Stock Incentive Plans

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

STOCK INCENTIVE PLANS

8. STOCK INCENTIVE PLANS

In August 2007, the Company adopted the Rubicon Technology Inc. 2007 Stock Incentive Plan, which was amended and restated effective in March 2011 (the “2007 Plan”), and which allowed for the grant of incentive stock options, 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 entitle the holder to purchase shares of the Company’s common stock at the specified option exercise price, which could not be less than the fair market value of the common stock on the grant date. On June 24, 2016, the 2007 Plan terminated with the adoption of the Rubicon Technology, Inc. 2016 Stock Incentive Plan, (the “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, 222,980 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:

	Shares available for grant			Number of options outstanding			Weighted- average option exercise price		Number of restricted stock shares issued		Number of RSUs outstanding
Outstanding at January 1, 2019		295,067			69,083			12.10		99,570		50,176
Granted		(60,925	)		1,000			—		—		9,925
Exercised/issued		—			(5,000	)		—		—		(6,098	)
Canceled/forfeited		42,244			(42,244	)		11.35		—		—
Outstanding at December 31, 2019		276,386			22,839			13.48		99,570		54,003
Granted		(20,877	)		—			—		—		3,597
Exercised/issued		—			(2,250	)		—		—		(3,597	)
Canceled/forfeited		40,596			(489	)		202.56		—		(9,000	)
Outstanding at December 31, 2020		296,105			20,100		$	9.71		99,570		45,003

There were no option grants made during 2020. 

At December 31, 2020, the exercise prices of outstanding options were as follows:

Exercise price	Number of options outstanding		Average remaining contractual life (years)		Number of options exercisable
$6.10 - $8.34		18,250		5.75		18,250
$44.10		1,850		3.94		1,850
		20,100		4.73		20,100

The aggregate grant date fair value of the options that became vested in the years ended 2020 and 2019 was $30,000 and $77,000, respectively.

The following table summarizes the activity of non-vested options:

	Non- vested options			Weighted- average option exercise price
Non-vested at January 1, 2019		21,992		$	6.86
Granted		1,000			8.34
Vested		(10,878	)		7.07
Cancelled		(7,248	)		7.25
Non-vested at December 31, 2019		4,866			6.10
Granted		—			—
Vested		(4,866	)		6.10
Cancelled		—			—
Non-vested at December 31, 2020		—		$	—

The Company’s aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company’s common stock. Based on the fair value of the common stock at December 31, 2020 there was $52,000 of intrinsic value arising from 18,250 stock options exercisable or outstanding.

The Company used historical stock prices as the basis for 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 for the year ended December 31, 2020, is based upon the Company’s median average life of its options. The forfeiture rate is based on the past history of forfeited options. The expense is being allocated using the straight-line method. For the years ended December 31, 2020 and 2019, the Company recorded $14,000 and $24,000, respectively, of stock option compensation expense. As of December 31, 2020, all outstanding options awarded have been fully vested.

For the year ended December 31, 2020, there were no options granted.

The following table summarizes the award vesting terms for the RSUs granted in 2019:

Number of RSUs	Target price
925	$	7.95

The following table summarizes the award vesting terms for the RSUs granted in 2018:

Number of restricted stock units	Target price
902	$	11.00
15,000	$	12.50
15,000	$	14.00

The RSUs vest in the amounts set forth below 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. During the twelve months ended December 31, 2017, the first three tranches of the grant vested. No additional tranches vested during the years ended December 31, 2020, 2019 and 2018.

The Company used Monte Carlo simulation model valuation technique to determine the fair value of RSUs granted because the awards vest based 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 Company used the following assumptions in determining the fair value of the RSUs:

	Granted
	January 2018			March 2017
Daily expected stock price volatility		4.2806	%		4.4237	%
Daily expected mean return on equity		(0.2575	)%		(0.2226	)%
Daily expected dividend yield		0.0	%		0.0	%
Average daily risk-free interest rate		0.0078	%		0.0063	%

The daily expected stock price volatility is based on a four-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. The RSUs granted in January 2018 and March 2017 had a grant date fair value of $209,000 and $323,000, respectively. There were no grants with market price targets issued in the years ended December 31, 2020 and 2019. 

A summary of the Company’s RSUs is as follows:

	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		9,925			8.32
Vested		(6,098	)		7.40
Cancelled		—			—
Non-vested RSUs as of December 31, 2019		54,003			6.56
Granted		3,597			8.34
Vested		(3,597	)		8.34
Cancelled		(9,000	)		8.36
Non-vested RSUs at December 31, 2020		45,003		$	6.20	$	278,961

The fair value of each RSU is the market price on the date of grant and is being recorded as compensation expense ratably over the vesting terms or the expected achievement of market price targets based on the Monte Carlo simulation model. For the years ended December 31, 2020 and 2019, the Company recorded $38,000 and $7,000 of RSU expense, respectively. The RSUs are forfeited by a participant upon termination for any reason, and there is no proportionate or partial vesting in the periods between the vesting dates. As of December 31, 2020, there was no unrecognized compensation cost related to the non-vested RSUs.

For the year ended December 31, 2020 the Company recorded no compensation related to restricted stock compared to $14,000 in the prior year.

 During the year ended December 31, 2020 the Company awarded approximately 17,000 shares to an officer of the Company with a fair value of $146,000.