EDGAR 10-K Filing

Company CIK: 1410172
Filing Year: 2023
Filename: 1410172_10-K_2023_0001213900-23-024745.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS OVERVIEW
Rubicon currently consists of two subsidiaries, Rubicon Worldwide LLC, doing business as Rubicon Technology Worldwide LLC (“RTW”) and Rubicon Technology BP LLC (“BP”). In June 2021 the operations of Rubicon DTP LLC, doing business as Direct Dose Rx (“Direct Dose”) were discontinued.
RTW is an advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Sapphire is a desirable material for high-performance 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 material durability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire sources in the market. We provide optical and industrial sapphire products and materials in a variety of shapes and sizes. We manage our operations 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 product offerings are difficult to predict. Our total sales backlog was approximately $1,167,100 and $1,735,000 as of December 31, 2022 and 2021, respectively.
In June 2021 the operations of Direct Dose Rx were discontinued. The costs associated with such closure were not material. Direct Dose Rx was a specialized pharmacy that provided prescription medications, over-the-counter drugs and vitamins to patients being discharged from skilled nursing facilities and hospitals, and directly to retail customers who want such medications delivered to their home. The delivered products were sorted by the dose, date, and time to be taken, and came in easy-to-use, perforated strip-packaging as opposed to separate pill bottles. Direct Dose Rx was licensed to operate in 11 states. The services offered by Direct Dose Rx benefited patients, skilled nursing facilities and hospitals by reducing the risk of hospital readmissions.
In August 2022, Janel Corporation (“Janel”) completed a tender offer to acquire 1,108,000 shares or 45% of our outstanding common stock at a price per share of $20.00. The tender offer was made pursuant to the terms and conditions set forth in a Stock Purchase and Sale Agreement, dated as of July 1, 2022, between the Company and Janel (the “Purchase Agreement”). The terms and conditions provided that, immediately after the consummation of the tender offer, the Company pay a cash distribution to all stockholders of $11.00 per share. This cash distribution was made in August 2022 and totaled approximately $27.1 million. As part of the transaction, the Board of Directors of the Company (the “Board of Directors”) approved Amendment No. 2 to the Rights Agreement dated as of December 18, 2017, between the Company and American Stock Transfer & Trust Company, LLC, regarding the Company’s ability to utilize its U.S. net operating loss (“NOL”) carryforwards (the “Rights Agreement”). This amendment extended the final expiration date of the Rights Agreement to September 1, 2025. For more information regarding the Rights Agreement, see Note 8 - Stockholder Rights Agreement to our Consolidated Financial Statements included in this Annual Report on Form 10-K.
We have significant NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and tax liabilities until such NOL carryforwards expire in accordance with the Internal Revenue Code of 1986, as amended (the “IRC”). Our NOL carryforwards provide a benefit to us, if fully utilized, of significant 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. If we 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 NOL carryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability to successfully identify and consummate suitable acquisitions or investment opportunities. As part of completing the Janel transaction, the Company took into consideration the impact it would have on the NOL carryforwards, and determined that the transaction would not result in any impairment. Rubicon is continuing to evaluate opportunities to utilize the NOL carryforwards.
Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock was listed on the Nasdaq Capital Market under the symbol “RBCN” until it was delisted effective December 30, 2022 (see Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K for more information). On January 3, 2023, our common stock began trading on the OTCQB Capital Market under the symbol “RBCN.”
Sapphire INDUSTRY OVERVIEW
Sapphire 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 wide-band transmission, superior strength, chemical and scratch resistance and high strength-to-weight ratio.
PRODUCTS
We provide optical and industrial sapphire products in various shapes and sizes. These optical sapphire products are qualified and used in equipment for a wide variety of end markets and high-performance applications, including defense and aerospace, specialty lighting, instrumentation, sensors and detectors, semiconductor process equipment, electronic substrates, medical and laser applications.
RESEARCH AND DEVELOPMENT
In 2022 and 2021, Rubicon did not incur any research and development (“R&D”) expenses and it currently does not have any plans for expenditures in 2023 related to R&D.
SALES AND MARKETING
We market and sell through our direct sales force to customers. Our direct sales team includes experienced and technically sophisticated sales professionals and engineers who are knowledgeable in the development, manufacturing and use of sapphire windows and other optical materials.
A key component of our marketing strategy is developing and maintaining strong relationships with our customers. We achieve this by working closely with our customers to optimize our products for their production processes. We believe that maintaining close relationships with our customers’ senior management and providing technical support improves customer satisfaction.
CUSTOMERS
Our principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. A substantial portion of our sales have been to a small number of customers. In 2022, our top six customers (each 10% or greater of our revenues) accounted for, in the aggregate, approximately 72% of our revenue from our continuing operations and in 2021, the top three customers accounted for approximately 46% of our revenue from our continuing operations. A customer who had accounted for 22% of revenue from continuing operations in 2021 accounted for only 4% of revenue from continuing operations in 2022. Although we are attempting to diversify and expand our customer base, we expect our sales to continue to be concentrated among a small number of customers. We also expect that our significant customers may change from time to time due to various factors. No other customer accounted for 10% or more of our sapphire revenues during 2022 or 2021 other than those referred to above.
COMPETITION
The markets for high-quality sapphire products are very competitive and have been characterized by rapid technological change. The products we sell must meet certain demanding requirements to succeed in the marketplace. Although we are a well-established sapphire provider, we face significant competition from other established providers of similar products as well as from new and potential entrants into our markets.
ENVIRONMENTAL REGULATION
From time to time, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of federal, state and local laws regulating the discharge of these materials into the environment or otherwise relating to the protection of the environment. These include statutory and regulatory provisions under which we are responsible for the management of hazardous materials we use and the disposition of hazardous wastes resulting from our manufacturing processes. Failure to comply with such provisions, whether intentional or inadvertent, could result in fines and other liabilities to the government or third parties, injunctions requiring us to suspend or curtail operations or other remedies, which could have a material adverse effect on our business. The cost of complying with environmental regulation is not material.
EMPLOYEES
As of December 31, 2022, we had 12 full-time employees. None of our employees are represented by a labor union. We consider our employee relations to be good.
OTHER INFORMATION
You may access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K 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 any document we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available through our Internet website (www.rubicontechnology.com). Reports filed with or furnished to the SEC will 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 SEC report (without exhibits) or document, write to Investor Relations, Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106, and a copy of such requested 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, the SEC.

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
You should carefully read the risk factors set forth below, together with the financial statements, related notes and other information contained in this Annual Report on Form 10-K. Our business is subject to a number of important risks and uncertainties, some of which are described below. The risks described below, 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 may also impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cash flows. Please refer to the discussion of “forward-looking statements” on page one of this Annual Report on Form 10-K in connection with your consideration of the 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 to attract new customers or retain existing customers. We have incurred net losses of $0.7 million, $1.1 million, $1.1 million, $17.8 million and $62.9 million in 2021, 2020, 2019, 2017 and 2016, respectively. Although we recorded net income of $0.9 million and $1.0 million in 2022 and 2018, respectively, there can be no assurance that we will achieve profitability in future periods.
We are exploring, evaluating, and may begin to implement certain strategic alternatives with a goal of providing greater value to our stockholders. There can be no assurance that we will be successful in identifying additional strategic alternatives or implementing any strategic alternative, or that any strategic alternative will yield additional value for stockholders.
Our management and the Board of Directors are continuing to review strategic alternatives with a goal of providing greater value to our stockholders. These alternatives could result in, among other things, modifying or eliminating certain of our operations, selling material assets, seeking additional financing, selling the business, making investments, effecting a merger, consolidation or other business combination, partnering or other collaboration agreements, or potential acquisitions 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 any transaction will be consummated. The process of exploring strategic alternatives may be costly and may be time consuming, distracting to management and disruptive to our business operations. If we are unable to effectively manage the process, our business, financial condition and results of operations could be adversely affected. We also cannot provide assurance that any potential transaction, investment or other alternative identified, evaluated and consummated, will provide greater value to our stockholders than that reflected in the current stock price. Any potential transaction or investment would be dependent upon a number of factors that may be beyond our control, including, among other factors, market conditions, industry trends and the availability of financing to us on reasonable terms.
We 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 may adversely 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 a business, product line or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significant attention of our management that would otherwise be available for the ongoing development of our business. Further, the acquisition of a business may result in the assumption of unknown liabilities or create risks with respect to our existing relationships with suppliers and customers. If we make acquisitions, we may issue shares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing intangible assets, 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 needs through public or private equity offerings, debt financings, corporate collaborations or licensing arrangements. Additional funds may not be available when we need them 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 our acquisition opportunities. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, if available, may involve restrictive covenants. To the extent that we raise additional funds through corporate collaborations or licensing arrangements, it may be necessary 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 the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. In evaluating whether and how to raise capital, the Company will consider the impact it may have on the ability to utilize its tax attributes in the future. As a result, the Company may be limited as to the amount of equity it can issue without impairing its tax attributes. In evaluating whether and how to raise capital, the Company will consider the impact it may have on the ability to utilize its tax attributes in the future. As a result, the Company may be limited as to the amount of equity it can issue without impairing its tax attributes.
We believe our existing cash and cash equivalents, and interest thereon, will be sufficient to fund our projected operating requirements for 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 to significantly adversely change, we may not have enough funds available to continue operating at our current level in future periods. A limitation of funds available may 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 do business with us.
Rubicon Technology Worldwide
We rely on third parties for certain material and 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 material and finishing functions for our products, including the slicing and polishing of our sapphire crystal inventory. These types of services are only available from a limited number of third parties. Our ability to successfully outsource these finishing functions will substantially depend on our ability to develop, maintain and expand our strategic relationship with these third parties. Any impairment in our relationships with the third parties performing these functions, in the absence of a timely and satisfactory alternative arrangement, could have a material adverse effect 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 their facilities, and we may not be able to adequately manage and oversee the third parties performing our finishing functions. Accordingly, any difficulties encountered by these third parties that result in product defects, delays or defaults on their contractual commitments to us could adversely affect our business, financial condition 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 the facility could result in lengthy interruptions in their services to us; and any loss or interruption of these services could significantly increase our expenses, cause us to default on our obligations to our customers and/or otherwise adversely affect our business. Furthermore, the outsourcing of our finishing steps, such as slicing and polishing of wafers, may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.
Our 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 to increase sales of higher margin products, introduce new differentiated products and lower our costs. There can be no assurance that we will be successful in improving our gross margin mix. If we are not successful, our overall gross margin levels and operating results in future periods would continue to be adversely impacted. Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand and other factors may lead to 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 capitalized than we are.
The markets for selling high-quality sapphire products are very competitive and have been characterized by broad advancements and changes in technological capabilities. This competition could result in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share or expected market share, any of which would likely seriously harm our business, operating results and financial condition.
The 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 products have trended downward due to an over-supply of products in the market. In some countries, government programs support sapphire producers who would otherwise be unprofitable; in such circumstances, sapphire may be sold at prices below cost for an extended period of time, depressing market prices, to the detriment of our gross margins. This has had a significant adverse impact on our profitability and our results of operations. Moreover, changes in average selling prices of our products as a result of competitive pricing pressures increased sales discounts and new product introductions by our competitors could have a significant impact on our profitability. Although we attempt to optimize our product mix, reduce manufacturing costs and pass along certain increases 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.
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. In 2022, our top six customers accounted for, in the aggregate, approximately 72% of our revenue from our continuing operations, and in 2021, our top three customers accounted for approximately 46% of our revenue from our continuing operations. A customer who had accounted for 22% of revenue from continuing operations in 2021 accounted for only 4% of revenue from continuing operations in 2022. A loss of one of our major customers or having a major customer significantly reduce its volume of business with us, could result in materially reduced revenues and profitability unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent on our major customers, 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 and without penalties. In addition, delays in product orders could cause our quarterly revenue to vary significantly. A number of factors could cause our customers to cancel or defer orders, including interruptions to their operations due to a downturn in their industries, natural disasters, delays in manufacturing their own product offerings 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 retain certain existing personnel, our business could be harmed.
Our success depends on our continued ability to retain and motivate highly skilled personnel. Competition for these individuals is intense, and we may not be able to successfully retain sufficiently qualified personnel. The inability to retain necessary personnel could harm our ability to obtain new customers and develop new products and could adversely affect our business and operating results. In addition, the loss of the services, or distraction, of our senior management for any reason could adversely affect our business, operating results and financial condition.
We are dependent on the continued services and performances of certain senior management employees such as sales management and the head of operations.
On December 12, 2022, the Board of Directors and the Company’s Chief Executive Officer, President and Acting Chief Financial Officer, Timothy Brog, mutually agreed that the Company’s operational staffing requirements had changed and that a new Chief Executive Officer was needed. Mr. Brog remained employed by the Company until January 6, 2023. Mr. Brog’s departure was not the result of any disagreements with the Company on any matters relating to its operations, policies or practices. On February 24, 2023, the Board of Directors appointed Joseph Ferrara as Executive Officer and Chief Financial Officer of the Company.
Our future success is dependent on the continued services and contributions of our senior management who must work together effectively in order to design and produce our products, expand our business, increase our revenue and improve our operating results. The loss of services of our senior management for any reason could adversely affect our business, operating results and financial condition.
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 obtain licenses on acceptable terms, we may face litigation. Any litigation to enforce patents issued to us, to protect trade secrets or know-how possessed by us or to defend us or indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operating results. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect our intellectual 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 such litigation 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 related compliance costs or otherwise adversely affect our business and operating results.
From time to time, we use water, oils, slurries, acids, adhesives and other industrial chemicals. We are subject to a variety of foreign, federal, state and 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 may have 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, or at 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 non-compliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including investigation and cleanup costs, fines and civil or criminal sanctions, third-party property damages or personal injury claims. In addition, new laws and regulations or stricter enforcement of existing laws and regulations could give rise to additional compliance costs and liabilities.
RTW’s operations are concentrated in one facility, and the unavailability of this facility could harm our business.
Our operations are concentrated in one facility located in Bensenville, Illinois. Should a casualty, natural disaster, inclement weather, an outbreak of disease, power loss, an act of terrorism or similar event affect the Chicagoland area, our operations could be significantly impacted. We may not be able to replicate the operations of our Bensenville facility. The disruption from such an event could adversely 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 material adverse effect on our operations. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to our systems, 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 securely process, transmit and store electronic information of financial, marketing, legal and regulatory nature to manage our business processes and activities. Although we have implemented enhanced controls around our information technology systems, these systems may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases, power outages, hardware failures, telecommunication failures, user errors, natural disasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, and our disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results of operations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our operations may be disrupted, exposing us to performance failures with customers. In addition, cybersecurity threats, such as computer viruses, attacks by computer hackers or other cybersecurity threats pose 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 security controls 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 protected information, reputational damage, and litigation with third parties. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilities related to a cybersecurity attack.
Our NOL carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the IRC or if changes are made to the IRC.
We have significant NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and tax liabilities until such NOL carryforwards expire in accordance with the IRC. Our NOL carryforwards provide a benefit to us, if fully utilized, of significant 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. If we 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 NOL carryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability to successfully 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 built-in losses, 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 plan to 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 stock ownership, 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, NOLs generated on or after January 1, 2018, could be limited to 80% of taxable income. If other changes were made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operating results and cash flows.
The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adversely affected by the COVID-19 pandemic.
COVID-19 has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures have included restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelter-in-place orders. The COVID-19 pandemic has significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The Company maintains a limited staff of full-time employees in skilled technical, non-technical and key management positions. If employees become infected by the COVID-19 virus we may not be able to maintain normal business operations for an extended period of time.
The COVID-19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact the Company’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions to its manufacturing, supply chain and logistical services provided by outsourcing partners, resulting in temporary supply shortages that affected sales worldwide. The Company is heavily reliant on domestic and foreign supply chains to operate its businesses. The COVID-19 pandemic may limit and restrict our access to necessary products that are required to operate.
The Company is continuing to monitor the situation and take appropriate actions in accordance with the recommendations and requirements of relevant authorities. The full extent of the impact of the COVID-19 pandemic on the Company’s operational and financial performance is currently uncertain and will depend on many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development and availability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on the global 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 strategic plans; and the Company’s profitability and cost structure.
To the extent the COVID-19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have the effect of heightening many of the other risks described in this Part I, Item 1A of this Annual Report on Form 10-K.
RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK
The 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 of which could adversely affect our stockholders’ value.
Our common stock was listed on the Nasdaq Capital Market under the symbol “RBCN” until it was delisted effective December 30, 2022 (see Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K for more information). On January 3, 2023, our common stock began trading on the OTCQB Capital Market under the symbol “RBCN.” 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 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;
● general market and economic conditions; and
● the size of the public float of our stock.
Our certificate of incorporation, bylaws and Delaware law may discourage takeovers and business combinations that our stockholders might consider in their best interests.
A number of provisions in our certificate of incorporation and bylaws, as amended, as well as anti-takeover 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 provisions include:
● a classified Board of Directors;
● a tax benefit preservation plan designed to preserve our ability to utilize our net operating losses as a result of certain stock ownership changes, which may 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 vacancy occurs 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 be determined 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;
● establishment of advance notice requirements for stockholder proposals and nominations for election to the Board of Directors at stockholder meetings; and
● a requirement that any action taken by the Company or any stockholder that would result in a stockholder owning greater than 49% (an “Above 49% Stockholder”) of the outstanding shares of common stock, would require the approval of a majority of stockholders of the common stock, excluding such Above 49% Stockholder and any entity or person(s) affiliated with such Above 49% Stockholder;
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 a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging takeover attempts in the future.
The foregoing provisions of our certificate of incorporation and bylaws, as amended, may also make it difficult for stockholders to replace or remove our management. These provisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the best interests 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 factors such as trends in the stock market in general, broad market and industry fluctuations or operating performance, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. This sort of litigation can be particularly costly and may divert the attention of our management 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 material effect on our business, financial condition, results of operations or cash flows. Further, uncertainties resulting from the initiation and continuation of securities or other litigation could harm our ability to obtain credit and financing for our operations and to compete in the marketplace.
Our Board of Directors may 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 other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors the Board of Directors considers relevant. Historically, the Company has never declared or paid cash dividends on its common stock. At the end of August 2022, the Company returned $27,092,000 of capital to its shareholders. At the time of the distribution, the Company had an accumulated deficit of approximately $331 million. The Company accounted for the distribution as a reduction of additional paid in capital (see Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K for more information). The Company may decide to make similar distributions or declare cash dividends in the future, but there is no assurance that the Company will do so.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
Disclosure under this item is not required, as the registrant is a smaller reporting company.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
All of our sapphire operations and certain of our executive functions are located in our Bensenville, Illinois, 30,000 square-foot facility that we purchased in September 2018. During the year ended December 31, 2022, the Company entered into a business loan agreement and promissory note in the amount of $1,620,000, which is secured by the property. For more information regarding the business loan agreement and promissory note, see Note 1 - Summary of Significant Accounting Policies of our Consolidated Financial Statements included in this Annual Report on Form 10-K.
On September 19, 2022, the Company completed the sale of a parcel of land located in Batavia, Illinois pursuant to the terms and conditions of the agreement of sale, dated as of February 7, 2022. The selling price for the property was $722,000. The Company realized net proceeds of approximately $600,000 after the payment of real estate taxes, brokerage and legal fees, transfer taxes and other expenses.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
From time to time, we, our subsidiaries and/or our directors and officers may be named in claims arising in the ordinary course of business. Management believes 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 effect on our consolidated results of operations or financial condition.
There are no outstanding material matters as of December 31, 2022 and through the date of this filing.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock was listed on the Nasdaq Capital Market under the symbol “RBCN” until it was delisted effective December 30, 2022 (see Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K for more information). On January 3, 2023, our common stock began trading on the OTCQB Capital Market under the symbol “RBCN.” The following table sets forth the high and low sales prices for our common stock as reported on those markets for the periods indicated:
High Low
Fiscal year ended December 31, 2022
First Quarter $ 9.39 $ 8.61
Second Quarter $ 9.68 $ 8.58
Third Quarter $ 17.74 $ 2.14
Fourth Quarter $ 2.39 $ 1.26
High Low
Fiscal year ended December 31, 2021
First Quarter $ 11.84 $ 9.18
Second Quarter $ 11.92 $ 9.42
Third Quarter $ 11.00 $ 8.60
Fourth Quarter $ 10.75 $ 8.65
Holders
As of February 28, 2023, our common stock was held by approximately 12 stockholders of record and there were 2,410,265 shares of our common stock outstanding.
Dividend Policy
Historically, the Company has never declared or paid cash dividends on its common stock. At the end of August 2022, the Company returned $27,092,000 of capital to its shareholders. At the time of the distribution, the Company had an accumulated deficit of approximately $330 million. The Company accounted for the distribution as a reduction of additional paid in capital (see Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K for more information. The Company may decide to make similar distributions or declare cash dividends in the future.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. [Reserved]
Disclosure under this item is not required as the registrant is a smaller reporting company.
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
In November 2018, the Board of Directors authorized a program to repurchase up to $3,000,000 of shares of the Company’s common stock. As of July 2020, the Company had repurchased $3,000,000 of shares of the Company’s common stock.
On December 14, 2020, the Board of Directors authorized an additional $3,000,000 for the repurchase of the Company’s common stock. On July 5, 2022 the Company announced that it had entered into the Purchase Agreement with Janel, pursuant to which Janel would commence a cash tender offer to purchase up to 45% of the outstanding shares of the Company’s common stock on a fully-diluted basis at a price of $20.00 per share. The transaction was subsequently consummated in August 2022. Pursuant to the terms of the Company’s share repurchase program, the Janel transaction resulted in the automatic termination of the program.
There was no share repurchase activity during the year ended December 31, 2022.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements described in the following discussion and analysis.
OVERVIEW
Rubicon currently consists of two subsidiaries, Rubicon Worldwide LLC, doing business as RTW, and Rubicon Technology BP LLC. In June 2021, the operations of Rubicon DTP LLC, doing business as Direct Dose Rx were discontinued.
RTW is an advanced materials provider specializing in monocrystalline sapphire for applications in optical and industrial systems. Sapphire is a desirable material for high-performance 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 material durability is just as important as optical clarity. We believe that we continue to have a reputation as one of the highest quality sapphire sources in the market. We provide optical and industrial sapphire products in a variety of shapes and sizes. We manage our operations 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 product offerings are difficult to predict. Our total sales backlog was approximately $1,167,100 and $1,735,000 as of December 31, 2022 and 2021, respectively.
In June 2021 the operations of Direct Dose Rx were discontinued. The costs associated with such closure were not material. Direct Dose Rx was a specialized pharmacy that provided prescription medications, over-the-counter drugs and vitamins to patients being discharged from skilled nursing facilities and hospitals and directly to retail customers who want such medications delivered to their home. The delivered products were sorted by the dose, date, and time to be taken, and came in easy-to-use, perforated strip-packaging as opposed to separate pill bottles. Direct Dose Rx was licensed to operate in 11 states. The services offered by Direct Dose Rx benefited patients, skilled nursing facilities and hospitals by reducing the risk of hospital readmissions.
In August 2022, Janel completed a tender offer to acquire 1,108,000 shares or 45% of our outstanding common stock at a price per share of $20.00. The tender offer was made pursuant to the terms and conditions set forth in the Purchase Agreement. The terms and conditions provided that, immediately after the consummation of the tender offer, the Company pay a cash distribution to all stockholders of $11.00 per share. This cash distribution was made in August 2022 and totaled approximately $27.1 million. As part of the transaction, the Board of Directors approved Amendment No. 2 to the Rights Agreement, regarding the Company’s ability to utilize its NOL carryforwards. This amendment extended the final expiration date of the Rights Agreement to September 1, 2025. For more information regarding the Rights Agreement, see Note 8 - Stockholder Rights Agreement to our Consolidated Financial Statements included in this Annual Report on Form 10-K.
We have significant NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and tax liabilities until such NOL carryforwards expire in accordance with the IRC. Our NOL carryforwards provide a benefit to us, if fully utilized, of significant 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. If we 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 NOL carryforwards. Our ability to use the tax benefits associated with our NOL carryforwards is dependent upon our generation of future taxable profits and our ability to successfully identify and consummate suitable acquisitions or investment opportunities. As part of completing the Janel transaction, the Company took into consideration the impact it would have on the NOL carryforwards, and determined that the transaction would not result in any impairment. Rubicon is continuing to evaluate opportunities to utilize the NOL carryforwards.
Rubicon Technology, Inc. is a Delaware corporation and was incorporated on February 7, 2001. Our common stock historically was listed on the Nasdaq Capital Market. On December 13, 2022, the Company notified The Nasdaq Stock Market LLC (“Nasdaq”) of its decision to voluntarily delist its common stock from the Nasdaq Capital Market, and on December 23, 2022, filed a Form 25 with the SEC. The delisting of the Company’s common stock became effective on December 30, 2022. On January 3, 2023, the Company’s common stock began trading on the OTCQB Capital Market under the symbol “RBCN.”
The Board of Directors has determined that the voluntary delisting of the Company’s common stock from the Nasdaq Capital Market was in the best interests of the Company and its stockholders. The decision of the Board of Directors was based on careful review of several factors, including the benefits to the Company of eliminating the expenses of being listed on the Nasdaq Capital Market and the costs associated with it, as well as eliminating the demands on management’s time of complying with the Nasdaq listing standards. On March 10, 2023, the Company commenced filing with the SEC post-effective amendments to various registration statements on Form S-3 (File Nos. 333-167272 and 333-192536) and Form S-8 (File Nos. 333-147552, 333-180211 and 333-213025) to remove from registration any and all securities registered but unsold under each of the registration statements as of the date of the relevant post-effective amendment. On March 28, 2023, the Board of Directors determined that the voluntary deregistration from the reporting requirements under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), was in the best interests of the Company and its stockholders. Further, on or about March 30, 2023, the Company intends to file a Form 15 with the SEC to suspend the Company’s reporting obligations under Section 15(d) of the Exchange Act. Upon the filing of the Form 15, the Company's obligation to file periodic reports with the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, will be suspended immediately.
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. For the year ended December 31, 2022, we had six customers individually that accounted for approximately 15%, 12%, 12%, 11%, 11%, and 11% of our revenue from our continuing operations. For the year ended December 31, 2021, we had three customers individually that accounted for approximately 22%, 12%, and 12% of our revenue from our continuing operations. The customer who had accounted for 22% of revenue from continuing operations in 2021 accounted for only 4% of revenue from continuing operations in 2022. Our principal customers have been defense subcontractors, industrial manufacturers, fabricators and resellers. Although we are attempting to diversify and expand our customer base, we expect our sales to continue to be concentrated among a small number of customers. We also expect that our significant customers may change from time to time. No other customer accounted for 10% or more of our revenues from our continuing operations during the years ended December 31, 2022 and 2021 other than those referred to above.
We sell our products on a global basis. For the year ended December 31, 2022, the North American and other markets accounted for 82% and 18% of our revenue, respectively. For the year ended December 31, 2021, the North American and other markets accounted for 90% and 10% of our revenue of continuing operations, respectively. All our revenue and corresponding accounts receivable are denominated in U.S. dollars. For more information about our revenues by geographic region, see Note 2 - Segment Information of our Consolidated Financial Statements included in this Annual Report on Form 10-K.
Financial operations
Revenue. RTW’s revenue consists of sales of optical and industrial sapphire products sold as blanks or polished windows. Products are made to varying specifications, such as crystal planar orientations and thicknesses. We expect that in future periods our revenue will continue to be primarily from the sale of optical materials. We recognize revenue once the performance obligation 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 of loss 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 our revenue and corresponding accounts receivable are denominated in U.S. dollars. Substantially all our revenue is generated by our direct sales team and we expect this 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 and other variance charges, outsourcing costs, freight and warranties. We purchase materials and supplies to support 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 have long-term fixed-price agreements with our suppliers. We currently outsource a material amount 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, and our ability to reduce costs.
General and administrative expenses. General and administrative expenses (“G&A”) consist primarily of compensation and associated costs for employees in finance, information technology and administrative activities, charges for accounting, legal services, insurance and stock-based compensation.
Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales activities.
(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 our property, 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 proceeds recovered from sale or disposal of this asset, such unfavorable variance is recorded as a loss on sale or disposal of assets.
Other gain. Other gain includes the settlement of liabilities for amounts that were less than amounts originally recorded and compensation received for an easement right.
Other income (expense). Other income (expense) consists of interest income, interest expense, gains and losses on investments, and grant revenue.
Provision for income tax. We account for income taxes under the asset and liability method whereby the expected future tax consequences of temporary differences 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 for the year in which the differences are expected to be recognized. Our analysis of ownership changes that limit the utilization of our NOL carryforwards as of December 31, 2022, shows no impact on such utilization. We are in a cumulative loss position for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Based on an evaluation in accordance with the accounting standards, as of December 31, 2022 and 2021, 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 available evidence. Until an appropriate level of sustained profitability is attained, we expect to maintain a full valuation allowance on our U.S. net deferred tax assets. Any U.S tax benefits or tax expense recorded on the Consolidated Statement of Operations will be offset with the corresponding adjustment from 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 of deferred 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 which such determination is made.
Stock-based compensation. The majority of our stock-based compensation relates primarily to our Board of Directors, executive and administrative personnel and is accounted for as a G&A expense. For the years ended December 31, 2022 and 2021, our stock-based compensation expense was $182,000 and $371,000, respectively.
RESULTS OF OPERATIONS
The following table sets forth our consolidated statements of continuing operations for the periods indicated:
Year Ended
December 31,
(in thousands)
Revenue $ 3,587 $ 4,061
Cost of goods sold 2,147 2,798
Gross profit 1,440 1,263
Operating expenses:
General and administrative 2,346 2,130
Sales and marketing
Gain on sale or disposal of assets (1,410 ) (613 )
Other gain (217 ) -
Total operating expenses 1,728
Income (loss) from continuing operations (464 )
Other income
Income (loss) before income taxes from continuing operations (459 )
Income (loss) from discontinued operations, net of taxes (271 )
Income tax expense - -
Net income (loss) $ 935 $ (730 )
The following table sets forth our statements of operations as a percentage of total revenue for the periods indicated:
Year Ended
December 31,
Revenue 100 % 100 %
Cost of goods sold
Gross profit
Operating expenses:
General and administrative
Sales and marketing
Gain on sale or disposal of assets (39 ) (15 )
Other gain (6 ) -
Total operating expenses
Income (loss) from continuing operations (11 )
Other income -
Income (loss) before income taxes from continuing operations (11 )
Income (loss) from discontinued operations, net of taxes - (7 )
Income tax expense - -
Net income (loss) 25 % (18 )%
Comparison of years ended December 31, 2022 and 2021
Revenue. Revenue from continuing operations was $3,587,000 for the year ended December 31, 2022, and $4,061,000 for the year ended December 31, 2021, a decrease of $474,000. This decrease in revenue was primarily due to the reduction in revenue from a major customer, offset by increased revenue from the remaining customer base.
Revenue from discontinued operations was $0 and $370,000 for the years ended December 31, 2022 and 2021, respectively. This decrease of $370,000 was due to the discontinuation of operations in June 2021.
Gross profit (loss). Gross profit from continuing operations was $1,440,000 for the year ended December 31, 2022, and $1,263,000 for the year ended December 31, 2021, an increase of $177,000. The increase was due to an improvement in production variances and an increased use of inventory that had previously been reserved, offset by a reduction in overall revenues.
Gross profit from discontinued operations was $0 and $33,000, for the years ended December 31, 2022 and 2021, respectively. This decrease of $33,000 was due to the discontinuation of operations.
General and administrative expenses. General and administrative expenses from continuing operations were $2,346,000 and $2,130,000 for the years ended December 31, 2022 and 2021, respectively, an increase of $216,000. The increase was due to an increase in legal and consulting fees of $547,000, related to the Company’s exploration of strategic alternatives, including the Purchase Agreement and the transactions contemplated thereby. This was offset by a reduction of $208,000 in employee compensation, $58,000 in insurance expense, $27,000 in licenses and fees, and $38,000 in other general and administrative expenses.
General and administrative expenses from discontinued operations were $0 and $285,000 for the years ended December 31, 2022 and 2021, respectively. This decrease of $285,000 was due to the discontinuation of operations.
Sales and marketing expenses. Sales and marketing expenses from continuing operations were $136,000 and $210,000 for the years ended December 31, 2022 and 2021, respectively, a decrease of $74,000. This was primarily due to a decrease in staffing.
Sales and marketing expenses from discontinued operations were $0 and $10,000, for the years ended December 31, 2022 and 2021, respectively. This decrease of $10,000 was due to the discontinuation of operations.
Gain on sale or disposal of assets. The gain on sale or disposal of assets for the year ended December 31, 2022 was $1,410,000, an increase of $797,000 over the gain of $613,000 recorded for the year ended December 31, 2021. The gain in 2022 includes a gain on the sale of equipment and excess consumable assets of $1,332,000, and a gain on the sale of the Company’s parcel of land located in Batavia, Illinois of $78,000. The gain in 2021 was entirely from the sale of excess consumable assets.
The Company recorded a loss on the sale of assets from discontinued operations of $9,000 for the year ended December 31, 2021.
Other gain. During the year ended December 31, 2022, the Company settled liabilities that were accrued in prior years, resulting in a gain of approximately $189,000, and received $28,000 from the Illinois Toll Authority as compensation for an easement right.
Other income (expense). Other income from continuing operations was $334,000 and $5,000 for the years ended December 31, 2022 and 2021, respectively, an increase of $329,000. This increase was primarily due to the recognition of $250,000 of grant revenues (see Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates of this Annual Report on Form 10-K for more information), as well as an increase in interest income of $100,000 due to rising interest rates and realized gains on the Company’s marketable securities of $18,000, offset by $39,000 of interest expense.
Income tax (expense) benefit. We are subject to income taxes in the United States. On an annual basis, we assess the recoverability of deferred tax assets and the need for a valuation allowance. For the year ended December 31, 2022, a valuation allowance has been included in the 2022 forecasted effective tax rate. At December 31, 2022, we continue to be in a three-year cumulative loss position; therefore, as of December 31, 2022, we maintained a full valuation allowance on our United States net deferred tax assets and until an appropriate level of profitability is attained, we expect to maintain a full valuation allowance going 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 with a 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% to 21% 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 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 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 the calculation 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 the impact of the increase of the deemed repatriation tax. The tax provision for the years ended December 31, 2022 and 2021 is based on an estimated combined statutory effective tax rate. For the years ended December 31, 2022 and 2022, we recorded a tax expense of $0 and $0, respectively, for an effective tax rate of 0.0% and 0.0%, respectively. For the years ended December 31, 2022 and 2021, the difference between our effective tax rate and the U.S. federal 21% statutory rate and state 7.4% (net of federal benefit) statutory rate was primarily related to the change in our U.S. NOL valuation allowances and U.S. R&D credit.
At December 31, 2022, we had separate Federal, Illinois and Indiana NOL carryforwards of $189 million, $181 million, and $723,000, respectively. The Federal NOLs will begin to expire in 2026, the Illinois NOLs will begin to expire in 2024, and the Indiana NOLs will begin to expire in 2039. With the adoption of ASU 2016-09 in 2017, we recorded a deferred tax asset related to $26,400,000 of unrecorded Federal and State NOLs attributable to stock option exercises. NOLs attributable to the stock option exercise were fully offset by the valuation allowance (as described above). We have recorded an uncertain tax position of $2,600,000 that further reduces the net operating loss deferred tax assets reported in the financial statements. In addition, at December 31, 2022, we had Federal research and development credits of $662,000, which will begin to expire in 2028.
LIQUIDITY AND CAPITAL RESOURCES
We have historically funded our operations using a combination of issuances of common stock and cash generated from our operations. However, during the year ended December 31, 2022, the Company entered into a business loan agreement and promissory note in the amount of $1,620,000. For more information regarding the business loan agreement and promissory note, see Note 1 - Summary of Significant Accounting Policies of our Consolidated Financial Statements included in this Annual Report on Form 10-K.
As of December 31, 2022, we had cash and cash equivalents totaling $1,590,000, including cash of $1,584,000 held in deposits at major banks and $6,000 invested in money market funds.
As of December 31, 2021, we had cash equivalents and short-term investments totaling $26,011,000, including cash of $8,123,000 held in deposits at major banks, $3,137,000 invested in money market funds and $14,751,000 of short-term investments in U.S. Treasury securities.
The Company currently has no plans for material capital expenditures.
Cash flows from operating activities
For the year ended December 31, 2022, cash used in operating activities of continuing operations was $521,000. The Company generated a net income of $919,000, including non-cash items of $1,315,000, and a decrease in cash from an increase in net working capital of $125,000. The net working capital increase was primarily driven by an increase in grants receivable of $250,000, a decrease in accrued payroll of $298,000, and a decrease in corporate income and franchise taxes and accrued real estate taxes of $33,000, offset by a decrease in inventories of $145,000, a decrease in prepaid assets and other current assets of $158,000, a decrease in accounts receivable of $41,000, an increase in accounts payable of $12,000 and an increase in accrued and other current liabilities and advance payments of $100,000.
There was no cash used in or provided by discontinued operations for the year ended December 31, 2022.
For the year ended December 31, 2021, cash used in operating activities of continuing operations was $61,000. The Company generated a net loss of $459,000, including non-cash items of $102,000, and an increase in cash from a decrease in net working capital of $500,000. The net working capital decrease was primarily driven by a decrease in inventories of $356,000, was a decrease in prepaid assets and other current assets of $108,000, and an increase in accrued payroll of $215,000. Additionally, there was an increase in accounts receivable of $236,000, which was the result of an increase in 3rd party trade receivables of $447,000 offset by a $211,000 decrease in amounts due from Direct Dose Rx.
Cash used in discontinued operations for the year ended December 31, 2021 of $262,000 was primarily the result of a net loss from discontinued operations of $271,000, as well as a decrease in inventories of $59,000 and an increase in accounts payable of $29,000. There was also a decrease in 3rd party trade receivables of $113,000, as well as a decrease in amounts owed to Rubicon of $211,000.
Cash flows from investing activities
For the year ended December 31, 2022, net cash provided from investing activities of continuing operations of $16,722,000 was comprised of proceeds from the sale of property and excess equipment and consumable assets of $1,954,000, as well as proceeds from the sale of investments of $15,823,000, offset by investment purchases of $1,055,000.
For the year ended December 31, 2021, net cash provided from investing activities of continuing operations of $640,000 was from the sale of excess equipment and consumable assets.
Cash flows from financing activities
For the year ended December 31, 2022, net cash used in financing activities of continuing operations was $25,751,000, resulting from a return of shareholder capital of $27,092,000 and cash used to settle net equity awards of $210,000, and mortgage loan principal payments of $9,000, offset by proceeds from the mortgage, net of escrow funding and loan costs, of $1,560,000.
For the year ended December 31, 2021, net cash used in financing activities of continuing operations was $187,000, resulting from cash used to settle net equity awards of $187,000.
Future liquidity requirements
We believe that our existing cash, cash equivalents, anticipated cash flows from operating activities and proceeds from sales or leases of fixed assets will be sufficient to meet our anticipated cash needs for at least the next twelve months. However, if our ability to generate sufficient operating 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 continue operating at our current level in future periods. Our cash needs include cash required to fund our operations. If the assumptions underlying our business plan regarding future revenues and expenses change, or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or convertible debt securities. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could be significantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders. In evaluating whether and how to raise capital, the Company will consider the impact it may have on the ability to utilize its tax attributes in the future. As a result, the Company may be limited as to the amount of equity it can issue without impairing its tax attributes.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in accordance with the accounting principles generally accepted in the U.S. requires us to make estimates, assumptions and judgments that affect the amounts reported in our financial statements and the accompanying notes. We base our estimates on historical experience and various other assumptions that we believe to be reasonable. Although these estimates are based on our present best knowledge of the future impact on the Company of current events and actions, actual results may differ from these estimates, assumptions and judgments.
We consider to be critical those accounting policies that require our most subjective or complex judgments, which often result from a need to make estimates about 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 condition and results of operations. We believe the following to be our critical accounting policies, including the more significant estimates and assumptions used in preparation of our financial statements.
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. We recognize revenue when performance obligations under a purchase order or signed quotation are satisfied. Our business practice commits us to manufacture and deliver product upon acceptance of a customer’s purchase order or signed quotation (“agreement”). The agreement with the customer includes specifications of the product to be delivered, price, expected ship date and payment terms. Our agreements generally do not contain variable, financing, rights of return or non-cash components. There are no up-front costs to develop the production process. The performance obligation is satisfied at the point in time (single performance obligation) 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 normal collection risk. If there is doubt about collection, full prepayment for the order is required. Any payments received prior to shipment are recorded as deferred revenue 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 valuation
We 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 course of business less reasonably predictable costs of completion and disposal. Raw materials cost is determined using the first-in, first-out method, and work-in-process and finished goods costs are determined on a standard cost basis which includes materials, labor and overhead. We establish inventory reserves when conditions exist that suggest inventory may be in excess of anticipated demand or is obsolete based on customer required specifications. We evaluate the ability to realize the value of our inventory based on a combination of factors, including forecasted sales, estimated current and future market value and changes in customers’ product specifications. For the year ended December 31, 2022, there was a reduction in excess or obsolete inventory of $697,000, which was attributable to consumed inventory which had previously been reserved. For the year ended December 31, 2021, there was a reduction in excess or obsolete inventory of $159,000, which was attributable to consumed inventory which had previously been reserved. In addition, in 2022 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 inventory and the related reserve of $17,000. In 2021, 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 inventory and the related reserve of $27,000. The excess and obsolete inventory reserve at December 31, 2022 was $7,052,000 compared to $7,749,000 at December 31, 2021.
We did not record any additional write-downs of consumable inventories for the years ended December 31, 2022 and 2021.
We did not record any additional adjustments of raw materials for the year ended December 31, 2022 and 2021, as we sold some of such raw materials at a price exceeding 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 will be made as required.
As of December 31, 2022 and 2021, the Company made the determination that raw material inventories were such that the likelihood of significant usage within the current year was doubtful and reclassified such raw material inventories as non-current in the reported financial statements. For the year ended December 31, 2022, an additional $301,000 of current inventory was reclassified as non-current. Also, during the year ended December 31, 2022, there were sales of non-current inventory totaling $95,000.
We determine our normal plant capacity and record as an expense the costs attributable to lower utilization of that capacity. For the years ended December 31, 2022 and 2021, such expenses were $65,000 and $99,000, respectively.
Investments
When the Company invests its available cash, it primarily invests in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of deposit, common stock, equity-related securities and corporate notes. Investments classified as available-for-sale debt securities are carried at fair value with unrealized gains and losses recorded in accumulated other comprehensive income (loss). Investments in equity securities are reported at fair value, with both realized and unrealized gains and losses recorded in other income (expense), in the Consolidated Statements of Operations. Investments in which we have the ability and intent, if necessary, to liquidate in order to support our current operations are classified as short-term.
We review our available-for-sale debt securities investments at the end of each quarter for other-than-temporary declines in fair value based on the specific identification method. We consider various factors in determining whether an impairment is other-than-temporary, including the severity and duration of the impairment, changes in underlying credit ratings, forecasted recovery, our ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that an other-than-temporary impairment has resulted, the difference between the fair value and carrying value is written off and recorded as a charge on the Consolidated Statement of Operations. As of December 31, 2022, the Company had no such investments, and no impairment was recorded as of December 31, 2021.
Allowance for doubtful accounts
We estimate the allowance for doubtful accounts based on an assessment of the collectability of specific customer accounts. The determination of risk for collection is assessed on a customer-by-customer basis considering our historical experience and expected future orders with the customer, changes in payment patterns 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 is deemed uncollectible, and the account balance differs from the allowance provided, the specific amount is written off to bad debt expense. We believe that based on the customers to whom we sell and the nature of our agreements with them, our estimates are reasonable. Our method of estimating collectability has remained consistent for all periods presented and with past collections experience.
Grants receivable and grant revenue
Section 2301 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and its subsequent amendments in sections 206 and 207 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, provides for a refundable payroll tax credit (Employee Retention Credit or ERC) to eligible employers with less than 500 employees who paid qualified wages after March 12, 2020, and before June 30, 2021. During the quarter ended June 30, 2022, the Company determined that although it did not meet the eligibility conditions during the period beginning March 12, 2020, and ending December 31, 2020, it did qualify to claim the ERC for the periods ending March 31, 2021, and June 30, 2021. As such, the Company recorded Grant Revenue and Grants Receivable of approximately $250,000 related to its pending ERC claim analogous to ASC Subtopic 958-605. Since the Company does not expect to receive the funds for the ERC claim for at least twelve months, the receivable has been classified as a non-current asset on its balance sheet.
Assets held for sale and long-lived assets
When circumstances, such as adverse market conditions, indicate that the carrying value of a long-lived asset may be impaired, we perform an analysis to review the recoverability of the asset’s carrying value using estimates of the undiscounted cash flows (excluding interest charges) from the expected future operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects of demand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized to the extent that the carrying value exceeds the estimated fair value. The estimated fair value of assets is determined using appraisal techniques which assume the highest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible at the measurement date. Any impairment losses are recorded as operating expenses, which reduce net income.
On September 19, 2022, the Company completed the sale of its parcel of land located in Batavia, Illinois pursuant to the terms and conditions of the agreement of sale, dated as of February 7, 2022. The selling price for the property was $722,000. The Company realized net proceeds of approximately $600,000 after the payment of real estate taxes, brokerage and legal fees, transfer taxes and other expenses. This property was classified as current assets held for sale at December 31, 2021.
Stock-based compensation
We grant stock-based compensation in the form of stock options, restricted stock units (“RSUs”) and restricted stock. We expense stock options based upon the fair value on the date of grant. We use the Black-Scholes option pricing model to determine the fair value of stock options. The determination of the fair value of stock-based payment awards on the date of grant using an option-pricing 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, risk-free interest rates, forfeitures and expected dividends.
The expected term represents the weighted-average 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 five-year historical stock price. We base the risk-free interest rate that we use in the option pricing model on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term on the options. We do not anticipate paying any cash dividends in the foreseeable 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 and revise 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 of forfeitures.
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 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.
We used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted to a key executive pursuant to an employment agreement, because the awards vest based upon achievement of market price targets of our common stock. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each RSU. The daily expected stock price volatility is based on a four-year historical volatility of our common stock. The daily expected dividend yield is based on annual expected dividend payments. The average daily risk-free interest rate is based on the three-year treasury yield as of the grant date. Each of the tranches is calculated 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 up to four years.
We allocate stock-based compensation costs relating to options using a straight-line method which amortizes the fair value of each option on a straight-line basis over the service period, 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. As of December 31, 2022, there were no stock options exercisable or outstanding.
For more information on stock-based compensation, see Note 7 - Stock Incentive Plans to our Consolidated Financial Statements included in this Annual Report on Form 10-K.
Current and long-term debt
The Company reports debt issuance costs as an adjustment to the carrying amount of the related debt in accordance with ASC 835-30-45. The amortization of such costs is included in interest expense for the period.
On August 15, 2022, Rubicon Technology BP LLC, a Delaware limited liability company (the “Borrower”), entered into a business loan agreement (the “Loan”) and promissory note (the “Note”) in the amount of $1,620,000 with American Community Bank & Trust (the “Lender”). The Borrower is a wholly owned subsidiary of the Company. The interest rate on the Note is 6% and it matures on August 15, 2027. The Note has a 25-year amortization schedule. Interest and principal payments will be made on a monthly basis and a balloon payment will be made upon the maturity of the Note. The Borrower may pay, without penalty, a portion or the entirety of the amount owed earlier than it is due. The Loan and Note have customary terms and provisions for default and increases in payment. As part of the Loan the Lender required approximately 12 months in “payment reserves” totaling $120,000 which are restricted from use by the Company until it can meet certain debt service ratio requirements. The Loan is secured by a real estate mortgage encumbering the property commonly known as 900 E. Green Street, Bensenville, IL. Rubicon Worldwide LLC, and the Company entered into unlimited commercial guaranty agreements in favor of the Lender. As of December 31, 2022, the Company is in compliance with all terms and covenants related to the Loan and Note.
Income tax valuation allowance
Evaluating the need for and amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all the positive and negative evidence available to determine whether all or some portion of the deferred tax assets will not be realized. A valuation allowance must be established for 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 the incremental benefit achieved through the reduction in future taxes payable or an increase in future taxes refundable from the deferred tax assets, assuming that the underlying deductible differences and carryforwards are the last items to enter into the determination of future taxable income. In determining our valuation allowance, we consider the source of taxable income including taxable income in prior carryback years, future reversals of existing temporary differences, the required use of tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. We are in a cumulative loss position for the past three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. Under the accounting standards, verifiable evidence will have greater weight than subjective evidence such as our projections for future growth. Based on an evaluation in accordance with the accounting standards, as of December 31, 2022, 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 available evidence. Any U.S. tax benefit or tax expense recorded on the Consolidated Statement of Operations will be offset with a corresponding adjustment from 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 of deferred 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 which such determination is made.
Accounting for uncertainty in income taxes
We 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 taxing authorities, based on the technical merits of the position. The tax benefit recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2022 and 2021, we had $1.1 million of unrecognized tax benefits 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 tax positions taken in 2012. We recognize interest and/or penalties related to income tax matters in income tax expense.
The Company is subject to taxation in the U.S. and in a U.S. state jurisdiction. Due to the existence of NOL carryforwards, tax years ended December 31, 2006, 2008, 2009 and 2012 through 2021 are open to examination by tax authorities for Federal purposes. Due to NOL carryforwards at the State level, tax years ended 2012 through 2021 are open to examination by state tax authorities.
Currently, the Company is trying to determine whether, and the extent to which, it has a Malaysian withholding tax obligation. It is performing related due diligence with Malaysian tax experts to resolve the issue, and has recorded an appropriate liability for the potential tax obligation.
Return of shareholder capital
On July 1, 2022, the Company and Janel entered into the Purchase Agreement pursuant to which Janel would commence a cash tender offer (the “Offer”) to purchase up to 45.0% of the issued and outstanding shares of the Company’s common stock, on a fully-diluted basis, at a price per share of $20.00, subject to the terms and conditions set forth in the Purchase Agreement. The transaction was approved by the Board of Directors of both Janel and the Company. The Purchase Agreement provided that, immediately after the consummation of the Offer, the Company would set a record date to authorize and approve a “return of capital” to be paid to all stockholders of the Company, which would include the Purchaser, in the aggregate amount of $11.00 per share. The Janel transaction was consummated in August 2022. At the end of August 2022, the Company returned $27,092,000 of capital to its shareholders in accordance with the Purchase Agreement. At the time of the distribution, the Company had an accumulated deficit of approximately $330 million. The Company accounted for the distribution as a reduction of additional paid-in capital.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1 - Summary of Significant Accounting Policies to the Consolidated Financial Statements included in this Annual Report on Form 10-K for a discussion of new accounting standards.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Disclosure under this item is not required as the registrant is a smaller reporting company.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our Consolidated Financial Statements, together with the related notes and the report of independent registered public accounting firm, are set forth on the pages indicated in Item 15 - Exhibits and Consolidated Financial Statement Schedules of this Annual Report on Form 10-K and are incorporated by reference herein.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Management’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 financial officer (“certifying officer”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the year covered by this report. Disclosure controls and 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 is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated and communicated to our management, including the (chief ) executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation, our certifying officer concluded that these disclosure controls and procedures were effective as of December 31, 2022.
Management’s Report on Internal Control over Financial Reporting
The financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).
The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting 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 with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
iii. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have 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 of controls. Accordingly, even effective internal controls can provide only reasonable assurance with respect to the financial statement preparation. Further, because of 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, 2022. In making this assessment, management used the criteria set forth in 2013 Internal Control-Integrated Framework by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on management’s assessment using those criteria, as of December 31, 2022, management concluded that the Company’s internal control over financial reporting was effective.
This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. The Company’s internal controls over financial reporting were not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the year ended December 31, 2022, that our certifying officer(s) concluded materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Our bylaws, as amended, permit our Board of Directors to establish by resolution the authorized number of directors. Our Board of Directors currently consists of four directors, who are divided into three classes with staggered three-year terms.
All of our directors bring to our Board of Directors a wealth of executive leadership experience derived from their service as corporate executives as well as service as directors on other boards. When evaluating director candidates, the Nominating and Governance Committee takes into account all factors it considers appropriate, which include (i) ensuring that the Board of Directors, as a whole, is diverse and consists of individuals with various and relevant career experience, relevant technical skills, industry knowledge and experience, and financial expertise (including expertise that could qualify a director as a “financial expert,” as that term is defined by the rules of the SEC), and (ii) minimum individual qualifications, including strength of character, mature judgment, familiarity with the Company’s business and industry and independence of thought. The Nominating and Governance Committee also considers geographical, cultural, experiential and other forms of diversity when evaluating director candidates. In addition, the Nominating and Governance Committee also may consider the extent to which the candidate would fill a present need on the Board of Directors. Information about our current directors, including their business experience for the past five years, appears below.
Class I Director
John Eidinger, 42, was appointed as a Class I director whose current term will expire at the Company’s 2023 annual meeting of stockholders. On January 1, 2023, Mr. Eidinger was elected to serve on the Board of Directors of Janel Corporation (Janel”) and, upon the recommendation of its Nominating and Corporate Governance Committee, appointed to serve as the Vice Chairman of the Board, and to serve on its Nominating and Corporate Governance Committee. Mr. Eidinger has served in business development at Janel Corporation since 2019. Mr. Eidinger was previously an associate portfolio manager for Select Equity Group. L.P. from 2011 to 2017. From 2007 to 2011, Mr. Eidinger served as an analyst and principal at Blum Capital Partners. From 2002 to 2007, Mr. Eidinger served as an analyst and associate at Merrill Lynch. Mr. Eidinger holds BS degrees in Finance and Economics from New York University. Mr. Eidinger’s qualifications to serve on the Board of the Company include his extensive experience in finance and acquisitions.
Class II Directors
Timothy Brog, 59, is a continuing Class II director whose current term expires at our 2024 Annual Meeting. Mr. Brog joined us in May 2016 as a member of our Board of Directors and was appointed as our President and Chief Executive Officer effective March 17, 2017. Mr. Brog served on our Audit Committee from July 1, 2016 until March 17, 2017 and on the Compensation Committee from December 14, 2016 to March 17, 2017. From March 2015 until March 17, 2017, Mr. Brog served as the president of Locksmith Capital Management LLC, an investment advisory firm. Previously, he served as Chairman of the Board of Directors of Peerless Systems Corporation from June 2008 to February 2015, Chief Executive Officer from August 2010 to March 2015 and a director beginning in July 2007. Mr. Brog served as a Managing Director and Portfolio Manager to Locksmith Value Opportunity Fund LP from September 2007 to August 2010. He also served as Managing Director of E2 Investment Partners LLC, a special purpose vehicle to invest in Peerless, from March 2007 to July 2008. Prior to his experience at Locksmith Capital and E2 Investment Partners, Mr. Brog was President of Pembridge Capital Management LLC and the Portfolio Manager of Pembridge Value Opportunity Fund LP, a small cap value hedge fund, from June 2004 to September 2007. He also worked as the Managing Director of The Edward Andrews Group Inc., a boutique investment bank, from 1996 to 2007. From 1989 to 1995, Mr. Brog was a corporate finance and mergers and acquisitions associate of the law firm Skadden, Arps, Slate, Meagher & Flom LLP. Mr. Brog has previously served as a director of Eco-Bat Technologies Limited from October 2007 to July 2019, Chairman of the Board and Chairman of the Audit Committee of Deer Valley Corporation from October 2014 to April 2015, and as a member of the board of directors of the Topps Company Inc., from July 2006 to October 2007. Mr. Brog received a JD from Fordham University School of Law in 1989 and a BA from Tufts University in 1986. Mr. Brog’s qualifications to serve on our Board of Directors include his operational, legal, investment banking, executive management and financial analysis experience.
Michael Mikolajczyk, 71, is a continuing Class II director whose current term expires at our 2024 Annual Meeting. Mr. Mikolajczyk has served as a member of our Board of Directors from June 2001 until May 2002 and rejoined our Board of Directors in March 2004. Mr. Mikolajczyk was elected as the chairman of our Board of Directors in December 2017. Mr. Mikolajczyk also serves as a member of our Audit, Compensation, and Nominating and Governance Committees. Since September 2003, Mr. Mikolajczyk has served as managing director of Catalyst Capital Management, LLC, a private equity firm. From 2001 through 2003, Mr. Mikolajczyk worked as an independent consultant providing business and financial advisory services to early stage and mid-cap companies. Mr. Mikolajczyk also served as vice chairman of Diamond Management & Technology Consultants, Inc., a management and technology consulting firm, from 2000 to 2001, president from 1998 to 2000 and chief financial officer from 1994 to 1998. Mr. Mikolajczyk served as chief financial officer of Technology Solutions Company, a business solutions provider, from 1993 to 1994. In addition, Mr. Mikolajczyk served as a director of Diamond Management & Technology Consultants, Inc. from 1994 to 2010 and served as director of Kanbay International, Inc. from 2004 to 2007. Mr. Mikolajczyk is a CPA in the State of Michigan and holds an MBA from Harvard Business School and a BS in business from Wayne State University. Mr. Mikolajczyk’s qualifications to serve on our Board of Directors include his experience as an operating executive and his years of experience providing business and financial advisory services. Mr. Mikolajczyk is a financial expert with extensive experience in corporate governance.
Class III Director
Darren Seirer, 48, was appointed as a Class III director who was re-elected at the Company’s 2022 annual meeting of stockholders. His term will expire at our 2025 annual meeting. On January 1, 2023, Mr. Seirer was elected to serve on the Board of Directors of Janel Corporation, and appointed to serve as President and Chief Executive Officer. Furthermore, upon the recommendation of its Nominating and Corporate Governance Committee, Mr. Seirer was also appointed to serve as the Chairman of the Board and to serve on its Nominating and Corporate Governance Committee. Previously, Mr. Seirer had been a private investor and had served as an advisor to Janel Corporation since 2021. Mr. Seirer was previously at Select Equity Group, L.P. from 1993 to 2019. Mr. Seirer holds a BA in Economics from Columbia University. Mr. Seirer’s qualifications to serve on the Board of the Company include his extensive experience in finance and acquisitions.
Recent Resignations and Appointments of Executive Officers and Directors
Timothy E. Brog, age 59, was appointed as our President and Chief Executive Officer effective March 17, 2017. Mr. Brog has also been a member of our Board of Directors since May 2016. As of April 24, 2021, until such time as a new candidate is appointed, Mr. Brog took on the role of Acting Chief Financial Officer. His biographical information is provided above.
On December 12, 2022, the Board of Directors of the Company and Mr. Brog mutually agreed that the Company’s operational staffing requirements had changed and that a new Chief Executive Officer was needed. Mr. Brog remained employed by the Company until January 6, 2023. Mr. Brog’s departure was not the result of any disagreements with the Company on any matters relating to its operations, policies or practices. On February 24, 2023, the Board of Directors named Joseph Ferrara as the Executive Officer and Chief Financial Officer.
On February 20, 2023, Mr. Brog tendered his resignation as a Class II director, which became effective on February 22, 2023. Mr. Brog’s resignation as a member of the Board of Directors was not the result of any disagreements with the Company on any matters relating to its operations, policies or practices. On March 3, 2023, the Board of Directors appointed Dennis Paul, 50, as an independent director. Since 2012, Mr. Paul has served as a Founder and Managing Member of Thyra Global Management, and since 2012, he has served as a Senior Advisor at Blackstone.
CORPORATE GOVERNANCE
Director Independence
Our Board of Directors undertook a review of the independence of each director and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our Board of Directors determined that Mr. Mikolajczyk independent under the standards for director independence adopted by the Board of Directors and are “independent directors” as defined under the Nasdaq rules. Based on the foregoing, our Board of Directors has concluded that a majority of our Board of Directors has been independent during 2021, as required by the Nasdaq rules.
On August 19, 2022, Mr. Jefferson Gramm and Ms. Susan Westphal, both of whom were independent directors, resigned from the Board the committees of the Board that they serve on. Mr. Seirer and Mr. Eidinger were appointed as their replacements by the Board of Directors.
On October 14, 2022, the Company received notifications from Nasdaq that it was no longer in compliance with various Nasdaq independent director requirements set forth in Listing Rule 5605. This rule requires, among other things, that (i) the Board of Directors be composed of a majority of independent directors, (ii) the Audit Committee be composed of three independent directors, and (iii) the Compensation Committee be composed of two independent directors. The Board of Directors was composed of four directors, one of which was an employee of the Company and therefore was not independent. At that time, the Board of Directors had not yet determined whether the two newly appointed directors would be deemed to be independent under the Nasdaq Listing Rules. Subsequently, on December 13, 2022, the Company notified Nasdaq of its decision to delist its common stock from the Nasdaq Capital Market. The delisting became effective December 30, 2022.
During December 2022, the Board began the analysis and review of the independence of Mr. Seirer and Mr. Eidinger to consider whether they have a material relationship with the Company that could compromise their ability to exercise independent judgment in carrying out their responsibilities. This review has not been completed as of the date hereof. On March 10, 2023, the Board of Directors appointed Dennis Paul as an independent director, and following Mr. Paul’s appointment, there were no vacancies on the Board of Directors. As such, the Board of Directors has determined that Mr. Mikolajczyk and Mr. Paul are the only independent directors under the standards for director independence adopted by the Board of Directors and therefore cannot conclude that a majority of the Board of Directors is independent under the Nasdaq rules.
Board of Directors Leadership Structure
Our Board of Directors is led by an independent Chairman, Mr. Mikolajczyk. The Board has determined that having an independent Chairman is in the best interest of the Company’s stockholders at this time and adopted a formal policy to that effect on December 14, 2016. The Board believes that this leadership structure is appropriate because it strikes an effective balance between management and independent director participation in the Board process. The independent Chairman role allows our Executive Officer to focus on his management responsibilities in leading the business, setting the strategic direction of the Company and optimizing the day-to-day performance and operations of the Company. At the same time, the independent Chairman can focus on Board leadership, providing guidance to the Executive Officer and the Company’s overall business strategy. The Board believes that the separation of functions between the Executive Officer and Chairman of the Board provides independent leadership of the Board in the exercise of its management oversight responsibilities, increases the accountability of the Executive Officer and creates transparency into the relationship among executive management, the Board of Directors and the stockholders. The independent Chairman regularly presides at executive sessions of the independent directors, without the presence of management.
Board of Directors Oversight of Risk
Our executive management team is responsible for our day-to-day risk management activities. The Board of Directors oversees these risk management activities, delegating its authority in this regard to the standing committees of the Board of Directors. The Audit Committee is responsible for discussing with executive management policies with respect to financial risk and enterprise risk management. The Audit Committee also oversees the Company’s corporate compliance programs. The Compensation Committee considers risk in connection with its design of compensation programs for our executives. The Nominating and Governance Committee reviews the Company’s corporate governance principles and their implementation. Each committee regularly reports to the Board of Directors. In addition to each committee’s risk management oversight, the Board of Directors regularly engages in discussions of the most significant risks that the Company is facing and how these risks are being managed.
The Board of Directors believes that each committee’s risk oversight function, together with the efforts of the full Board of Directors and the Chief Executive Officer in this regard, enables the Board of Directors to effectively oversee the Company’s risk management activities.
Committees of the Board of Directors and Meetings
Our Board of Directors has established three standing committees: an Audit Committee, a Compensation Committee and a Nominating and Governance Committee. Described below are the membership and principal responsibilities of each of the standing committees of the Board of Directors, as well as the number of meetings held during 2022. Each of these committees is composed entirely of non-employee directors who, for 2022, have been determined by our Board of Directors to be independent under the current requirements of Nasdaq and the rules and regulations of the SEC. Each committee operates under a charter approved by the Board of Directors setting out the purposes and responsibilities of the committee. As of December 31, 2022, Mr. Mikolajczyk was the only member of each committee, as he was the only director whose independence had been confirmed by the Board. On March 10, 2023, the Board of Directors appointed Dennis Paul as an independent director, and following Mr. Paul’s appointment, there were no vacancies on the Board of Directors. The Board of Directors has not yet determined the committees, if any, on which Mr. Paul will serve.
The Board of Directors held 16 meetings during 2022. Each of our directors attended every meeting. Our non-employee directors meet regularly without our Chief Executive Officer present.
Audit Committee
From January 1, 2022 to August 19, 2022, our Audit Committee was comprised of Michael E. Mikolajczyk, Susan M. Westphal and Jefferson Gramm. Subsequently, Mr. Mikolajczyk was the only member of the committee.
Mr. Mikolajczyk is the chairman of our Audit Committee. Our Board of Directors has determined that each member of our Audit Committee, during the period served on the committee, met or meets the requirements for financial sophistication and independence for Audit Committee membership under the current requirements of Nasdaq and SEC rules and regulations. Our Board of Directors has also determined that Mr. Mikolajczyk is an “audit committee financial expert” as defined in the SEC rules. The Audit Committee’s responsibilities include, but are not limited to:
● selecting and hiring our independent registered public accounting firm, and approving the audit and permitted non-audit services to be performed by our independent registered public accounting firm;
● evaluating the qualifications, experience, performance and independence of our independent registered public accounting firm;
● monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters;
● reviewing the adequacy, effectiveness and integrity of our internal control policies and procedures;
● discussing the scope and results of the audit with the independent registered public accounting firm and reviewing with management and the independent registered public accounting firm our interim and year-end operating results;
● preparing the Audit Committee report required by the SEC in our annual proxy statement; and
● overseeing management with respect to enterprise and financial risk management.
Our Audit Committee held six meetings during 2022.
Compensation Committee
From January 1, 2022 to August 19, 2022, our Compensation Committee was comprised of Jefferson Gramm, Michael E. Mikolajczyk and Susan M. Westphal. Subsequently, Mr. Mikolajczyk was the only member of the committee.
Mr. Gramm was the chairman of our Compensation Committee. The Compensation Committee’s responsibilities include, but are not limited to:
● reviewing and approving our Chief Executive Officer’s and other executive officers’ annual base salaries and annual bonuses;
● evaluating and recommending to the Board of Directors incentive compensation plans;
● overseeing an evaluation of the performance of our executive officers;
● administering, reviewing and making recommendations with respect to our equity compensation plans; and
● reviewing and making recommendations to the Board of Directors with respect to director compensation.
The Compensation Committee may, in its sole discretion, retain or obtain the advice of one or more compensation consultants or other advisors to assist it with these duties.
Our Compensation Committee held one meeting during 2022.
Nominating and Governance Committee
From January 1, 2022 to August 19, 2022, our Nominating and Governance Committee was comprised of Susan M. Westphal, Jefferson Gramm and Michael E. Mikolajczyk. Subsequently, Mr. Mikolajczyk was the only member of the committee.
Ms. Westphal was the chairman of our Nominating and Governance Committee. The Nominating and Governance Committee’s responsibilities include, but are not limited to:
● developing and recommending to the Board of Directors criteria for Board of Directors and committee membership;
● assisting our Board of Directors in identifying prospective director nominees and recommending to the Board of Directors nominees for each annual meeting of stockholders;
● recommending members for each committee to our Board of Directors;
● reviewing developments in corporate governance practices and developing and recommending governance principles applicable to our Board of Directors; and
● overseeing the evaluation of the Board of Directors.
Our Nominating and Governance Committee held one meeting during 2022.
Code of Ethics
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 Investor Relations, 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. Any waiver from or amendment to the Code of Ethics granted to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, will be timely disclosed by filing a Current Report on Form 8-K.
Policies and Procedures Governing Director Nominations
The Nominating and Governance Committee considers candidates for nomination to the Board of Directors from a number of sources, including recommendations by current members of the Board of Directors and members of management. Current members of the Board of Directors are considered for re-election unless they have notified us that they do not wish to stand for re-election. The Nominating and Governance Committee will also consider director candidates recommended by our stockholders, although a formal policy has not been adopted with respect to consideration of such candidates because stockholders may nominate director candidates pursuant to our bylaws. Stockholders desiring to submit recommendations for director candidates must follow the following procedures:
● The Nominating and Governance Committee will accept recommendations of director candidates throughout the year; however, in order for a recommended candidate to be considered for nomination for election at an upcoming annual meeting of stockholders, the recommendation must be received by the Acting Secretary of the Company not later than the close of business on the 60th day nor earlier than the close of business on the 90th day prior to the anniversary date of our most recent annual meeting of stockholders, unless the date of the annual meeting is more than 30 days before or more than 60 days after the first anniversary of the preceding year’s annual meeting, in which case notice must be delivered not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the 10th day following the day on which we first publicly announce the date of such annual meeting. If the number of directors to be elected to the Board is increased and the Company does not make public announcement naming all of the nominees for director or specifying the size of the increased Board at least 70 days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s nomination notice will also be considered timely with respect to nominees for any newly created positions if such notice is delivered to the Acting Secretary not later than the close of business on the 10th day following the day on which such public announcement is first made by the Company.
● A stockholder making the recommendation must be a stockholder of record at the time of giving of notice, be entitled to vote at the meeting and comply with the notice procedures set forth in the bylaws. Furthermore, this recommendation must be in writing and must include the following initial information: (i) as to each person whom the stockholder proposes to nominate for election as a director, all information relating to such person that would be required to be disclosed in proxy solicitations for election of directors in an election contest, or would otherwise be required, in each case pursuant to Regulation 14A under the Exchange Act and Rule 14a-11 promulgated under the Exchange Act, including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected; and (ii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made, the name and address of such stockholder and beneficial owner, and the class and number of shares of the Company that are owned beneficially and of record by such stockholder and beneficial owner. The Nominating and Governance Committee may subsequently request additional information regarding the candidate.
In evaluating nominees for director, the Nominating and Governance Committee is guided by, among other things, the objective that the Board of Directors be composed of qualified, dedicated and highly regarded individuals who have experience relevant to our operations and who understand the complexities of our business environment. The Nominating and Governance Committee may also consider other factors such as whether the candidate is independent under the standards adopted by the Board of Directors and within the meaning of the listing standards of Nasdaq, and whether the candidate meets any additional requirements for service on the Audit Committee. The Nominating and Governance Committee does not intend to evaluate candidates recommended by stockholders any differently than other candidates. Under the Company’s bylaws, as amended, at least 50% of the members of the Board of Directors must be independent under the Nasdaq Listing Rules.
Stockholder Communications with the Board of Directors
Interested parties, including stockholders, may communicate by mail with all or selected members of the Board of Directors. Correspondence should be addressed to the Board of Directors or any individual director(s) or group or committee of directors either by name or title (for example, “Chairman of the Nominating and Governance Committee” or “All Non-Management Directors”). All correspondence should be sent to Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106. The Board of Directors will, as necessary, generally screen out communications from stockholders to identify communications that are (i) commercial, charitable or other solicitations for products, services and funds, (ii) matters of a personal nature not relevant for stockholders, or (iii) matters that are of a type that render them improper or irrelevant to the functioning of the Board of Directors and the Company.
Attendance at Annual Meeting
Directors are encouraged, but not required, to attend our annual stockholders’ meeting. All directors attended the 2022 Annual Meeting of Stockholders either in person or telephonically.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors, executive officers and persons who own more than 10% of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and to provide us copies of these reports. Based solely on a review of the copies of these reports furnished to us and written representations that no other reports were required to be filed, we believe that all such filings applicable to our officers, directors and beneficial owners of greater than 10% of our common stock were made timely during the fiscal year ended December 31, 2022.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION
In 2022, all non-employee directors received an annual fee of $20,000 cash, payable quarterly. At every Annual Meeting, beginning in 2018 until 2021, non-employee directors received $10,000 in restricted stock units (“RSUs”) which vest on the day immediately preceding the next following Annual Meeting of Stockholders. The Board granted no RSUs in 2022. The Chairman of the Board and Chairman of the Audit Committee each receive an annual cash retainer of $5,000, payable quarterly.
We also have a policy of reimbursing directors for travel, lodging and other reasonable expenses incurred in connection with their attendance at Board or committee meetings or conducting Company business.
The following table sets forth information regarding the aggregate compensation we paid to the non-employee members of our Board of Directors for 2022.
Name Fees
earned or
paid in cash
($) Stock
awards(1)
($) Total
($)
Michael E. Mikolajczyk 30,000 10,000 (2) 40,000
John Eidinger 7,283 (3) - 7,283
Darren Seirer 7,283 (3) - 7.283
Susan M. Westphal 12,717 (4) 10,000 (5) 30,000
Jefferson Gramm 12,717 (4) 10,000 (6) 30,000
(1) Amounts reflect the grant date fair value of the restricted stock units granted at the 2021 Annual Meeting (the “2021 RSUs”).
(2) During the three months ended June 30, 2022, the 2021 RSUs were automatically converted and Mr. Mikolajczyk was issued 1,010 shares of restricted stock.
(3) The Company has accrued $7,283 for each of Messrs. Eidinger and Seirer, which represents the pro rata share of the annual fee for the portion of the year each member served. Both directors have not determined whether they will take payment for their services.
(4) Amount represents the pro rata share of the annual fee for the portion of the year each member served.
(5) During the three months ended June 30, 2022, the 2021 RSUs were automatically converted and Ms. Westphal was issued 1,010 shares of restricted stock.
(6) During the three months ended June 30, 2022, the 2021 RSUs were automatically converted and Mr. Gramm was issued 1,010 shares of restricted stock.
Summary Compensation Table
The table below sets forth, the compensation earned by Timothy E. Brog, the President, Chief Executive Officer and Acting Chief Financial Officer, and Kevin T. Lusardi our former Chief Financial Officer, during fiscal 2022 and fiscal 2021. Such persons are referred to in this Report on Form 10-K as our “named executive officers.” Mr. Lusardi was the Company’s Chief Financial Officer from March 2021 to April 2021.
Name and Principal Position Year Salary
($) Bonus
($) Stock
Awards
($) All Other
Compensation
($) Total
($)
Timothy E. Brog 332,692 350,000 (1) 398,750 (2) - 1,081,442
President, Chief Executive Officer & Acting Chief Financial Officer 350,000 - 341,055 (3) - 691,055
Kevin T. Lusardi(4) 19,048 - - - 19,048
Former Chief Financial Officer
(1) During 2022, the Company amended Mr. Brog’s executive employment agreement, whereby Mr. Brog was paid $350,000 to reward him for his assistance in the closing of the Stock Purchase and Sale Agreement between Rubicon Technology, Inc. and Janel Corporation. As part of that same amendment, Mr. Brog waived his rights to severance under his original employment agreement.
(2) During 2022, Mr. Brog’s 25,000 RSUs vested at a price of $15.95.
(3) Pursuant to Mr. Brog’s employment agreement, he was eligible for a bonus based upon certain objectives set forth by the Compensation Committee and agreed to by him and a discretionary bonus. For work performed in 2020 and paid in 2021, as part of his objective bonus, Mr. Brog was eligible to earn up to 42,067 shares of the Company’s common stock if certain goals were achieved. The Board of Directors determined that Mr. Brog’s 2020 objectives were only partially met and as a result Mr. Brog was granted 31,550 shares of common stock in 2021 for work performed in 2020.
(4) Prior to his appointment as CFO in March 2021, Mr. Lusardi served as a consultant to the Company from December 2020 to the date of such appointment and was paid $50,346 for his services during that period.
Discussion of Summary Compensation Table
Our executive compensation policies and practices for fiscal 2022 and 2021, pursuant to which the compensation set forth in the “Summary Compensation Table” table was paid or awarded, are described below.
Base salary
Pursuant to the terms of his employment agreement, the annual base salary for 2022 for Mr. Brog was $350,000 until it was changed to $300,000 as part of his amended employment agreement.
Pursuant to the terms of their employment agreements, the annual base salaries for 2021 for Mr. Brog and Mr. Lusardi were $350,000 and $170,000, respectively.
We formally evaluate executive performance on an annual basis, and these evaluations are one of the factors considered in making adjustments to base salaries.
Incentive bonuses
The primary objectives of our incentive bonus plan are to provide an incentive for superior work, to motivate our executives toward even higher achievement and business results, to tie our executives’ goals and interests to ours and our stockholders’ and to enable us to attract and retain highly qualified individuals. These targets are typically set in the first three months of the year. The targets under our objective incentive bonus plan are mutually agreed upon by the independent directors and each of the executives.
Objective incentive compensation
In 2008, our Board of Directors adopted a policy generally to grant equity awards to executives once per year to the extent equity awards are to be granted during such year (except in the case of newly hired executives, as described below). With respect to newly hired executives, our practice is typically to make equity grants at the first meeting of the Board of Directors following such executive’s hire date. We do not have any program, plan or practice to time equity awards in coordination with the release of material non-public information.
Pursuant to Mr. Brog’s employment agreement, he was eligible for a bonus based upon certain objectives set forth by the Compensation Committee and agreed to by him.
2022 Goals
The Compensation Committee did not set specific goals for Mr. Brog in 2022, however, Mr. Brog was paid $350,000 to reward him for his assistance in the closing of the Stock Purchase and Sale Agreement between Rubicon Technology, Inc. and Janel Corporation. As part of that same amendment, Mr. Brog waived his rights to severance under his original employment agreement.
2021 Goals
In 2021, Mr. Brog’s primary goal was to identify and consummate an acquisition. The Compensation Committee decided that Mr. Brog’s bonus for work performed in 2021 would be solely discretionary and that there would be no objective goals or bonus. To date, Mr. Brog did not receive an objective nor a discretionary bonus for work performed in 2021.
Severance and change in control arrangements
Payments upon termination are described below under “Termination of Employment or Change in Control”.
OUTSTANDING EQUITY AWARDS AT 2022 FISCAL YEAR-END
There were no outstanding equity awards at December 31, 2022.
TERMINATION OF EMPLOYMENT OR CHANGE IN CONTROL
Mr. Brog was the only employee to have an employment agreement during 2022. That agreement did include severance terms and restrictive covenants. During 2022, Mr. Brog’s employment agreement was amended, whereby he forfeited and waived his right to severance in exchange for the Company’s payment of the $350,000 awarded to him for his assistance in the closing of the Janel transaction. On February 20, 2023, the Company entered into a Confidential Separation Agreement and General Release (the “Separation Agreement”) with Mr. Brog, in connection with Mr. Brog’s resignation from the Company as Chief Executive Officer, President and Acting Chief Financial Officer. Pursuant to the Separation Agreement, Mr. Brog was entitled to receive, among other things, a payment of $112,000 for the assignment to the Company by Mr. Brog of 57,593 shares of common stock of the Company held by Mr. Brog. The Separation Agreement also contained a general release of claims against the Company, as well as certain other customary covenants, including covenants pertaining to non-disparagement and confidentiality.
Equity Compensation Awards. The equity compensation awards granted under the 2016 Plan or 2007 Plan may become vested upon a change in control. The 2016 and 2007 Plans provide that in the event of “change in control,” as defined in the 2016 and 2007 Plans, each outstanding award will be treated as the Compensation Committee determines, including that the successor corporation or its parent or subsidiary may be required to assume or substitute an equivalent award for each outstanding award. The Compensation Committee is not required to treat all awards similarly. If there is no assumption or substitution of outstanding awards, the award recipient will fully vest in and have the right to exercise all of his or her outstanding options and stock appreciation rights, all restrictions on restricted stock and RSUs will lapse and all performance goals or other vesting requirements for performance awards will be deemed achieved at 100% of target levels and all other terms and conditions will be deemed met. If an option or stock appreciation right is not assumed or substituted, the Compensation Committee will provide notice to the award recipient that the option or stock appreciation right will be fully vested and exercisable for a period of time determined by the Compensation Committee in its discretion, and the option or stock appreciation right will terminate upon the expiration of such period. Notwithstanding the Compensation Committee’s general discretionary authority described above, the individual award agreements may provide for the vesting of such awards upon the occurrence of a change in control. Under the 2016 and 2007 Plans, a “change in control” is deemed to occur when (i) a person becomes the beneficial owner (directly or indirectly) of at least 50% of the voting power represented by the Company’s outstanding voting securities, (ii) the Company sells or disposes of all or substantially all of its assets, (iii) the composition of the Board of Directors changes within a two-year period resulting in fewer than a majority of the directors being “incumbent directors” (as defined in the 2016 and 2007 Plans), or (iv) a merger or consolidation of the Company is consummated with any other corporation resulting in the voting securities of the Company outstanding immediately prior thereto representing (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) less than 50% of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Securities Authorized for Issuance under Equity Compensation Plans
The following table represents securities authorized for issuance under, the Rubicon Technology Inc. 2007 Stock Incentive Plan, as amended and restated, and the Rubicon Technology Inc. 2016 Stock Incentive Plan as of December 31, 2022.
Equity Compensation Plan Information
Plan category Number of securities
to be issued
upon exercise of
outstanding options,
warrants and rights Weighted-average
exercise price of
outstanding options,
warrants and rights Number of securities
remaining available
for future issuances
under the equity
compensation plans
(excluding securities
reflected in column
(a))
(a) (b) ©
Equity compensation plans approved by security holders(1) $ 44.10 320,273
(1) The Rubicon Technology Inc. 2007 Stock Incentive Plan was approved by stockholders before our initial public offering. The Rubicon Technology Inc. 2016 Stock Incentive Plan was approved by stockholders in June 2016.
Security Ownership of Certain Beneficial Owners and Management
Unless otherwise noted, the following table sets forth, as of February 28, 2023, the beneficial ownership of our common stock by:
● each person that was a beneficial owner of 5% of more of our outstanding shares of common stock;
● each of our named executive officers;
● each of our directors, including the director nominees; and
● all of our named executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to such securities. Except as otherwise indicated, all of the shares reflected in the table are shares of common stock and all persons listed below have sole voting and investment power with respect to the shares beneficially owned by them, subject to applicable community property laws. Percentage of beneficial ownership is based on 2,410,265 shares of common stock outstanding as of February 28, 2023. Unless otherwise indicated in the footnotes below, the address for each beneficial owner is c/o Rubicon Technology, Inc., 900 East Green Street, Bensenville, Illinois 60106.
Shares beneficially owned
Name of beneficial owner Number Percent
5% stockholders:
Bandera Master Fund L.P.(1) 128,323 5.3 %
Janel Corporation(2) 1,108,000 46.0 %
Named Executive Officers, Directors and Nominees:
Timothy Brog 4,969 0.2 %
Darren Seirer(3) - 0.0 %
Michael E. Mikolajczyk 31,456 1.3 %
John Eidinger(4) - 0.0 %
All executive officers and directors as a group (4 persons)(5) 36,425 1.5 %
(1) The ownership information set forth in the table is based on information contained in a statement on Schedule 13D (the “Bandera 13D”), filed on August 19, 2022, with the SEC by Bandera Master Fund L.P. (“Bandera”), together with Bandera Partners LLC, Gregory Bylinsky and Jefferson Gramm, Managing Partners, Managing Directors and Portfolio Managers of Bandera Partners (“Reporting Persons”) with respect to ownership of shares of our common stock. The Bandera 13D reflects that each of Bandera Master Fund L.P. and Bandera Partners has sole dispositive and voting power with respect to 128,323 of the reported shares. Bandera reports on the Bandera 13D that each of Messrs. Bylinsky and Gramm as Managing Partners, Managing Directors and Portfolio Managers of Bandera Partners may be deemed to have shared power to vote or dispose of the shares owned by Bandera. Bandera reports on the Bandera 13D that no person other than the Reporting Persons have the right to receive or the power to direct the receipts of dividends from, or the proceeds from the sale of, our common stock. The principal business address of Bandera is 50 Broad Street, Suite 1820, New York, New York 10004.
(2) The ownership information set forth in the table is based on information contained in a statement on Schedule 13D (the “Janel 13D”), filed on August 15, 2022, with the SEC by Janel, together with Oaxaca Group L.L.C. and Dominique Schulte, its then Chief Executive Officer, (“Reporting Persons”) with respect to ownership of shares of our common stock. The Janel 13D reflects that the Reporting Persons have shared dispositive and voting power with respect to 1,108,000 of the reported shares. The principal business address of Janel is 80 Eighth Avenue, New York, New York 10011.
(3) Mr. Seirer is the President and Chief Executive Officer of Janel Corporation, and serves as the Chairman of the Board on Janel’s Board of Directors. Excludes the shares owned by Janel, as Mr. Seirer does not have sole dispositive and voting power with respect to the Janel shares, and therefore is not a beneficial owner of those shares.
(4) Mr. Eidinger serves as the Vice Chairman of the Board on Janel’s Board of Directors. Excludes the shares owned by Janel, as Mr. Eidinger does not have sole dispositive and voting power with respect to the Janel shares, and therefore is not a beneficial owner of those shares.
(5) Excludes the shares owned by Janel.
On March 3, 2023, the Board of Directors appointed Dennis Paul, 50, as an independent director. Mr. Paul has no beneficial ownership of Rubicon shares.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Policy and Procedures for Review, Approval or Ratification
We recognize that transactions between the Company and related persons present a potential for actual or perceived conflicts of interest. Our general policies with respect to such transactions are included in our Code of Ethics which is administered by our Audit Committee. All employees and members of our Board of Directors agree to be bound by the Code of Ethics. As a supplement to the Code of Ethics, the Audit Committee adopted a written policy setting out the procedures and standards to be followed for the identification and evaluation of “related party transactions.” For purposes of the policy, a related party transaction is any transaction or series of related transactions in excess of $120,000 in which we are a party and in which a “related person” has a material interest. Related persons include our directors, director nominees, executive officers, beneficial owners of 5% or more of any class of our voting securities and members of their immediate families. The Audit Committee has determined that certain transactions are deemed to be pre-approved under this policy. These include (i) transactions with another company in which the related person’s only interest is as a director or beneficial owner of less than 10% of the equity interests in that other company and (ii) certain compensation arrangements that have either been disclosed in our public filings with the SEC or approved by our Compensation Committee.
We collect information about potential related party transactions in our annual questionnaires completed by directors, executive officers and certain beneficial owners of 5% or more of any class of our voting securities. Potential related party transactions are first reviewed and assessed by our Acting Secretary to consider the materiality of the transactions and then reported to the Audit Committee. If a related party transaction is identified during the year, it is reported promptly to the Audit Committee. The Audit Committee reviews and considers all relevant information available to it about each related party transaction. A related party transaction is approved or ratified only if the Audit Committee determines that it is in, or is not inconsistent with, our best interests and those of our stockholders and is in compliance with the Code of Ethics.
Director Independence
Our Board of Directors undertook a review of the independence of each director and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our Board of Directors determined that Mr. Mikolajczyk is independent under the standards for director independence adopted by the Board of Directors and are “independent directors” as defined under the Nasdaq rules. Based on the foregoing, our Board of Directors has concluded that a majority of our Board of Directors has been independent during 2021, as required by the Nasdaq rules.
On August 19, 2022, Mr. Jefferson Gramm and Ms. Susan Westphal, both of whom were independent directors, resigned from the Board the committees of the Board that they serve on. Mr. Seirer and Mr. Eidinger were appointed as their replacementds by the Board of Directors.
On October 14, 2022, the Company received notifications from Nasdaq that it was no longer in compliance with various Nasdaq independent director requirements set forth in Listing Rule 5605. This rule requires, among other things, that (i) the Board of Directors be composed of a majority of independent directors, (ii) the Audit Committee be composed of three independent directors, and (iii) the Compensation Committee be composed of two independent directors. The Board of Directors was composed of four directors, one of which was an employee of the Company and therefore was not independent. At that time, the Board of Directors had not yet determined whether the two newly appointed directors would be deemed to be independent under the Nasdaq Listing Rules. Subsequently, on December 13, 2022, the Company notified Nasdaq of its decision to delist its common stock from the Nasdaq Capital Market. The delisting became effective December 30, 2022.
During December 2022, the Board began the analysis and review of the independence of Mr. Seirer and Mr. Eidinger to consider whether they have a material relationship with the Company that could compromise their ability to exercise independent judgment in carrying out their responsibilities. This review has not been completed as of the date hereof. On March 10, 2023, the Board of Directors appointed Dennis Paul as an independent director, and following Mr. Paul’s appointment, there were no vacancies on the Board of Directors. As such, the Board of Directors has determined that Mr. Mikolajczyk and Mr. Paul are the only independent directors under the standards for director independence adopted by the Board of Directors and therefore cannot conclude that a majority of the Board of Directors is independent under the Nasdaq rules.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Audit Committee of the Board of Directors has selected Marcum LLP (“Marcum”) to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2023, and is submitting this matter to the stockholders for ratification at the Annual Meeting. Marcum has served as the Company’s independent registered public accounting firm since 2017.
Neither our bylaws nor other governing documents or law require stockholder ratification of the selection of Marcum as our independent registered public accounting firm. However, the Board of Directors is submitting the selection of Marcum to the stockholders for ratification as a matter of good corporate practice. In the event the proposal to ratify the selection of Marcum is defeated, the adverse vote will be considered as a direction to the Board of Directors to select another independent registered public accounting firm for the next fiscal year ending December 31, 2024. However, because of the expense and difficulty in changing independent registered public accounting firms after the beginning of a year, the Board intends to allow the appointment of Marcum for the fiscal year ending December 31, 2023 to stand unless the Board finds other reasons for making a change.
Audit Fees
The aggregate fees billed by Marcum for audit services of the Company’s annual financial statements and review services of the Company’s quarterly financial statements for the fiscal year 2022 were $221,883. The aggregate fees billed by Marcum for audit services of the Company’s annual financial statements and assistance with and review of SEC filings for the fiscal year 2021 were approximately $200,356.
Audit-Related Fees
There were no audit-related fees billed by Marcum in the fiscal years 2022 and 2021.
Tax Fees
There were no tax fees billed by Marcum in the fiscal years 2022 and 2021.
All Other Fees
There were no other fees billed by Marcum in the fiscal years 2022 and 2021 for any other services.
Pre-Approval Policy and Procedures
In accordance with the Sarbanes-Oxley Act of 2002, the Audit Committee is required to pre-approve all auditing services and permissible non-audit services, including related fees and terms, to be performed for the Company by its independent registered public accounting firm subject to the de minimis exceptions for non-audit services described under the Exchange Act, which are approved by the Audit Committee prior to the completion of the audit. In the fiscal years 2022 and 2021, the Audit Committee pre-approved all audit and non-audit services provided to the Company by its independent registered public accounting firm.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 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 10-K.
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID #688)
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Operations for the years ended December 31, 2022 and 2021
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022 and 2021
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2022 and 2021
Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021
Notes to Consolidated Financial Statements
(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 page to this Annual Report on Form 10-K 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 Regulation S-X, or the information that would otherwise be included in such schedules is contained in the registrant’s financial statements or accompanying notes.