The accompanying notes are an integral part
of these condensed consolidated financial statements.
The accompanying notes are an integral part
of these condensed consolidated financial statements.
The accompanying notes are an integral part
of these condensed consolidated financial statements.
The accompanying notes are an integral part
of these condensed consolidated financial statements.
The accompanying notes are an integral part
of these condensed consolidated financial statements.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 2021
1. BASIS OF PRESENTATION
Interim financial data
The accompanying
unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete consolidated
financial statements and should be read in conjunction with Rubicon Technology, Inc.’s (the “Company”) annual
report filed on Form 10-K for the fiscal year ended December 31, 2020. In the opinion of management, all adjustments (consisting
only of adjustments of a normal and recurring nature) considered necessary for a fair presentation of the results of operations
have been included. Consolidated operating results for the three-month period ended March 31, 2021, are not necessarily indicative
of results that may be expected for the year ending December 31, 2021.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated
financial statements include the accounts of the Company and its wholly owned subsidiaries, Rubicon Technology Worldwide LLC, Rubicon
Technology BP LLC, Rubicon Sapphire Technology (Malaysia) SDN BHD and Rubicon DTP LLC. All intercompany transactions and balances
have been eliminated in consolidation.
Investments
The Company
invests available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates of
deposit, common stock, preferred 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 common stock, preferred stock and equity-related securities are reported at fair value, with both realized and unrealized
gains and losses recorded in other income (expense), in the consolidated statement of operations. Investments in which the Company
has the ability and intent, if necessary, to liquidate are classified as short-term.
The Company
reviews its 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. The Company considers 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,
its 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 the Company concludes 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.
Accounts receivable
The majority
of the Company’s accounts receivable is due from defense subcontractors, industrial manufacturers, fabricators and resellers.
Credit is extended based on an evaluation of the customer’s financial condition. Accounts receivable are due based on contract
terms and at stated amounts due from customers, net of an allowance for doubtful accounts. Losses from credit sales are provided
for in the financial statements.
Accounts outstanding
longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number
of factors, including length of time customer’s account is past due, customer’s current ability to pay and the condition
of the general economy and industry as a whole. The Company writes off accounts receivable when they are deemed uncollectible and
such write-offs, net of payments received, are recorded as a reduction to the allowance.
Purchases of Equity Securities by the Issuer and Affiliated
Purchasers
In November
2018, the Company’s Board of Directors authorized a program to repurchase up to $3,000,000 of its common stock. In July 2020,
the Company used all of the original authorized $3,000,000.
On December
14, 2020, Rubicon’s Board of Directors authorized an additional $3,000,000 for the repurchase of the Company’s common
stock. The Company’s share repurchase program does not obligate it to acquire any specific number of shares. The timing,
price and volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases
may be made from time to time, through solicited or unsolicited transactions in the open market, in privately negotiated transactions
or pursuant to a Rule 10b5-1 plan. The program may be terminated, suspended or modified at any time. There can be no assurance
as to the number of shares of common stock repurchased. The Company records treasury stock purchases under the cost method whereby
the entire cost of the acquired stock is recorded as treasury stock.
No shares of
the Company’s common stock were repurchased during the three months ended March 31, 2021. The dollar value of shares
that may yet to be purchased under the program is $3,000,000.
Inventories
Inventories
are valued at the lower of cost or net realizable value. Net realizable value is determined based on an estimated selling price
in the ordinary course 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 manufacturing overhead. The Company reduces the carrying value of its inventories for differences
between the cost and the estimated net realizable value, taking into account usage, expected demand, technological obsolescence
and other information.
The Company
establishes inventory reserves when conditions exist that suggest inventory may be in excess of anticipated demand or is obsolete
based on customer specifications. The Company evaluates the ability to realize the value of its inventory based on a combination
of factors, including forecasted sales, estimated current and future market value and changes in customers’ product specifications.
The Company’s method of estimating excess and obsolete inventory has remained consistent for all periods presented.
Inventories consisted of the following:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
(in thousands)
|
|
Raw materials
|
|
$
|
468
|
|
|
$
|
468
|
|
Work-in-process
|
|
|
452
|
|
|
|
614
|
|
Finished goods
|
|
|
594
|
|
|
|
459
|
|
|
|
$
|
1,514
|
|
|
$
|
1,541
|
|
As of December
31, 2020 and March 31, 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.
Property and equipment
Property and equipment consisted
of the following:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
(in thousands)
|
|
Machinery, equipment and tooling
|
|
$
|
3,343
|
|
|
$
|
3,343
|
|
Buildings
|
|
|
1,711
|
|
|
|
1,711
|
|
Information systems
|
|
|
835
|
|
|
|
835
|
|
Land and land improvements
|
|
|
594
|
|
|
|
594
|
|
Furniture and fixtures
|
|
|
8
|
|
|
|
8
|
|
Total cost
|
|
|
6,491
|
|
|
|
6,491
|
|
Accumulated depreciation and amortization
|
|
|
(4,050
|
)
|
|
|
(4,009
|
)
|
Property and equipment, net
|
|
$
|
2,441
|
|
|
$
|
2,482
|
|
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, the Company performs
an analysis to review the recoverability of the asset’s carrying value. The Company makes 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.
For the year
ended December 31, 2020, the Company reviewed the current fair value of its assets and concluded no adjustments were needed. Additionally,
no adjustments were recorded for the three months ended March 31, 2021. The Company will continue to assess its long-lived assets
to ensure the carrying amount of these assets is still appropriate given any changes in the asset usage, marketplace and other
factors used in determining the current fair value.
The Company did not record any sales
of its equipment or consumable assets for the three months ended March 31, 2021.
The Company
is pursuing the sale of our parcel of land located in Batavia, Illinois. Although the Company cannot assure the timing of this
sale, the property was classified as current asset held for sale at March 31, 2021 and December 31, 2020, as it is our intention
to complete this sale within the next twelve-month period. We cannot guarantee that we will be able to successfully complete the
sale or lease of this asset.
Revenue recognition
The Company
recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (“Topic 606”), when
performance obligations under a purchase order or signed quotation are satisfied. The Company’s business practice commits
the Company 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.
The Company’s 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 the Company. Accordingly, the Company recognizes revenue when the product is shipped, and control of the
product, title and risk of loss have been transferred to the customer. The Company grants 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 do not have sales that involve bill & hold arrangements, multiple elements or deliverables.
However, we do provide product warranty for up to 90 days, for which we have accrued a warranty reserve of $2,000 and $2,000 at
March 31, 2021 and December 31, 2020, respectively.
Net income (loss) per common share
Basic net income
(loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during
the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted-average number
of diluted common shares outstanding during the period. Diluted shares outstanding are calculated by adding to the weighted-average
shares (a) any outstanding stock options based on the treasury stock method and (b) restricted stock units (“RSU”).
Diluted net
income per common share was the same as basic net income per common share for the three months ended March 31, 2021 and 2020,
because the effects of potentially dilutive securities did not have a material impact on the calculation of diluted net income
per share. The Company had outstanding options exercisable into 18,250 and 19,500 shares of the Company’s common stock that
would have had an anti-dilutive effect at March 31, 2021 and 2020, respectively.
New accounting pronouncements
adopted
The Company
has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a
significant impact the Company’s consolidated financial statements and related disclosures.
3. INVESTMENTS
The Company
invests its available cash primarily in U.S. Treasury securities, investment grade commercial paper, FDIC guaranteed certificates
of deposit, common stock, preferred 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 common stock, preferred stock and equity-related 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.
The following table presents the
amortized cost and gross unrealized losses on all securities at March 31, 2021:
|
|
Amortized
cost
|
|
|
Gross
unrealized
gains
|
|
|
Gross
unrealized
losses
|
|
|
Fair
value
|
|
|
|
(in thousands)
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
14,749
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,749
|
|
Marketable securities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Total short-term investments
|
|
$
|
14,749
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,749
|
|
The following table presents the amortized cost and gross
unrealized losses on all securities at December 31, 2020:
|
|
Amortized
cost
|
|
|
Gross
unrealized
gains
|
|
|
Gross
unrealized
losses
|
|
|
Fair
value
|
|
|
|
(in thousands)
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
14,748
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,748
|
|
Marketable securities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total short-term investments
|
|
$
|
14,748
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,748
|
|
The Company
values its investments at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability
(an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs
and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of
which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the
following:
|
●
|
Level 1—Quoted prices in active markets for identical assets or liabilities.
|
|
|
|
|
●
|
Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
|
|
|
|
●
|
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
The Company
invests in fixed-income, common stock, preferred stock and equity-related securities. Its fixed-income available-for-sale debt
securities consist of U.S. Treasury securities, high-quality investment grade commercial paper, FDIC guaranteed certificates of
deposit, and corporate notes. The Company values these securities based on pricing from pricing vendors, who may use quoted prices
in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly
or indirectly (Level 2 inputs) in determining fair value. The valuation techniques used to measure the fair value of the Company’s
financial instruments having Level 2 inputs were derived from non-binding market consensus prices that are corroborated by observable
market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques.
The following table summarizes the
Company’s financial assets measured at fair value on a recurring basis as of March 31, 2021:
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
3,137
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,137
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities — current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
|
—
|
|
|
|
14,749
|
|
|
|
—
|
|
|
|
14,749
|
|
Total
|
|
$
|
3,137
|
|
|
$
|
14,749
|
|
|
$
|
—
|
|
|
$
|
17,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the
Company’s financial assets measured at fair value on a recurring basis as of December 31, 2020:
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
3,136
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,136
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities — current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
|
—
|
|
|
|
14,748
|
|
|
|
—
|
|
|
|
14,748
|
|
Total
|
|
$
|
3,136
|
|
|
$
|
14,748
|
|
|
$
|
—
|
|
|
$
|
17,884
|
|
There are no terms or conditions
restricting the Company from redeeming any of its investments.
In addition to the securities
noted above, the Company had approximately $7,434,000 and $7,994,000 of time deposits included in cash and cash equivalents as of March
31, 2021 and December 31, 2020, respectively.
4. SIGNIFICANT CUSTOMERS
For the three
months ended March 31, 2021, the Company had three customers individually that accounted for approximately 19%, 15%, and 11%
of revenue. For the three months ended March 31, 2020, the Company had four customers individually that accounted for approximately
18%, 18%, 16% and 13% of revenue. No other customer accounted for 10% or more of the Company’s revenues during the three
months ended March 31, 2021 and 2020.
Customers individually
representing more than 10% of trade receivables accounted for approximately 62% and 44% of accounts receivable as of March 31,
2021 and December 31, 2020, respectively.
5. STOCKHOLDERS’ EQUITY
Common shares reserved
As of March 31, 2021, the
Company had reserved 65,103 shares of common stock for issuance upon the exercise of outstanding common stock options and vesting of
RSUs. Also, 279,505 shares of the Company’s common stock were reserved for future grants of stock options and RSUs (or other similar
equity instruments) under the Rubicon Technology, Inc. 2016 Stock Incentive Plan (the “2016 Plan”) as of March 31, 2021.
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 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 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, as of March 31, 2021 there are 279,505 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 March 31, 2021, and changes during the three months
then ended:
|
|
Shares
available
for grant
|
|
|
Number of
options
outstanding
|
|
|
Weighted-
average option
exercise price
|
|
|
Number of
restricted
stock and
board
shares
issued
|
|
|
Number of
RSUs
outstanding
|
|
At January 1, 2021
|
|
|
296,105
|
|
|
|
20,100
|
|
|
$
|
9.71
|
|
|
|
99,570
|
|
|
|
45,003
|
|
Granted
|
|
|
(31,550
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Exercised/issued
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Cancelled/forfeited
|
|
|
14,950
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
At March 31, 2021
|
|
|
279,505
|
|
|
|
20,100
|
|
|
$
|
9.71
|
|
|
|
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 March 31, 2021, there was $74,775
of intrinsic value arising from 18,250 stock options exercisable or 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 36.13% is based on the history of forfeited options. The expense is allocated using the straight-line method.
For the three months ended March 31, 2021 and 2020, the Company recorded $0 and $3,000, respectively, of stock option compensation
expense. As of March 31, 2021, there was no unrecognized compensation cost related to non-vested stock option awards granted under
the Company’s stock-based plans.
As of December
31, 2020 and March 31, 2021, the Company did not have any non-vested options.
The Company did not record any RSU
expense for the three months ended March 31, 2021 and 2020.
A summary of the Company’s
RSUs during the three months ended March 31, 2021, is presented below:
|
|
RSUs
outstanding
|
|
|
Weighted
average
price at
time of
grant
|
|
|
Aggregate
intrinsic
value
|
|
Non-vested RSUs as of January 1, 2021
|
|
|
45,003
|
|
|
$
|
6.20
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
Vested
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
Cancelled
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
Non-vested RSUs at March 31, 2021
|
|
|
45,003
|
|
|
$
|
6.20
|
|
|
$
|
278,961
|
|
Every year at the Company’s
annual meeting each member of the Board of Directors is issued an RSU which vests on the day of the following year’s
annual meeting. When such RSU vests, they are automatically converted into $10,000 of the Company’s common stock based upon
the closing price the day before the following year’s annual meeting.
During the three months ended
March 31, 2021, the Company awarded 31,550 shares to an officer of the Company with a fair value of approximately $341,000.
The Company’s
board of directors are compensated partially in cash and partially in restricted stock. For the three months ended March 31, 2021
and 2020, no restricted stock shares were issued to our directors. As of March 31, 2021 and December 31, 2020, there were no outstanding
non-vested restricted stock shares.
7. COMMITMENTS AND CONTINGENCIES
Litigation
From time to time,
the Company experiences routine litigation in the normal course of its business. The management of the Company does not believe
any pending litigation, will have a material adverse effect on the financial condition, results of operations or cash flows
of the Company.
COVID-19 Pandemic
In March 2020, the
World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic. The full impact of the COVID-19
outbreak is unknown and cannot be reasonably estimated. The magnitude and duration of the COVID-19 outbreak, as well as other factors,
could result in a material impact to the Company’s financial statements in future reporting periods.
8. INCOME TAXES
In 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 allows the Company 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. The Company has completed its accounting for the tax
effects of enactment of the Act. The deemed inclusion from the repatriation tax increased from $3,900,000 at the time of provision
to $5,000,000 at the time the calculation was finalized for the tax return. The increase of the inclusion related primarily to
the refinement of Malaysia earnings and profits. As the Company is in a full valuation allowance position, an equal benefit adjustment
was recorded for the impact of the increase of the deemed repatriation tax.
The Company
is subject to taxation in the U.S. and in a U.S. state jurisdiction. On a quarterly basis, the Company assesses the recoverability
of deferred tax assets and the need for a valuation allowance. Such evaluations involve the application of significant judgment,
and multiple factors, both positive and negative, are considered. For the period ended March 31, 2021, a valuation allowance
has been included in the 2021 forecasted effective tax rate. The Company is 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, objective verifiable evidence is given greater weight than
subjective evidence such as the Company’s projections for future growth. Based on an evaluation in accordance with the accounting
standards, as of December 31, 2015, 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
available evidence. At March 31, 2021, the Company continues to be in a three-year cumulative loss position, therefore, until
an appropriate level of profitability is attained, the Company expects to maintain a full valuation allowance on its U.S. net deferred
tax assets. Any U.S. tax benefits or tax expense recorded on the Company’s consolidated statement of operations will be offset
with a corresponding adjustment from the use of the net operating loss (“NOL”) carryforward asset which currently has
a full valuation allowance. In the event that the Company changes its determination as to the amount of deferred tax assets that
can be realized, the Company will adjust its valuation allowance with a corresponding impact to the provision for income taxes
in the period in which such determination is made.
9. SEGMENT INFORMATION
The Company
has determined that it operates in two segments, the sapphire and pharmacy business.
Revenue is
attributed by geographic region based on ship-to location of the Company’s customers. The following table summarizes revenue
by geographic region:
|
|
Three months ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
588
|
|
|
$
|
1,040
|
|
Asia
|
|
|
139
|
|
|
|
113
|
|
Other
|
|
|
2
|
|
|
|
7
|
|
Total revenue
|
|
$
|
729
|
|
|
$
|
1,160
|
|
The following table summarizes sales
by product type:
|
|
Three months ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(in thousands)
|
|
|
|
|
|
Optical
|
|
$
|
495
|
|
|
$
|
1,027
|
|
Rubicon DTP
|
|
|
234
|
|
|
|
133
|
|
Total revenue
|
|
$
|
729
|
|
|
$
|
1,160
|
|
As of March 31, 2021 and December
31, 2020, the Company held all of its assets in the United States.
Direct Dose Rx accounted
for a loss of approximately $95,000 and $119,000 for the three months ended March 31, 2021 and 2020, respectively.
Direct Dose Rx assets
are currently not material to the consolidated financial information of the Company and therefore there is limited disclosure relating
specifically to them.
10. SUBSEQUENT EVENTS