Stock Incentive Plans

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

STOCK INCENTIVE PLANS

6. STOCK INCENTIVE PLANS

In August 2007, the Company adopted the Rubicon Technology Inc. 2007 Stock Incentive Plan, which was amended and restated effective in June 2011 (the "2007 Plan"), and which allowed for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, RSUs, performance awards and bonus shares. The maximum number of shares that could be awarded under the 2007 Plan was 440,769 shares. Options granted under the 2007 Plan entitled the holder to purchase shares of the Company's common stock at the specified option exercise price, which could not be less than the fair value of the common stock on the grant date. On June 24, 2016, the plan terminated with the adoption of the Rubicon Technology, Inc. 2016 Stock Incentive Plan, (the "2016 Plan"). Any existing awards under the 2007 Plan remain outstanding in accordance with their current terms under the 2007 Plan.

In June 2016, the Company's stockholders approved adoption of the 2016 Plan effective as of March 17, 2016, which allows for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, RSUs, performance awards and bonus shares. The Compensation Committee of the Board administers the 2016 Plan. The committee determines the type of award to be granted, the fair value, the number of shares covered by the award, and the time when the award vests and may be exercised.

Pursuant to the 2016 Plan, 280,386 shares of the Company's common stock plus any shares subject to outstanding awards under the 2007 Plan that subsequently expire unexercised, are forfeited without the delivery of shares, or are settled in cash, will be available for issuance under the 2016 Plan. The 2016 Plan will automatically terminate on March 17, 2026, unless the Company terminates it sooner.

The following table summarizes the activity of the stock incentive and equity plans as of September 30, 2019, and changes during the nine months then ended:

	Shares available for grant			Number of options outstanding			Weighted- average option exercise price		Number of restricted stock shares issued		Number of RSUs outstanding
At January 1, 2019		295,067			69,083		$	12.10		99,570		50,176
Granted		(51,925	)		1,000			8.34		—		925
Exercised/issued		—			—			—		—		(6,098	)
Cancelled/forfeited		37,244			(37,244	)		12.31		—		—
At September 30, 2019		280,386			32,839		$	11.49		99,570		45,003

The Company's aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company's common stock. Based on the fair value of the common stock at September 30, 2019, there was $85,655 of intrinsic value arising from 29,500 stock options exercisable and outstanding.

The Company uses the Black-Scholes option pricing model to value stock options. The Company uses historical stock price average to determine its volatility assumptions. The assumed risk-free rates were based on U.S. Treasury rates in effect at the time of grant with a term consistent with the expected option lives. The expected term is based upon the vesting term of the Company's options. The forfeiture rate of 28.99% is based on the history of forfeited options. The expense is allocated using the straight-line method. For the three and nine months ended September 30, 2019, the Company recorded $6,000 and $19,000, respectively, of stock option compensation expense. For the three and nine months ended September 30, 2018, the Company recorded $8,000 and $38,000, respectively, of stock option compensation expense. As of September 30, 2019, the Company had $38,000 of total unrecognized compensation cost related to non-vested stock option awards granted under the Company's stock-based plans that it expects to recognize over the weighted-average period of 1.0 year.

A summary of the Company's non-vested options during the nine months ended September 30, 2019, is presented below:

	Options			Weighted- average exercise price
Non-vested options at January 1, 2019		21,992		$	6.86
Granted		1,000			8.34
Vested		(9,878	)		6.95
Canceled/forfeited		(2,248	)		6.10
Non-vested options at September 30, 2019		10,866		$	7.08

Pursuant to an employment agreement, the Company granted 30,902 and 59,098 RSUs to a key executive in 2018 and 2017, respectively.

The following table summarizes the award vesting terms for the remaining unvested RSUs under this grant:

Number of RSUs	Target price
15,000	$	11.00
15,000	$	12.50
15,000	$	14.00

The RSUs vest in the amounts set forth above on the first date the 15-trading day average closing price of the Company's common stock equals or exceeds the corresponding target price for the common stock before May 12, 2021. At the time the negotiation of the terms of the employment agreement began, the closing price of the common stock was $5.50. On the date of grant, the closing price of the common stock was $6.30.

The Company used a Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted because the awards vest based upon achievement of market price targets. 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 three-year historical volatility of the Company's 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.

For the three and nine months ended September 30, 2019, the Company recorded $0 and $7,000, respectively, of RSU expense. For the three months and nine months ended September 30, 2018, the Company recorded $50,000 and $256,000, respectively, of RSU expense. As of September 30, 2019, there was no compensation cost related to the non-vested RSUs remaining.

A summary of the Company's RSUs for the nine month period ended September 30, 2019, is presented below:

	RSUs outstanding			Weighted average price at time of grant		Aggregate intrinsic value
Non-vested RSUs as of January 1, 2019		50,176		$	6.31
Granted		925			7.95
Vested		(6,098	)		7.40
Cancelled		—			—
Non-vested RSUs at September 30, 2019		45,003		$	6.20	$	279,011

For the three and nine months ended September 30, 2019, the Company recorded $2,000 and $7,000, respectively, of stock compensation expense related to restricted stock. For the three and nine months ended September 30, 2018, the Company recorded $49,000 and $110,000, respectively, of stock compensation expense related to restricted stock.

In 2018, all non-employee directors received an annual fee of $20,000 cash, payable quarterly. From January 1, 2018, to the 2018 Annual Meeting of Stockholders, the directors in the aggregate earned $15,000 in stock, which was equal to 1,878 shares of restricted common stock. Thereafter, at every Annual Meeting, beginning in 2018, each non-employee director receives $10,000 in RSUs which vest on the day immediately preceding the next following Annual Meeting of Stockholders.

For the three months ended September 30, 2019, no RSUs were issued to our directors. As of September 30, 2019 and December 31, 2018, outstanding non-vested restricted stock shares were 0 and 2,454 respectively.

For the nine months ended September 30, 2018, 1,878 shares of restricted common stock were issued to outside directors.

An analysis of restricted stock outstanding is as follows:

Non-vested restricted stock as of January 1, 2019	2,454
Granted	—
Vested	(2,454	)
Non-vested restricted stock as of September 30, 2019	—