a whole. The Company writes off accounts receivable when they are deemed uncollectible and such writeoffs, net of payments received, are recorded as areduction to the allowance.The following table shows the activity of the allowance for doubtful accounts:Year endedDecember 31,20202019(in thousands)Beginning balance$40$7Charges to costs and expenses(20)33Account writeoffs, less recoveries(17)—Ending balance$3$40InventoriesInventories are valued at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price in the ordinary course ofbusiness less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the firstin, firstout method, and workinprocessand finished goods costs are determined on a standard cost basis, which includes materials, labor and overhead. The Company reduces the carrying value of itsinventories for differences between the cost and the estimated net realizable value, taking into account usage, expected demand, technological obsolescence andother relevant information.The Company establishes inventory reserves when conditions exist that suggest inventory may be in excess of anticipated demand or is obsolete based oncustomer specifications. The Company evaluates the ability to realize the value of its inventory based on a combination of factors, including forecasted sales,estimated current and future market value and changes in customers’ product specifications. The Company’s method of estimating excess and obsolete inventoryhas remained consistent for all periods presented. The Company also carries a lower of cost or market inventory reserve based on net realizable value using mostrecent sales prices to determine market value. As of December 31, 2020 and 2019, the balance of the lower of cost or market reserve was $51,000 and $72,000,respectively, representing a decrease of $21,000 resulting from sales of related reserved for inventory. In addition, in 2020 we sold inventory that was valued at thelower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $21,000. In 2019 we sold inventorythat was valued at the lower of cost or market resulting in a reduction in both the lower of cost or market inventory reserve and cost of goods sold of $35,000.In 2019 and 2020, the Company used some of its previously written down twoinch diameter core material in production of optical and industrial sapphire wafersand did not record any additional adjustments for the years ended December 31, 2019 and December 31, 2020.The Company evaluates the amount of raw material needed for future production based on expected crystal growth production needed to meet anticipatedsales. The Company did not record any writedowns of its raw materials inventory for the years ended December 31, 2019 and December 31, 2020.F10Inventories are composed of the following:As ofDecember 31,20202019(in thousands)Raw materials$468$468Workinprocess614901Finished goods459809$1,541$2,178As of December 31, 2020 and 2019, the Company made the determination that raw material inventories were such that the likelihood of significant usage withinthe current year was doubtful and reclassified such raw material inventories as noncurrent in the reported financial statements.Other inventory suppliesThe Company’s other inventory supplies include stock of consumable assets and spare parts used in the manufacturing process.Assets held for saleAn asset is considered to be held for sale when all of the following criteria are met: (i) management commits to a plan to sell the asset; (ii) it is unlikely that thedisposal plan will be significantly modified or discontinued; (iii) the asset is available for immediate sale in its present condition; (iv) actions required to complete thesale of the asset have been initiated; (v) sale of the asset is probable and the completed sale is expected to occur within one year; and (vi) the asset is actively beingmarketed for sale at a price that is reasonable given its current market value.A longlived asset classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. If the longlived asset is newlyacquired, the carrying amount of the longlived asset is established based on its fair value less cost to sell at the acquisition date. A longlived asset is notdepreciated or amortized while it is classified as held for sale.In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.F11Property and equipmentProperty and equipment consisted of the following:As ofDecember 31,20202019(in thousands)Machinery, equipment and tooling$3,343$3,341Buildings1,7111,711Information systems835835Land and land improvements594594Furniture and fixtures88Total cost6,4916,489Accumulated depreciation and amortization(4,009)(3,842)Property and equipment, net$2,482$2,647Property and equipment are carried at cost and depreciated over their estimated useful lives using the straightline method. The cost of maintenance and repairsis charged to expense as incurred. Significant renewals and improvements are capitalized. Depreciation expense associated with property and equipment was$167,000 and $169,000 for the years ended December 31, 2020 and 2019, respectively.The estimated useful lives are as follows:Asset descriptionLifeBuildings39 yearsMachinery, equipment and tooling310 yearsFurniture and fixtures7 yearsInformation systems3 yearsWarranty costThe Company’s sales terms include a warranty that its products will meet certain specifications. The Company records a current liability for the expected cost ofwarrantyrelated claims at the time of sale. The warranty reserve is included in accrued and other current liabilities on the Consolidated Balance Sheets.The following table presents changes in the Company’s product warranty liability:Year endedDecember 31,20202019(in thousands)Balance, beginning of period$4$8Charged to cost of sales1831Actual product warranty expenditures(20)(35)Balance, end of period$2$4The Company does not provide maintenance or other services and it does not have sales that involve bill & hold arrangements, multiple elements ordeliverables. However, the Company does provide product warranty for up to 90 days, for which the Company has accrued a warranty reserve of $2,000 and $4,000for the years ended December 31, 2020 and 2019, respectively.Fair value of financial instrumentsThe Company’s financial instruments consist primarily of cash and cash equivalents, shortterm investments, accounts receivable, and accounts payable. Thecarrying values of these assets and liabilities approximate their fair values due to the shortterm nature of these instruments at December 31, 2020 and 2019.F12Concentration of credit risks and other risks and uncertaintiesFinancial instruments that could potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, restrictedcash, shortterm investments and accounts receivable. At December 31, 2020 the Company had no deposits at foreign financial institutions and $1.6 million ondeposit at foreign financial institutions at December 31, 2019. As of December 31, 2020, the Company had $8 million on deposit at financial institutions in excess ofamounts insured by the FDIC. This compares to a $5.7 million as of December 31, 2019. The Company performs a periodic evaluation of these institutions for relativecredit standing. The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant risk of loss on thesebalances.The Company uses third parties for certain finishing functions for its products, including the slicing and polishing of its sapphire crystal inventory. These typesof services are only available from a limited number of third parties. The Company’s ability to successfully outsource these finishing functions will substantiallydepend on its ability to develop, maintain and expand its strategic relationship with these third parties. As a result, the Company may be unable to meet the demandfor its products, which could have a material adverse impact on the Company.Concentration of credit risk related to revenue and accounts receivable is discussed in Note 4.Revenue recognitionRevenues recognized include product sales and billings for costs and fees for government contracts.Product SalesThe Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”) which was adopted on January 1,2018. The Company recognizes revenue when performance obligations under a purchase order or signed quotation are satisfied. The Company’s business practicecommits the Company to manufacture and deliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement withthe customer includes specifications of the product to be delivered, price, expected ship date and payment terms. The Company’s agreements generally do notcontain variable, financing, rights of return or noncash components. There are no upfront costs to develop the production process. The performance obligation issatisfied at the point in time (single performance obligation) when the product is manufactured to the customer’s specification, as performance does not create anasset with an alternative use to the Company. Accordingly, the Company recognizes revenue when the product is shipped, and control of the product, title and riskof loss have been transferred to the customer. The Company grants credit terms considering normal collection risk. If there is doubt about collection, full prepaymentfor the order is required. Any payments received prior to shipment are recorded as deferred revenue and included in Advance Payments in the Consolidated BalanceSheets. The Company does not provide maintenance or other services and we do not have sales that involve multiple elements or deliverables. All of the Company’s revenue is denominated in U.S. dollars.Shipping and handling costsThe Company records costs incurred in connection with shipping and handling of products as cost of goods sold. Amounts billed to customers in connectionwith these costs are included in revenue and are not material for any of the periods presented in the accompanying financial statements.Sales taxThe Company collects and remits sales taxes on products sold to customers and reports such amounts under the net method in its Consolidated Statements ofOperations and records a liability until remitted to the respective tax authority.F13Stockbased compensationThe Company requires all sharebased payments to employees, including grants of employee stock options, to be measured at fair value and expensed in theConsolidated Statements of Operations over the service period (generally the vesting period) of the grant. Expense is recognized in the Consolidated Statements ofOperations for these sharebased payments. The Company uses Black Scholes option pricing model in order to determine the fair value of stock option grants.Accounting for uncertainty in income taxesThe Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by thetaxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured basedon the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and/or penalties related to incometax matters in income tax expense. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years endedDecember 31, 2020 and 2019.The Company is subject to taxation in the U.S., Malaysia and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years endedDecember 31, 2001 through 2006, 2008, 2009 and 2012 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at theState level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 are open to examinationby the Malaysia Inland Revenue Board.Income taxesDeferred tax assets and liabilities are provided for temporary differences between financial reporting and income tax bases of assets and liabilities, and aremeasured using the enacted tax rates and laws expected to be in effect when the differences will reverse. Deferred income taxes also arise from the future benefits ofNOL carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Full valuationallowances on net deferred tax assets are maintained until an appropriate level of profitability that generates taxable income is deemed sustainable or until a taxstrategy is developed that would enable the Company to conclude that it is more likely than not that a portion of the deferred tax assets will be realizable. Based onan evaluation in accordance with the accounting standards, as of December 31, 2020 and 2019, a valuation allowance has been recorded against the net U.S. andMalaysia deferred tax assets in order to measure only the portion of the deferred tax assets that are more likely than not to be realized based on the weight of all theavailable evidence.Use of estimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at thedate of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.Other comprehensive lossComprehensive loss is defined as the change in equity of a business enterprise from transactions and other events from nonowner sources. Comprehensiveloss includes net loss and other nonowner changes in equity that bypass the statement of operations and are reported in a separate component of equity.Net income (loss) per common shareBasic net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of common shares outstanding duringthe period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weightedaverage number of diluted common sharesoutstanding during the period. Diluted shares outstanding are calculated by adding to the weightedaverage shares (a) any outstanding stock options based on thetreasury stock method and (b) restricted stock units (“RSU”).F14Diluted net income per share was the same as basic net income per share for the year ended December 31, 2020, because the effects of potentially dilutivesecurities did not have a material impact on the calculation of diluted net income per share. The Company had outstanding options exercisable into 18,250 shares ofthe Company’s common stock that would have had an antidilutive effect at December 31, 2020.Diluted net loss per common share was the same as basic net loss per common share for the year ended December 31, 2020, because the effects of potentiallydilutive securities were antidilutive.New accounting pronouncements adoptedThe Company has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significantimpact the Company’s consolidated financial statements and related disclosures. 2. SEGMENT INFORMATIONThe Company has determined that it operates in two segments, the sapphire and pharmacy business.Revenue is attributed by geographic region based on shipto location of the Company’s customers. The following table summarizes revenue by geographicregion:Year ended December 31,20202019(in thousands)North America$4,039$3,324Asia406185Other2217Total revenue$4,467$3,526The following table summarizes sales by product type:Year ended December 31,20202019(in thousands)Optical$3,611$3,338Core69Rubicon DTP850179Total revenue$4,467$3,526The following table summarizes assets by geographic region:As ofDecember 31,20202019(in thousands)United States$31,240$29,703Malaysia—5,094Other—4Total assets$31,240$34,801 The total assets of Rubicon DTP were not material to the total assets of the Company as stated on the consolidated balance sheets, as of December 31, 2020and 2019.Rubicon DTP accounted for approximately $340,000 and $447,000 of the Company’s loss for the year ended December 31, 2020 and 2019, respectively. F153. INVESTMENTSThe Company invests available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, commonstock, equity related securities and corporate notes. Investments classified as availableforsale debt securities are carried at fair value with unrealized gains andlosses recorded in accumulated other comprehensive income/(loss). Investments in equity securities are reported at fair value, with both realized and unrealizedgains and losses recorded as unrealized gain/(loss) on investments and realized gain on investments, in other income/(expense), in the Consolidated Statements ofOperations. Investments in which the Company has the ability and intent, if necessary, to liquidate are classified as shortterm.The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2020:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,748$—$—$14,748Marketable securities————Total shortterm investments$14,748$—$—$14,748The following table presents the amortized cost, and gross unrealized gains and losses on all securities at December 31, 2019:AmortizedcostGrossunrealizedgainsGrossunrealizedlossesFairvalue(in thousands)Shortterm investments:U.S. Treasury securities$14,668$—$—$14,668Marketable securities961(171)790Total shortterm investments$15,629$—$(171)$15,458The Company values its investments at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in theprincipal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniquesused to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchybased on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are thefollowing:●Level 1—Quoted prices in active markets for identical assets or liabilities.●Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices inmarkets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assetsor liabilities.●Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.The Company’s fixed income availableforsale securities consist of U.S. Treasury securities, highquality investment grade commercial paper, FDIC guaranteedcertificates of deposit, common stock, equity related securities and corporate notes. The Company values these securities based on pricing from pricing vendors,who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly(Level 2 inputs) in determining fair value. The valuation techniques used to measure the fair value of the Company’s financial instruments having Level 2 inputswere derived from nonbinding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricingmodels, such as discounted cash flow techniques.F16The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2020:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,136$—$—$3,136Investments:Availableforsales securities—current:U.S. Treasury securities—14,748—14,748Total$3,136$14,748$—$17,884The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2019:Level 1Level 2Level 3Total(in thousands)Cash equivalents:Money market funds$3,759$—$—$3,759Investments:Availableforsales securities—current:U.S. Treasury securities—14,668—14,668790790Total$4,549$14,668$—$19,217There are no terms or conditions restricting the Company from redeeming any of its investments.In addition to the debt securities noted above, the Company had approximately $8.0 million and $4.9 million of time deposits included in cash and cashequivalents as of December 31, 2020 and 2019, respectively.4. SIGNIFICANT CUSTOMERSFor the year ended December 31, 2020, the Company had four customers that accounted for approximately 21%, 13%, 11% and 10% of its revenue. For the yearended December 31, 2019, the Company had three customers that accounted for approximately 31%, 15% and 12% of its revenue.Customers individually representing more than 10% of trade receivables accounted for approximately 44% and 77% of accounts receivable as of December 31,2020 and 2019, respectively. 5. ASSETS HELD FOR SALE AND LONGLIVED ASSETSWhen circumstances, such as adverse market conditions, indicate that the carrying value of a longlived asset may be impaired, the Company performs ananalysis to review the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expectedfuture operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects ofdemand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized tothe extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume thehighest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible atthe measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.F17In connection with the Company’s decision in 2016 to limit its focus to the optical and industrial sapphire markets and exit the LED market, the Companydeveloped a plan to close its Malaysia facility, scale down and consolidate remaining operations in the U.S. and sell additional assets that would not be needed. TheCompany evaluated its U.S. and Malaysia asset portfolios to identify assets needed for its current business strategy and excess assets that were no longer needed.The Company determined it had excess machinery, equipment and facilities. Excess U.S. and Malaysia assets were evaluated based on assuming an orderlyliquidation plan, which considers economic obsolescence and sales of comparable equipment, as it is the Company’s intention to sell these assets. Additionally, theCompany evaluated its U.S. assets continuing to be used in operations using a cost and market approach to determine the current fair value. In the year ended December 31, 2019, we completed the sale of the remaining excess equipment located in Malaysia for total consideration of $490,000. Suchequipment had a total net book value of $188,000, thereby resulting in a gain on disposal of $302,000.The Company entered into an agreement for the sale of its Malaysian facility in December 2019, which was completed in June 2020.In June 2020, the Company completed the sale of its Malaysian facility for a net sale price of approximately $4.8 million (based on the exchange rate on June 30,2020 of $1=MYR4.27) after the payment of consent fees, real estate taxes, brokerage and legal fees, transfer and other expenses. The Company recorded a gain onthe disposal of the Malaysian facility of approximately $1.8 million.In December, 2020, the Company completed the sale of all of the outstanding shares of capital stock (the “Capital Shares”) of its wholly owned subsidiaryRubicon Sapphire Technology (Malaysia) SDN. BHD. The company recorded a gain on the sale of $261,000. The Company is continuing to pursue the sale of ourvacant parcel of land in Batavia, Illinois. Although the timing on the sale or lease of this real estate is difficult to predict, this property was classified as currentassets held for sale at December 31, 2020 and 2019, as it is the Company’s intention to complete the sale of the Batavia Illinois property within the next twelvemonthperiod.6. STOCKHOLDERS’ EQUITYCommon stockAt the Company’s annual meeting of stockholders held on May 3, 2017, the Company’s stockholders approved amendments to the Company’s Eighth Amendedand Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”) to (i) effect a reverse stock split of the Company’s common stock; and (ii)decrease the Company’s authorized number of shares of common stock to three times the number of shares of the Company’s common stock outstandingimmediately following the reverse stock split. On May 3, 2017, following the annual meeting, the Company filed with the Secretary of State of the State of Delaware aCertificate of Amendment to (a) implement the reverse stock split at a ratio of 1for10; and (b) to reduce the number of authorized shares of common stock from40,000,000 to 8,200,000, consequently reducing the number of total authorized shares from 45,000,000 to 13,200,000. With the completion of the reverse stock split,the Company’s shares began trading above the required $1.00 per share closing bid price, as required by the Listing Qualifications Department of NASDAQ. Theshare information has been retroactively reflected for the effects of this reverse stock split for all periods presented.Preferred stockAt the Company’s annual meeting of stockholders held on May 10, 2018, the Company’s stockholders approved an amendment to the Certificate ofIncorporation to decrease the Company’s authorized number of shares of preferred stock from 5,000,000 shares to 1,000,000 shares. The Company filed with theSecretary of State of the State of Delaware a Certificate of Amendment to decrease the authorized number of preferred shares, consequently reducing the number oftotal authorized shares from 13,200,000 to 9,200,000.Common shares reservedAs of December 31, 2020, the Company had reserved 65,103 shares of common stock for issuance upon the exercise of outstanding common stock options andvesting of RSUs. Also 301,105 shares of the Company’s common stock were reserved for future grants of stock options and RSUs (or other similar equityinstruments) under the Rubicon Technology, Inc. 2016 Stock Incentive Plan (the “2016 Plan”) as of December 31, 2020.F187. STOCKHOLDER RIGHTS AGREEMENT On December 18, 2017, the Company entered into a Section 382 Rights Agreement with American Stock Transfer & Trust Company, LLC, as Rights Agent (the“Rights Agreement”) in an effort to protect stockholder value by attempting to diminish the risk that the Company’s ability to use its net NOLs to reduce potentialfuture federal income tax obligations may become substantially limited. The Company’s ability to utilize its NOLs may be substantially limited if the Companyexperiences an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”). The Rights Agreement isintended to act as a deterrent to any person acquiring beneficial ownership of 4.9% or more of the Company’s outstanding common stock without the approval ofthe Company’s Board of Directors (the “Board”).The Board authorized the issuance of one Right for each outstanding share of common stock, par value $0.001 per share, of the Company, payable tostockholders of record date of the close of business on January 2, 2018. One Right will also be issued together with each share of the Company’s common stockissued after January 2, 2018 but before the Distribution Date (as defined below) and, in certain circumstances, after the Distribution Date. Subject to the terms,provisions and conditions of the Rights Agreement, if the Rights become exercisable, each Right would initially represent the right to purchase from the Companyone onethousandth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company (the “Series A Preferred Stock”) for apurchase price of $40.00. If issued, each onethousandth of a share of Series A Preferred Stock would give the stockholder approximately the same dividend, votingand liquidation rights as does one share of common stock. However, prior to exercise, a Right does not give its holder any rights as a stockholder of the Company,including, without limitation, any dividend, voting or liquidation rights.The Rights will not be exercisable until the earlier of (i) ten business days after a public announcement that a person has become an “Acquiring Person” byacquiring beneficial ownership of 4.9% or more of outstanding common stock (or, in the case of a person that had beneficial ownership of 4.9% or more of theoutstanding common stock as of the close of business on December 18, 2017, by obtaining beneficial ownership of any additional shares of common stockrepresenting 0.5% or more of the shares of common stock then outstanding (other than pursuant to a dividend or distribution paid or made by the Company on theoutstanding shares of the common stock or pursuant to a split or subdivision of the outstanding shares of common stock) at a time such person still beneficiallyowns 4.9% or more of the outstanding common stock), and (ii) ten business days (or such later date as may be specified by the Board prior to such time as anyperson becomes an Acquiring Person) after the commencement of a tender or exchange offer by or on behalf of a person that, if completed, would result in suchperson becoming an Acquiring Person (the “Distribution Date”).Until the Distribution Date, common stock certificates or the ownership statements issued with respect to uncertificated shares of common stock will evidencethe Rights. Any transfer of shares of common stock prior to the Distribution Date will also constitute a transfer of the associated Rights. After the Distribution Date,separate rights certificates will be issued and the Rights may be transferred other than in connection with the transfer of the underlying shares of common stockunless and until the Board has determined to effect an exchange pursuant to the Rights Agreement (as described below).In the event that a person becomes an Acquiring Person, each holder of a Right, other than Rights that are or, under certain circumstances, were beneficiallyowned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right and payment of the purchaseprice, a number of shares of the Company’s common stock (or, in certain circumstances, cash, property or other securities of the Company) having a market valueequal to two times the purchase price. However, Rights are subject to redemption and exchange at the option of the Company.In the event that, at any time following a person becoming an Acquiring Person, (i) the Company engages in a merger or other business combination transactionin which the Company is not the surviving corporation; (ii) the Company engages in a merger or other business combination transaction in which the Company isthe surviving corporation and the common stock is changed or exchanged; or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold ortransferred, each holder of a Right (except Rights which have previously been voided) shall thereafter have the right to receive, upon exercise of the Right, commonstock of the acquiring company having a value equal to two times the purchase price.F19At any time until the earlier of December 18, 2023, and ten calendar days following the first date of public announcement that a person has become an AcquiringPerson or that discloses information which reveals the existence of an Acquiring Person or such earlier date as a majority of the Board becomes aware of theexistence of an Acquiring Person, the Board may redeem the Rights in whole, but not in part, at a price of $0.001 per Right (the “Redemption Price”). The redemptionof the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon anyredemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.At any time after a person becomes an Acquiring Person, the Board may, at its option, exchange the Rights (other than Rights that have become void), in wholeor in part, at an exchange ratio of one share of common stock, or a fractional share of Series A Preferred Stock (or of a share of a similar class or series of theCompany’s preferred stock having similar rights, preferences and privileges) of equivalent value, per Right (subject to adjustment). Immediately upon an exchange ofany Rights, the right to exercise such Rights will terminate and the only right of the holders of Rights will be to receive the number of shares of common stock (orfractional share of Series A Preferred Stock or of a share of a similar class or series of the Company’s preferred stock having similar rights, preferences andprivileges) equal to the number of such Rights held by such holder multiplied by the exchange ratio.Each one onethousandth of a share of Series A Preferred Stock, if issued: (i) will be nonredeemable and junior to any other series of preferred stock theCompany may issue (unless otherwise provided in the terms of such other series), (ii) will entitle holders to preferential cumulative quarterly dividends in an amountper share of Series A Preferred Stock equal to the greater of (a) $1 or (b) 1,000 times the aggregate the dividends, if any, declared on one share of the Company’scommon stock, (iii) will entitle holders upon liquidation (voluntary or otherwise) to receive $1,000 per share of Series A Preferred Stock plus an amount equal toaccrued and unpaid dividends and distributions thereon, whether or not declared, (iv) will have the same voting power as one share of common stock, and (v) willentitle holders to a per share payment equal to the payment made on one share of the Company’s common stock, if shares of the common stock are exchanged viamerger, consolidation, or a similar transaction. Because of the nature of the Series A Preferred Stock’s dividend, liquidation and voting rights, the value of a Unit ofSeries A Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of common stock.The Rights and the Rights Agreement will expire on the earliest of (i) December 18, 2023, (ii) the time at which the Rights are redeemed pursuant to the RightsAgreement, (iii) the time at which the Rights are exchanged in full pursuant to the Rights Agreement, (iv) the date that the Board determines that the RightsAgreement is no longer necessary for the preservation of material valuable Tax Benefits, (v) the beginning of a taxable year of the Company to which the Boarddetermines that no NOL tax benefits may be carried forward, and (vi) a determination by the Board, prior to the time any Person becomes an Acquiring Person, thatthe Rights Agreement and the Rights are no longer in the best interests of the Company and its stockholders.The Board may adjust the purchase price, the number of shares of Series A Preferred Stock or other securities or assets issuable and the number of outstandingRights to prevent dilution that may occur as a result of certain events, including among others, a stock dividend, a stock split or a reclassification of the Series APreferred Stock or common stock. With certain exceptions, no adjustments to the purchase price will be required until cumulative adjustments amount to at least 1%of the purchase price.For so long as the Rights are redeemable, the Board may supplement or amend any provision of the Rights Agreement in any respect without the approval ofthe holders of the Rights. From and after the time the Rights are no longer redeemable, the Board may supplement or amend the Rights Agreement only to cure anambiguity, to alter time period provisions, to correct inconsistent provisions, or to make any additional changes to the Rights Agreement which the Company maydeem necessary or desirable, but only to the extent that those changes do not impair or adversely affect any Rights holder (other than an Acquiring Person or anyAffiliate or Associate of an Acquiring Person or certain of their transferees) and do not result in the Rights again becoming redeemable or the Rights Agreementagain becoming amendable other than in accordance with this sentence.In connection with the adoption of the Rights Agreement and authorization and declaration of the dividend of the Rights, on December 18, 2017, the Companyfiled the Certificate of Designation with the Secretary of State of the State of Delaware. The Certificate of Designation became effective on December 18, 2017.F208. STOCK INCENTIVE PLANSIn August 2007, the Company adopted the Rubicon Technology Inc. 2007 Stock Incentive Plan, which was amended and restated effective in March 2011 (the“2007 Plan”), and which allowed for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, RSUs, performanceawards and bonus shares. The maximum number of shares that could be awarded under the 2007 Plan was 440,769 shares. Options granted under the 2007 Planentitle the holder to purchase shares of the Company’s common stock at the specified option exercise price, which could not be less than the fair market value of thecommon stock on the grant date. On June 24, 2016, the 2007 Plan terminated with the adoption of the Rubicon Technology, Inc. 2016 Stock Incentive Plan, (the “2016Plan”). Any existing awards under the 2007 Plan remain outstanding in accordance with their current terms under the 2007 Plan. In June 2016, the Company’sstockholders approved adoption of the 2016 Plan effective as of March 17, 2016, which allows for the grant of incentive stock options, nonstatutory stock options,stock appreciation rights, restricted stock, RSUs, performance awards and bonus shares. The Compensation Committee of the Board administers the 2016 Plan. Thecommittee determines the type of award to be granted, the fair value, the number of shares covered by the award, and the time when the award vests and may beexercised.Pursuant to the 2016 Plan, 222,980 shares of the Company’s common stock plus any shares subject to outstanding awards under the 2007 Plan thatsubsequently expire unexercised, are forfeited without the delivery of shares or are settled in cash, will be available for issuance under the 2016 Plan. The 2016 Planwill automatically terminate on March 17, 2026, unless the Company terminates it sooner.The following table summarizes the activity of the stock incentive and equity plans:Sharesavailablefor grantNumber ofoptionsoutstandingWeightedaverageoptionexercise priceNumber ofrestrictedstock sharesissuedNumber ofRSUsoutstandingOutstanding at January 1, 2019295,06769,08312.1099,57050,176Granted(60,925)1,000——9,925Exercised/issued—(5,000)——(6,098)Canceled/forfeited42,244(42,244)11.35——Outstanding at December 31, 2019276,38622,83913.4899,57054,003Granted(20,877)———3,597Exercised/issued—(2,250)——(3,597)Canceled/forfeited40,596(489)202.56—(9,000)Outstanding at December 31, 2020296,10520,100$9.7199,57045,003There were no option grants made during 2020. At December 31, 2020, the exercise prices of outstanding options were as follows:Exercise priceNumber ofoptionsoutstandingAverageremainingcontractual life(years)Number ofoptionsexercisable$6.10 $8.3418,2505.7518,250$44.101,8503.941,85020,1004.7320,100F21The aggregate grant date fair value of the options that became vested in the years ended 2020 and 2019 was $30,000 and $77,000, respectively.The following table summarizes the activity of nonvested options:NonvestedoptionsWeightedaverage optionexercisepriceNonvested at January 1, 201921,992$6.86Granted1,0008.34Vested(10,878)7.07Cancelled(7,248)7.25Nonvested at December 31, 20194,8666.10Granted——Vested(4,866)6.10Cancelled——Nonvested at December 31, 2020—$—The Company’s aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of theCompany’s common stock. Based on the fair value of the common stock at December 31, 2020 there was $52,000 of intrinsic value arising from 18,250 stock optionsexercisable or outstanding.The Company used historical stock prices as the basis for its volatility assumptions. The assumed riskfree rates were based on U.S. Treasury rates in effect atthe time of grant with a term consistent with the expected option lives. The expected term for the year ended December 31, 2020, is based upon the Company’smedian average life of its options. The forfeiture rate is based on the past history of forfeited options. The expense is being allocated using the straightline method.For the years ended December 31, 2020 and 2019, the Company recorded $14,000 and $24,000, respectively, of stock option compensation expense. As ofDecember 31, 2020, all outstanding options awarded have been fully vested.For the year ended December 31, 2020, there were no options granted.The following table summarizes the award vesting terms for the RSUs granted in 2019:Number of RSUsTarget price925$7.95The following table summarizes the award vesting terms for the RSUs granted in 2018:Number of restricted stock unitsTarget price902$11.0015,000$12.5015,000$14.00F22The RSUs vest in the amounts set forth below on the first date the 15trading day average closing price of the Company’s common stock equals or exceeds thecorresponding target price for the common stock before May 12, 2021. At the time the negotiation of the terms of the employment agreement began, the closing priceof the common stock was $5.50. On the date of grant, the closing price of the common stock was $6.30. During the twelve months ended December 31, 2017, the firstthree tranches of the grant vested. No additional tranches vested during the years ended December 31, 2020, 2019 and 2018.The Company used Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted because the awards vest based uponachievement of market price targets. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the marketcondition stipulated in the award and calculates the fair value of each RSU. The Company used the following assumptions in determining the fair value of the RSUs:GrantedJanuary2018March2017Daily expected stock price volatility4.2806%4.4237%Daily expected mean return on equity(0.2575)%(0.2226)%Daily expected dividend yield0.0%0.0%Average daily riskfree interest rate0.0078%0.0063%The daily expected stock price volatility is based on a fouryear historical volatility of the Company’s common stock. The daily expected dividend yield is basedon annual expected dividend payments. The average daily riskfree interest rate is based on the threeyear treasury yield as of the grant date. Each of the tranches iscalculated to have its own fair value and requisite service period. The fair value of each tranche is amortized over the requisite or derived service period which is upto four years. The RSUs granted in January 2018 and March 2017 had a grant date fair value of $209,000 and $323,000, respectively. There were no grants with marketprice targets issued in the years ended December 31, 2020 and 2019. A summary of the Company’s RSUs is as follows:RSUsoutstandingWeightedaverageprice attime of grantAggregateintrinsicvalueNonvested RSUs as of January 1, 201950,176$6.31Granted9,9258.32Vested(6,098)7.40Cancelled——Nonvested RSUs as of December 31, 201954,0036.56Granted3,5978.34Vested(3,597)8.34Cancelled(9,000)8.36Nonvested RSUs at December 31, 202045,003$6.20$278,961The fair value of each RSU is the market price on the date of grant and is being recorded as compensation expense ratably over the vesting terms or theexpected achievement of market price targets based on the Monte Carlo simulation model. For the years ended December 31, 2020 and 2019, the Company recorded$38,000 and $7,000 of RSU expense, respectively. The RSUs are forfeited by a participant upon termination for any reason, and there is no proportionate or partialvesting in the periods between the vesting dates. As of December 31, 2020, there was no unrecognized compensation cost related to the nonvested RSUs.For the year ended December 31, 2020 the Company recorded no compensation related to restricted stock compared to $14,000 in the prior year. During the year ended December 31, 2020 the Company awarded approximately 17,000 shares to an officer of the Company with a fair value of $146,000.F239. INCOME TAXESOn December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other provisions, reduced the U.S. corporate tax rate from 35% to21% effective January 1, 2018. The SEC issued guidance, Staff Accounting Bulletin 118, on accounting for the tax effects of the Act. The guidance allowed theCompany to record provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date ofenactment. The Company has completed its accounting for the tax effects of enactment of the Act. The deemed inclusion from the repatriation tax increased from$3.9 million at the time of provision to $5.0 million at the time the calculation was finalized for the tax return. The increase of the inclusion related primarily to therefinement of Malaysia earnings and profits. As the Company is in a full valuation allowance position, an equal benefit adjustment was recorded for the impact ofthe increase of the deemed repatriation tax.Components of income before income taxes and the income tax provision are as follows:Income (loss) before income taxesYear endedDecember 31,20202019(in thousands)U.S.$(3,060)$(1,142)Foreign2,01817Total$(1,050)$(1,125)Income taxesYear endedDecember 31,20202019(in thousands)CurrentU.S.$—$—State——Foreign1322Total current income tax expense1322DeferredU.S.——State——Foreign——Total deferred income tax expense (benefit)——Total income tax expense (benefit)$13$22The reconciliation of income tax computed at the federal statutory rate to income before taxes is as follows:Year endedDecember 31,20202019U.S. federal statutory rate(21.0)%(21.0)%State taxes net of federal benefit(18.2)(7.6)Foreign rate differential and transactional tax5.90.1Tax credits——Valuation allowance33.328.5Other12.01.0%2.0%F24Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amount of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred income taxes are as follows at December 31:20202019(in thousands)Deferred tax assets:Allowance for doubtful accounts$1$11Inventory reserves3,0963,185Consumables excess reserve167169Accrued liabilities8152Warrant interest expense195196Stock compensation expense789789State net operating loss14,47615,010Net operating loss carryforward41,10540,437Tax credits710740Depreciation1,0001,329Valuation allowance(61,556)(61,869)Total deferred tax assets6449Deferred tax liability:Prepaid expenses(64)(49)Net deferred tax liability$—$—In February 2018, the FASB issued ASU No. 201802 (“ASU 201802), Income StatementReporting Comprehensive Income (Topic 220): Reclassification ofCertain Tax Effects from Accumulated Comprehensive Income. The new guidance allows companies to reclassify stranded tax effects resulting from the Tax Act,from accumulated other comprehensive income to retained earnings. The guidance also requires certain new disclosures regardless of the election. Early adoption ispermitted. The Company’s adoption of ASU 201802 did not have a material impact on its consolidated financial statements.The Company adopted the guidance in ASU No. 201517, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which requires that alldeferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent in the balance sheet. As a result, each jurisdiction has onenet noncurrent deferred tax asset or liability. The new guidance does not change the existing requirement that only permits offsetting within a jurisdiction.Companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The change inaccounting principle did not have an impact on the Company’s results of operations, cash flows or stockholders’ equity. At December 31, 2020, we had separate Federal, Illinois and Indiana NOL carryforwards of $191.3 million, $196.0 million and $322,000, respectively. The Federaland Illinois NOLs began to expire in 2021 and the Indiana NOL will begin to expire in 2039. With the adoption of ASU 201609 in 2017, we recorded a deferred taxasset related to $26.4 million of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fullyoffset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2.6 million that further reduces the net operating lossdeferred tax assets reported in the financial statements. In addition, at December 31, 2020, we had Federal and Illinois research and development credits and Illinoisinvestment tax credit of $662,000, $51,000 and $370, respectively. The Illinois credits expire in 2021.The Company completed an analysis of the utilization of NOLs subject to limits based upon certain ownership changes as of December 31, 2020. The results ofthis analysis indicated no ownership change limiting the utilization of net operating losses and tax credits.F25The Company prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, orexpected to be taken, in a tax return. At December 31, 2020 and 2019, the Company had $1.1 million of unrecognized tax benefits taken or expected to be taken in a taxreturn that have been recorded on the Company’s financial statements as an offset to the valuation allowance related to tax positions taken in 2012. It is notreasonably possible that the amount will change in the next twelve months. There were no material changes to prior year or current year positions taken during theyear ended December 31, 2020.There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years ended December 31, 2020 and 2019.The Company files income tax returns in the United States federal jurisdiction and in a state jurisdiction. During 2009, the Company began foreign operations inMalaysia and is subject to local income taxes in that jurisdiction. The Company’s Malaysia tax returns for the periods ended December 31, 2010 through 2012 havebeen audited by the Malaysia Inland Revenue Board with no changes made to the taxable income for those years. All other tax years in Malaysia are open toexamination by tax authorities.The Company’s federal tax returns for the periods ended December 31, 2010, 2008 and 2007 have been audited by the Internal Revenue Service (IRS) with nochanges made to the Company’s taxable losses for those years. The Company’s state tax returns for the periods ended December 31, 2009 through 2012 have beenaudited by the Illinois Department of Revenue with no changes made to the Company’s taxable losses for those years. Due to the existence of NOL carryforwards,tax years ended December 31, 2001 through 2006, 2008, 2009 and 2011 through 2019 are open to examination by tax authorities for Federal purposes. Due to NOLcarryforwards at the State level, tax years ended 2008, 2009 and 2012 through 2019 are open to examination by state tax authorities. Tax years 2013 through 2019 areopen to examination by the Malaysia Inland Revenue Board.Due to the closing of the Rubicon Malaysia operations, the Company no longer considers the undistributed earnings of Rubicon Malaysia to be indefinitelyreinvested. Upon liquidation of Rubicon Malaysia, it is anticipated any cash left after the liquidation will be brought back to the U.S. via a payment of principaltowards the intercompany loan. A withholding tax may be payable to the Malaysian government on the interest portion of the loan. At December 31, 2020 and 2019,the Company accrued the withholding tax on the interest balance of the loan in the amount of $13,000 and $22,000, respectively, which represents the incremental tax.10. COMMITMENTS AND CONTINGENCIESCOVID19 PandemicIn March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID19) as a pandemic. The full impact of the COVID19outbreak is unknown and cannot be reasonably estimated. The magnitude and duration of the COVID19 outbreak, as well as other factors, could result in a materialimpact to the Company’s financial statements in future reporting periods.Operating LeasesThe Company adopted ASU 201602 in the first quarter of the fiscal year ending December 31, 2019. The adoption of ASU 201602 did not have a material impacton the Company’s consolidated financial statements, as the Company does not have any material lease agreements Rubicon DTP leases a building for itsmanufacturing and offices, however such lease was not considered material to the Company’s financial statements.Direct Dose’s net rent expense under operating leases in 2020 and 2019 amounted to $34,200 and $25,900, respectively. As of December 31, 2020, Direct Dose’soperating lease for its facility was monthtomonth. On January 6, 2021, Direct Dose entered into a one year lease for an aggregate commitment of approximately$35,500.LitigationFrom time to time, the Company experiences routine litigation in the ordinary course of its business.There are no outstanding material matters as of December 31, 2020 and through the date of this filing.11. BENEFIT PLANThe Company sponsors a 401(k) savings plan (the “Plan”). Employees are eligible to participate in the Plan upon reaching 18 years of age. Employees makecontributions to the Plan through payroll deferrals. Employer matching contributions are discretionary. There were no employer matching contributions for the yearsended December 31, 2020 and 2019.12. SUBSEQUENT EVENTSNone.F26EX21.1 2 f10k2020ex211_rubicon.htm SUBSIDIARIES OF THE COMPANYExhibit 21.1Rubicon Technologies, Inc.Subsidiaries of the CompanyName of subsidiaryState (or other jurisdiction of incorporation)Rubicon Technology Worldwide LLCIllinoisRubicon Technology BP LLCDelawareRubicon DTP LLCDelawareEX23.1 3 f10k2020ex231_rubicon.htm CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMExhibit 23.1INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENTWe consent to the incorporation by reference in the Registration Statements of Rubicon Technology, Inc. on Form S3 (File No. 333167272), as amended (File No.333192536) and on Forms S8 (File No. 333147552, File No. 333180211 and File No. 333213025) of our report dated March 22, 2021 with respect to our audits of theconsolidated financial statements of Rubicon Technology, Inc. and Subsidiaries as of December 31, 2020 and 2019 and for each of the two years in the period endedDecember 31, 2020, which report is included in this Annual Report on Form 10K of Rubicon Technology, Inc. and Subsidiaries for the year ended December 31, 2020./s/ Marcum LLPMarcum LLPChicago, IllinoisMarch 22, 2021EX31.1 4 f10k2020ex311_rubicon.htm CERTIFICATIONExhibit 31.1CertificationsCertification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Timothy E. Brog, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerEX31.2 5 f10k2020ex312_rubicon.htm CERTIFICATIONExhibit 31.2Certification pursuant to Section 302 of the SarbanesOxley Act of 2002I, Kevin T. Lusardi, certify that:1.I have reviewed this Annual Report on Form 10K of Rubicon Technology, Inc. (the “registrant”);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 statementsmade, 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 financialcondition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant andhave:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith 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 ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)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’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerEX32.1 6 f10k2020ex321_rubicon.htm CERTIFICATIONExhibit 32.1Certification Pursuant to Section 906 of The SarbanesOxley Act of 2002,18 U.S.C. Section 1350In connection with the Annual Report of Rubicon Technology, Inc. (the “Company”) on Form 10K for the year ended December 31, 2020, as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Timothy E. Brog, President and Chief Executive Officer of the Company, and I, Kevin T.Lusardi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the SarbanesOxley Act of 2002,that, to my knowledge:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 22, 2021By:/s/ Timothy E. BrogTimothy E. BrogPresident and Chief Executive OfficerDate: March 22, 2021By:/s/ Kevin T. LusardiKevin T. LusardiChief Financial OfficerA signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnishedto the Securities and Exchange Commission or its staff upon request.
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