10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark one)

x Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended March 31, 2010

or

¨ Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from              to             

Commission file number 001-33834

RUBICON TECHNOLOGY, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	36-4419301
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
9931 Franklin Avenue Franklin Park, Illinois	60131
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (847) 295-7000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of May 5, 2010 the Registrant had 20,271,171 shares of common stock, par value $0.001 per share, outstanding.

RUBICON TECHNOLOGY, INC.

Quarterly Report on Form 10-Q

For the quarterly period ended March 31, 2010

TABLE OF CONTENTS

			Page
Part I		Financial Information	2
	Item 1.	Consolidated Financial Statements (unaudited)	2
		Consolidated Balance Sheets (unaudited) – March 31, 2010 and December 31, 2009	2
		Consolidated Statements of Operations (unaudited) – Three months ended March 31, 2010 and 2009	3
		Consolidated Statements of Cash Flows (unaudited) – Three months ended March 31, 2010 and 2009	4
		Notes to Consolidated Financial Statements (unaudited)	5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
	Item 4.	Controls and Procedures	22
Part II		Other Information	22
	Item 1.	Legal Proceedings	22
	Item 1A.	Risk Factors	22
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
	Item 3.	Defaults Upon Senior Securities	23
	Item 4.	Reserved	23
	Item 5.	Other Information	23
	Item 6.	Exhibits	23
Signatures			24
Exhibit Index			25

1

PART I FINANCIAL INFORMATION

ITEM 1. Financial Statements

Rubicon Technology, Inc.

Consolidated balance sheets

	March 31, 2010			December 31, 2009
	(unaudited) (in thousands other than share data)
Assets
Cash and cash equivalents	$	12,505		$	3,860
Restricted cash		7			8
Short-term investments		28,966			40,716
Accounts receivable, net		7,311			4,967
Inventories, net		6,635			6,597
Spare parts		2,535			2,133
Prepaid expenses and other current assets		1,477			1,311
Total current assets		59,436			59,592
Property and equipment, net		42,025			39,525
Investments		2,000			2,000
Other assets		187			69
Total assets	$	103,648		$	101,186
Liabilities and stockholders’ equity
Accounts payable	$	1,685		$	2,056
Accrued payroll		1,028			515
Corporate income and franchise taxes		128			171
Accrued and other current liabilities		1,182			1,004
Total current liabilities		4,023			3,746
Commitments and contingencies (Note 9)
Stockholders’ equity
Preferred stock, $0.001 par value, 5,000,000 undesignated shares authorized, no shares issued or outstanding		—			—
Common stock, $0.001 par value, 85,000,000 shares authorized, 21,521,146 and 21,482,558 shares issued and outstanding		21			21
Additional paid-in capital		262,590			261,974
Treasury stock, at cost, 1,249,975 shares		(5,661	)		(5,661	)
Accumulated other comprehensive income		(16	)		(10	)
Accumulated deficit		(157,309	)		(158,884	)
Total stockholders’ equity		99,625			97,440
Total liabilities and stockholders’ equity	$	103,648		$	101,186

The accompanying notes are an integral part of these statements.

2

Rubicon Technology, Inc.

Consolidated statements of operations

	Three months ended March  31,
	2010			2009
	(unaudited) (in thousands, other than share and per share data)
Revenue	$	11,516		$	2,338
Cost of goods sold		7,363			4,946
Gross profit (loss)		4,153			(2,608	)
Operating expenses:
General and administrative		2,141			1,135
Sales and marketing		257			243
Research and development		212			152
Income (loss) from operations		1,543			(4,138	)
Other income:
Interest income		97			257
Realized loss on foreign currency translation		(40	)		—
Realized gain on investments		15			13
Total other income		72			270
Income (loss) before income taxes		1,615			(3,868	)
Income tax expense		(40	)		—
Net income (loss)	$	1,575		$	(3,868	)
Net income (loss) per common share
Basic	$	0.08		$	(0.19	)
Diluted	$	0.07		$	(0.19	)
Weighted average common shares outstanding used in computing net income (loss) per common share
Basic		20,244,347			20,280,160
Diluted		21,437,861			20,280,160

The accompanying notes are an integral part of these statements.

3

Rubicon Technology, Inc.

Consolidated statements of cash flows

	Three months ended March 31,
	2010			2009
	(unaudited) (in thousands)
Cash flows from operating activities
Net income (loss)	$	1,575		$	(3,868	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation and amortization		1,398			1,296
Stock-based compensation		465			226
Realized gain on investments		(15	)		(13	)
Changes in operating assets and liabilities:
Accounts receivable		(2,344	)		996
Inventories		(38	)		(212	)
Spare parts		(402	)		678
Prepaid expenses and other current assets		(166	)		304
Accounts payable		(371	)		(1,234	)
Accrued payroll		513			(301	)
Corporate income and franchise taxes		(43	)		(183	)
Accrued and other current liabilities		152			(72	)
Net cash provided by (used in) operating activities		724			(2,383	)
Cash flows from investing activities
Purchases of property and equipment		(3,857	)		(525	)
Sales of investments		11,750			3,369
Net cash provided by investing activities		7,893			2,844
Cash flows from financing activities
Deferred offering costs		(118	)		—
Proceeds from exercise of options		151			3
Restricted cash		1			(4	)
Purchase of treasury stock		—			(2,577	)
Net cash provided by (used in) financing activities		34			(2,578	)
Net effect of currency translation		(6	)		—
Net increase (decrease) in cash and cash equivalents		8,645			(2,117	)
Cash and cash equivalents, beginning of period		3,860			7,629
Cash and cash equivalents, end of period	$	12,505		$	5,512
Supplemental disclosures of non-cash transactions
Unrealized gain on investments	$	15		$	115

The accompanying notes are an integral part of these statements.

4

Rubicon Technology, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

1. BASIS OF PRESENTATION

Interim financial data

The accompanying unaudited 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 for Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements and should be read in conjunction with the Company’s annual report filed on Form 10-K for the fiscal year ended December 31, 2009. 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. Operating results for the three month period ended March 31, 2010 are not necessarily indicative of results that may be expected for the year ending December 31, 2010.

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 Worldwide LLC and Rubicon Sapphire Technology (Malaysia) SDN BHD. All intercompany transactions and balances have been eliminated in consolidation.

Investments

The Company invests available cash primarily in investment grade commercial paper, corporate notes and government securities. While the Company’s investment policy no longer includes auction-rate securities as an approved investment, the Company continues to hold auction-rate securities purchased prior to the policy change. The Company also holds put options associated with an agreement with UBS, AG (see “Auction-rate securities put options” below). Investments classified as available-for-sale securities are carried at fair market value with unrealized gains and losses recorded in accumulated other comprehensive income (loss). Investments in trading 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 in order to support its current operations, are classified as short-term.

The Company reviews its available-for-sale 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. As of March 31, 2010, no impairment was recorded.

Auction-rate securities put options (“ARS Put Options”)

In October 2008, the Company entered into an agreement that provides the Company with the right, but not the obligation, to sell all of its auction-rate securities to UBS, AG for par value during the period from June 30, 2010 to July 2, 2012. The ARS Put Options will provide the Company with the opportunity to recover the estimated unrealized loss on its ARS investments. The Company recorded the fair value of the ARS Put Options upon receipt and included it in short-term investments at March 31, 2010. The Company values ARS Put Options at fair value using a discounted cash flow model. Unrealized gains and losses related to the ARS Put Options are recognized in earnings. See Note 4—Investments for additional information regarding the ARS Put Options.

Treasury Stock

The Company records treasury stock purchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock.

5

Inventories

Inventories are valued at the lower of cost or market. Cost is determined using the first-in, first-out method, and includes materials, labor and 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. Inventories are composed of the following:

	March 31, 2010			December 31, 2009
	(in thousands)
Raw materials	$	3,768		$	3,982
Work in progress		1,527			1,277
Finished goods		1,824			2,788
		7,118			8,047
Reserve for obsolescence and realization		(484	)		(1,450	)
	$	6,635		$	6,597

The change in inventory reserves is comprised of the disposal of obsolete inventory and a change in standard cost to net realizable value and changes to costs and expenses. The table below details such changes (in thousands):

Inventory reserves at December 31, 2009	$	(1,450	)
Disposal of obsolete inventory		472
Change in standard cost to net realizable value		331
Changes to costs and expenses		163
Inventory reserves at March 31, 2010	$	(484	)

Property and equipment

Property and equipment consisted of the following:

	March 31, 2010			December 31, 2009
	(in thousands)
Land and land improvements	$	623		$	623
Machinery, equipment and tooling		49,242			48,125
Leasehold improvements		7,667			6,985
Furniture and fixtures		728			715
Information systems		559			546
Construction in progress		6,434			4,361
Total cost		65,253			61,355
Accumulated depreciation and amortization		(23,228	)		(21,830	)
Property and equipment, net	$	42,025		$	39,525

Revenue recognition

The Company recognizes revenue from product sales when earned. Revenue is recognized when, and if, evidence of an arrangement is obtained and the other criteria to support revenue recognition are met, including:

• Persuasive evidence of an arrangement exists. The Company requires evidence of a purchase order with the customer specifying the terms and specifications of the product to be delivered, typically in the form of a signed quotation or purchase order from the customer.

• Title has passed and the product has been delivered. Title passage and product delivery generally occur when the product is delivered to a common carrier.

6

• The price is fixed or determinable. All terms are fixed in the signed quotation or purchase order received from the customer. The purchase orders do not contain rights of cancellation, return, exchange or refund.

• Collection of the resulting receivable is reasonably assured. The Company’s standard arrangement with customers includes 30 day payment terms. Customers are subject to a credit review process that evaluates the customers’ financial position and their ability to pay. Collectability is determined by considering the length of time the customer has been in business and history of collections. If it is determined that collection is not probable, no product is shipped and no revenue is recognized unless cash is received in advance.

The Company does not provide maintenance or other services and it does not have sales that involve multiple elements or deliverables.

7

Net income (loss) per share

Net income (loss) per share is as follows for the three months ended March 31, 2010 and 2009:

	Three months ended March  31,
	2010		2009
Net income (loss) (in thousands):	$	1,575	$	(3,868	)
Net income (loss) per share:
Basic	$	0.08	$	(0.19	)
Diluted	$	0.07	$	(0.19	)
Weighted average common shares outstanding used in:
Basic		20,244,347		20,280,160
Diluted		21,437,861		20,280,160

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted-average number of dilutive common shares outstanding during the period. Dilutive shares outstanding are calculated by adding to the weighted shares outstanding any common stock equivalents from outstanding stock options and warrants based on the treasury stock method.

Diluted net loss per share is the same as basic net loss per share for the three months ended March 31, 2009 because the effects of potentially dilutive securities were anti-dilutive.

At March 31, 2009 the Company had the following anti-dilutive securities outstanding which were excluded from the calculation of diluted net loss per share:

Warrants	76,757
Stock options	62,244
	139,001

Recent Accounting Pronouncements

On January 21, 2010 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2010-06, amending Accounting Standards Codification (ASC) 820 (formerly Statement of Financial Accounting Standards No. 157). New disclosures related to transfers in and out of Level 1 and Level 2 measurements and separate disclosures about purchases, shares, issuances, and settlements relating to Level 3 measurements are required. ASU 2010-06 clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, except for the Level 3 measurements disclosures about purchases, shares, issuances, and settlements which is effective for fiscal years beginning after December 15, 2010. The adoption of ASU 2010-06 did not have a material impact on the Company’s financial condition or results of operations.

On February 24, 2010 the FASB issued ASU 2010-09, which amends ASC 855 to address certain implementation issues related to an entity’s requirement to perform and disclose subsequent events procedures. ASU 2010-09 requires entities to evaluate subsequent events through the date the financial statements are issued. ASU 210-09 is effective immediately for financial statements that are issued or available to be issued. The adoption of ASU 2010-09 did not have a material impact on the Company’s financial condition or results of operations. See Note 10 for disclosures associated with adoption of this standard.

3. SEGMENT INFORMATION

The Company evaluates operations as one reportable segment, as it only reports profit and loss information on an aggregate basis to its chief operating decision maker.

8

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,
	2010		2009
	(in thousands)
Asia	$	9,102	$	537
North America		2,111		1,615
Europe		303		186
Revenue	$	11,516	$	2,338

4. INVESTMENTS

The Company invests available cash primarily in investment grade commercial paper, corporate notes and government securities. The Company’s short-term investments balance of $29.0 million as of March 31, 2010, is comprised of US Treasury securities of $13.0 million, auction-rate securities and put options of $9.7 million, corporate notes and bonds of $3.2 million and FDIC guaranteed certificates of deposit of $3.1 million. The Company’s investments, except for the auction-rate securities, put options and long-term investments, are classified as available-for-sale securities and are carried at fair market value with unrealized gains and losses recorded in accumulated other comprehensive income (loss).

While the Company’s investment policy no longer includes auction-rate securities as an approved investment, the Company continues to hold auction-rate securities purchased prior to the policy change. In February 2008, the Company began experiencing failed auctions of its entire auction-rate securities portfolio, resulting in its inability to sell these securities in the short term. All of these auction-rate securities are AAA rated by one or more of the major credit rating agencies and have contractual maturities from 2036 to 2045. Further, all of these securities are collateralized by student loans, and approximately 99% of the collateral qualifies under the Federal Family Education Loan Program and is guaranteed by the US government. The Company is receiving the underlying cash flows on all its auction-rate securities. The Company is unable to predict if these funds will become available before their maturity dates. The Company also holds put options associated with an agreement with UBS, AG related to the auction-rate securities purchased through them. It is the Company’s intent to exercise these put options at the first available date, therefore, the auction-rate securities and the related put options have been classified as short-term investments as of March 31, 2010. The auction-rate securities are trading securities recorded at fair value and unrealized gains and losses are reported as part of gain on investments in the Consolidated Statements of Operations. The Company’s long-term investments at March 31, 2010 consist of a $2.0 million investment in Peregrine Semiconductor, Corp. (a customer) Series D-1 Preferred shares.

As noted above, in October 2008 the Company entered into an agreement with UBS, AG, which provides the Company certain rights to sell to UBS, AG the auction-rate securities that were purchased through them. As of March 31, 2010, the Company held $9.7 million par value auction-rate securities purchased from UBS, AG. The Company has the option to sell these securities to UBS, AG at par value from June 30, 2010 through July 2, 2012. UBS, AG, at its discretion, may purchase or sell these securities on the Company’s behalf at any time provided the Company receives par value for the securities sold. The issuers of the auction-rate securities continue to have the right to redeem the securities at their discretion. The agreement also permits the Company to establish a demand revolving credit line in an amount equal to the par value of the securities at a net no cost. If the Company’s debt is determined to be rated below investment grade or is not rated, the amount that can be borrowed is limited to 75% of the market value of the auction-rate securities. As of March 31, 2010, the Company had no loans outstanding under this agreement.

The Company’s right to sell the auction-rate securities to UBS, AG, commencing on June 30, 2010, represents put options for a payment equal to the par value of the auction-rate securities. The Company values the put options at their estimated fair value using a discounted cash flow model. During the three months ended March 31, 2010, the Company recorded a loss of $55,279, representing the change in fair value of the put options. The Company also recorded during the three ended March 31, 2010, a gain of $70,803, representing the change in fair value of the auction-rate securities. Both the gain and loss from recording the change in fair value of the put options and auction-rate securities were recorded in gain (loss) on investments in the Consolidated Statements of Operations.

The Company values the auction-rate securities and put options using a discounted cash model that weighs various factors, including interest rates and expected holding period. At March 31, 2010, the fair value recorded on the balance sheet of auction-rate securities and ARS put options was $8.6 million and $1.1 million, respectively. The Company believes this is a fair value of these investments at March 31, 2010.

The investment in Peregrine Semiconductor Corp. (Peregrine) is accounted for as a cost method investment.

9

The following table presents the amortized cost, and gross unrealized gains and losses on all securities at March 31, 2010 (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
Short-term Investments:
U.S. Treasury securities and agency (taxable)	$	13,021		—	$	5	$	13,016
Corporate Notes/Bonds (taxable)		3,170		—		9		3,161
FDIC guaranteed certificates of deposit (taxable)		3,080		2		—		3,082
Auction rate securities		8,611		—		—		8,611
Auction rate securities put options		1,096		—		—		1,096
Total short-term investments	$	28,978	$	2	$	14	$	28,966
Long-term Investments:
Peregrine Semiconductor, Corp. Series D-1 Preferred shares	$	2,000	$	—	$	—	$	2,000

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 below 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 following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of March 31, 2010:

	Level 1		Level 2		Level 3		Total
Cash Equivalents:
Money market funds	$	10,994	$	—	$	—	$	10,994
Investments:
Available-for-sales securities—current		—		19,259		—		19,259
Trading securities—non-current		—		—		9,707		9,707
Total	$	10,994	$	19,259	$	9,707	$	39,960

Level 3 assets consist of AAA-rated municipal bonds with an auction reset feature (auction rate securities) whose underlying assets are generally student loans which are substantially backed by the federal government and auction rate security put options. As of March 31, 2010, it is the Company’s intent to exercise the auction rate securities put options at the first available date; therefore, the Company has classified its investment in auction rate securities as short-term investments. These investments were valued at fair value as of March 31, 2010.

10

The following table provides a summary of changes in fair value of the Company’s Level 3 financial asset as of March 31, 2010 (in thousands):

	Level 3
Balance at January 1, 2010	$	10,092
Redemption of auction rate securities		(400	)
Net recognized gains and (losses)		15
Balance at March 31, 2010	$	9,707

In addition to the debt securities noted above, the Company had approximately $1.5 million of time deposits included in cash and cash equivalents as of March 31, 2010.

5. RELATED PARTY TRANSACTIONS

In November 2008, the Company purchased 1,345,444 shares of Peregrine Series D-1 Preferred shares for a total of $2.0 million, which represents less than 1% of shares outstanding. The terms and stock price of the purchase were the same as for the other investors who participated. Peregrine is a customer of the Company. For the three months ended March 31, 2010, revenue from Peregrine was $1,002,000. As of March 31, 2010, accounts receivable from Peregrine was $612,500. The pricing terms and conditions of the sales to Peregrine are similar to those available to the Company’s other non-related customers.

6. SIGNIFICANT CUSTOMERS

For the three months ended March 31, 2010, the Company had three customers that accounted for 25%, 15% and 12% of its revenue and for the three months ended March 31, 2009, the Company had three customers that accounted for approximately 34%, 19% and 14% of its revenue.

Customers individually representing more than 10% of trade receivables accounted for approximately 57% and 68% of accounts receivable as of March 31, 2010 and December 31, 2009, respectively. The Company grants credit to customers based on an evaluation of their financial condition. Losses from credit sales are provided for in the financial statements.

7. STOCKHOLDERS’ EQUITY

Common Stock

As of March 31, 2010, the Company had 85,000,000 shares of common stock authorized with a par value of $0.001 and the Company had reserved 2,177,058 shares of common stock for issuance upon the exercise of outstanding common stock options. Also, 852,909 shares of the Company’s common stock were reserved for future grants of stock options (or other similar equity instruments) under the Company’s 2001 Equity Plan (the “2001 Plan”) and 2007 Stock Incentive Plan (the “2007 Plan”) as of March 31, 2010. In addition, 281,561 shares of the Company’s common stock were reserved for future exercise of outstanding warrants as of March 31, 2010.

Warrants

For the three months ended March 31, 2010, no common stock warrants were exercised. At March 31, 2010 and December 31, 2009, there were 281,561 common stock warrants outstanding.

Treasury Stock

In November 2008, the Company authorized a stock repurchase program to purchase up to $15.0 million of common stock over a period of two years. The stock repurchase program authorizes the Company to repurchase shares of its common stock in the open market at times and prices considered appropriate by the Company depending upon prevailing market conditions and other corporate considerations. The treasury shares are accounted for using the cost method whereby the entire cost of the acquired stock is recorded as treasury stock. For the three months ended March 31, 2010, no shares were repurchased.

8. STOCK INCENTIVE PLANS

The Company sponsors a stock option plan, the 2001 Plan, which allows for the grant of incentive and nonqualified stock options for the purchase of common stock. Each option entitles the holder to purchase one share of common stock at the specified option exercise price. The exercise price of each incentive stock option granted must not be less than the fair market value on the grant date. At the discretion of management and with the approval of the Board of Directors, the Company may grant options under the 2001 Plan. Management and the Board of Directors determine vesting periods and expiration dates at the time of the grant.

11

In August 2007, the Company adopted the 2007 Plan, which allows for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards and bonus shares. The maximum number of shares which may be awarded or sold under the 2007 Plan is 2,307,692 shares. The Board of Directors has appointed a committee to administer the plan. The plan committee determines the type of award to be granted, the fair market value, the number of shares covered by the award, and the time when the award vests and may be exercised.

The Company uses the Black-Scholes option pricing model to value stock options issued after January 1, 2006. The Company uses historical stock prices of companies which it considers as a peer group as the basis for its volatility assumptions. The assumed risk-free rates were based on US 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, a review of a peer group of companies, and expected exercise behavior. The forfeiture rate is based on past history of forfeited options. The expense is being allocated using the straight-line method. For the three months ended March 31, 2010 and 2009, the Company recorded $465,471 and $162,302 of stock compensation expense, respectively. As of March 31, 2010, the Company has $3,439,174 of total unrecognized compensation cost related to non-vested awards granted under the Company’s stock-based plans that it expects to recognize over a weighted-average period of 2.95 years. The Company accounts for options issued prior to January 1, 2006 under the intrinsic value method.

The following table summarizes the activity of the stock incentive and equity plans as of March 31, 2010 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
At December 31, 2009	874,269		2,194,286		$	9.48	34,863
Authorized	—
Granted	(21,751	)	21,751			17.94	—
Exercised	—		(38,588	)		3.92
Cancelled/forfeited	391		(391	)		3.91	—
At March 31, 2010	852,909		2,177,058		$	9.66	34,863

The weighted average fair value per share of options granted for the three months ended March 31, 2010 was $17.94, and the fair value of each option grant was estimated at the date of grant using the Black-Scholes option-pricing model using an expected term of 5.4 years, risk-free interest rates of 0.38% - 0.75%, respectively, expected volatility of 60% and no dividend yield. The Company used an expected forfeiture rate of 27.54%.

For the three months ended March 31, 2010 and 2009, the Company recorded $28,499 of stock compensation expense related to restricted stock.

A summary of the Company’s non-vested options during the three month period ended March 31, 2010 is presented below:

	Options		Weighted-average exercise price
Non-vested at January 1, 2010	1,500,639		$	2.26
Granted	21,751			17.94
Vested	(200,535	)		4.08
Forfeited	(387	)		3.91
Non-vested at March 31, 2010	1,321,468		$	11.37

An analysis of restricted stock issued is as follows:

Non-vested restricted stock as of December 31, 2009	8,453
Granted	—
Vested	(1,846	)
Non-vested restricted stock as of March 31, 2010	6,607

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9. COMMITMENTS AND CONTINGENCIES

Purchase Commitments

The Company has entered into agreements to purchase land, equipment and components to construct furnaces. These agreements will result in the Company purchasing buildings, equipment or components for a total cost of approximately $12,893,000 with deliveries occurring through December 2010.

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 or results of operations of the Company.

10. SUBSEQUENT EVENTS

On April 16, 2010, the Company purchased a 134,400 square foot building in Batavia, Illinois to be used for the expansion of crystal growth and fabrication operations. The purchase price is $7,000,000. A payment of $250,000 was made at signing and the remainder paid at closing.

We evaluated the events or transactions occurring between the balance sheet date and the date of issuance of the financial statements to determine if any would require recognition or disclosure in the financial statements. There were no material subsequent events, except as described above.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

All statements, other than statements of historical facts, included in this Quarterly Report on Form 10-Q regarding our estimates, expectations, beliefs, intentions, projections or strategies for the future, results of operations, financial position, net sales, projected costs, prospects and plans and objectives of management for future operations may be “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward looking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions such as “will,” “may,” “could,” “should,” etc. (or the negative thereof). Items contemplating or making assumptions about actual or potential future sales, market size and trends or operating results also constitute forward-looking statements.

Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Before investing in our common stock, investors should be aware that the occurrence of the risks, uncertainties and events described in the section entitled “Risk factors” in our Annual Report on Form 10-K and elsewhere in this Quarterly Report could have a material adverse effect on our business, results of operations and financial condition.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, forward-looking statements are inherently subject to known and unknown business, economic and other risks and uncertainties that may cause actual results to be materially different from those discussed in these forward-looking statements. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Quarterly Report, other than as may be required by applicable law or regulation. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.

You should read this Quarterly Report, the documents that we reference in this Quarterly Report and have filed with the SEC as exhibits and our Annual Report on Form 10-K for the year ended December 31, 2009 with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

Unless otherwise indicated, the terms “Rubicon,” the “Company,” “we,” “us,” and “our” refer to Rubicon Technology, Inc.

OVERVIEW

We are an advanced electronic materials provider that develops, manufactures and sells monocrystalline sapphire and other innovative crystalline products for Light-Emitting Diodes (“LEDs”), radio frequency integrated circuits (“RFICs”), blue laser diodes, optoelectronics and other optical applications. The emergence of sapphire in commercial volumes at competitive prices has enabled the development of new technologies such as high brightness (“HB”) white, blue and green LEDs and highly-integrated RFICs. We apply our proprietary crystal growth technology to produce high-quality sapphire products efficiently to supply our end-markets, and we work closely with our customers to meet their quality and delivery needs.

We are a vertically-integrated manufacturer of high-quality sapphire substrates and optical windows that are used in a variety of high-growth, high-volume end-market applications. Our largest product line is two inch to four inch sapphire wafers for use in LEDs and blue laser diodes for solid state lighting and electronic applications. In addition, we sell six inch sapphire wafers that are used for Silicon-on-Sapphire (“SOS”) RFICs, as well as products for military, aerospace, sensor and other applications. We have also extended our technology, which gives us the ability to produce cores and wafers of up to twelve inches in diameter to support next-generation LED and SOS RFIC production. We currently sell six and eight inch wafers to LED chip manufacturers for their research and development efforts toward moving production on to these larger diameter substrates. We have also developed the ability to produce large diameter circular and rectangular sapphire windows for use in various optical window applications.

Our revenue consists of sales of sapphire materials sold in core, as-cut, as-ground and polished forms in two, three, four, six and eight inch diameters as well as optical materials sold as blanks or polished windows. Products are made to varying specifications, such as crystal planar orientations and thicknesses.

Historically, a significant portion of our revenue has been derived from sales to relatively few customers. For the three months ended March 31, 2010, we had three customers that accounted for approximately 25%, 15% and 12% of our revenue and for the three months ended March 31, 2009, we had three customers that accounted for approximately for 34%, 19% and 14% of our revenue. Other than as discussed above, none of our customers accounted for more than 10% of our revenue for such periods. Although we are attempting to diversify and expand our customer base, we expect our revenue to continue to be concentrated among a small number of customers. We expect that our significant customers may change from period to period.

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We recognize revenue upon shipment to our customers. We derive a significant portion of our revenue from customers outside of the United States. The majority of our sales are to the Asian market and we expect that region to continue to be a major source of revenue for us. All of our revenue is denominated in US dollars.

Our revenue in the first quarter of 2009 was significantly impacted by the global recession. Much of the sapphire we sell into the marketplace goes into LED lighting for consumer electronics. Consumer spending on these products declined during the recession, which decreased demand for our products. Toward the end of 2009, demand for sapphire began to strengthen as consumers resumed spending on consumer electronics, driven, in part, by the introduction of new products such as LED backlit LCD televisions. With the increased demand, average selling prices for our products in the three months ended March 31, 2010 increased 20% sequentially from the fourth quarter of 2009. We expect demand and average selling prices to continue to improve in 2010, although it is difficult to predict the magnitude and timing of further increases.

We manufacture and ship our products from our facilities in the Chicago metropolitan area. We have approximately 102,600 square feet of manufacturing and office space. We are currently building a 65,000 square foot facility in Penang, Malaysia, which will process sapphire grown by us in our Illinois facilities into finished cores and wafers. We anticipate this facility to open in the fourth quarter of 2010. We also acquired in April 2010 a 134,400 square foot building in Batavia, Illinois to expand our crystal growth operations. We anticipate this facility will begin operations in the fourth quarter of 2010.

Our cost of goods sold consists primarily of manufacturing materials, labor, manufacturing-related overhead such as utilities, depreciation and rent, provisions for excess and obsolete inventory reserves, freight and warranties. We manufacture our products at our Franklin Park, Illinois and Bensenville, Illinois manufacturing facilities based on customer orders. We purchase materials and supplies to support such demand. We are subject to variations in the cost of raw materials and consumables from period to period because we do not have long-term fixed-price agreements with our suppliers.

Our operating expenses are comprised of sales and marketing, research and development (“R&D”), and general and administrative (“G&A”) expenses. G&A expenses consist primarily of salaries and associated costs for employees in finance, human resources, information technology and administrative activities, charges for accounting, legal, and insurance fees, and stock-based compensation. The majority of our stock-based compensation relates to administrative personnel and is accounted for as a G&A expense.

Other income (expense) consists of interest income and expense and realized gains and losses on investments and currency translation. For the three months ended March 31, 2010, interest income was $97,000 partially offset by a realized loss on currency translation of $40,000. For the three months ended March 31, 2009, interest income was $257,000.

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. A full valuation allowance is provided as management cannot conclude that it is more likely than not that our deferred tax assets will be realized. At March 31, 2010, we had approximately $55.6 million in net operating loss carryforwards (“NOLs”). We believe that we are not restricted in our ability to use the full amount of the NOLs, nor is there a limit to the amount of NOLs that may be used in any given year, however, we will update our analysis in 2010 and the results of that analysis may indicate an ownership change. If an ownership change is determined, the utilization of the NOLs may be limited. As of March 31, 2010, no tax benefit has been recognized for these loss carryforwards.

We anticipate our capital expenditures will be between $35 million and $45 million in 2010. These expenditures will be primarily focused on expansion projects in Illinois and Malaysia. Our capital expenditures in the first quarter 2010 were $3.9 million.

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RESULTS OF OPERATIONS

The following table sets forth our consolidated statements of operations for the periods indicated:

	Three months ended March 31,
	2010		2009
	(in millions)
Revenue	$	11.5	$	2.3
Cost of goods sold		7.4		4.9
Gross profit (loss)		4.1		(2.6	)
Operating expenses:
General and administrative		2.1		1.1
Sales and marketing		0.3		0.2
Research and development		0.2		0.2
Total operating expenses		2.6		1.5
Income (loss) from operations		1.5		(4.1	)
Other income		0.1		0.2
Income (loss) before income taxes		1.6		(3.9	)
Income tax expense		—		—
Net income (loss)	$	1.6	$	(3.9	)

The following table sets forth our consolidated statements of operations as a percentage of revenue for the periods indicated:

	Three months ended March 31,
	2010		2009
	(percentage of total)
Revenue	100	%	100	%
Cost of goods sold	64		213
Gross profit (loss)	36		(113	)
Operating expenses:
General and administrative	18		47
Sales and marketing	3		9
Research and development	2		9
Total operating expenses	23		65
Income (loss) from operations	13		(178	)
Other income (expense)	1		9
Income (loss) before income taxes	14		(169	)
Income tax expense	—		—
Net income (loss)	14	%	(169	)%

Revenue. Revenue was $11.5 million for the three months ended March 31, 2010 and $2.3 million for the three months ended March 31, 2009, an increase of $9.2 million. We experienced a significant increase in revenue across most product lines and diameters due to increased demand for our products as the market rebounded significantly. Revenue from the sale of core products for the three months ended March 31, 2010 increased by $8.3 million, of which $8.2 million was attributed to volume and $103,000 due to an increase in pricing. This was partially offset by a decrease in as cut sales of $954,000 attributed to focusing production on higher margin core products. We also increased our sales of polished wafers by $1.4 million as demand for these products increased in both the SOS RFIC and LED markets. We also had higher revenue of $358,000 from optical products due to increased sales of sapphire for military, sensor and instrumentation applications. For the remainder of 2010, we expect pricing on all product lines to continue to strengthen as we currently expect the demand for sapphire to remain high.

Gross profit (loss). Gross profit was $4.1 million for the three months ended March 31, 2010 compared to a gross loss of $2.6 million for the three months ended March 31, 2009, an increase of $6.7 million. The increase in gross profit is primarily attributable to higher revenue of $9.2 million and better utilization of equipment and staff, which led to improved operating leverage and higher throughput.

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General and administrative expenses. G&A expenses were $2.1 million for the three months ended March 31, 2010 and $1.1 million for the three months ended March 31, 2009, an increase of $970,000. The increase was primarily due to $360,000 from higher bonus costs due to no performance bonus earned in 2009, higher bad debt expense of $176,000 as 2009 included a reduction of our reserve on collection of an over 90 day past due receivable, and $200,000 in increased stock option expense for executives. We also incurred higher corporate taxes of $67,000, increased legal fees of $62,000, increased recruiting costs of $32,000 relating to our Malaysian employees, and $29,000 in higher salary and payroll tax expenses associated with salary increases.

Sales and marketing expenses. Sales and marketing expenses were $257,000 for the three months ended March 31, 2010 and $243,000 for the three months ended March 31, 2009, an increase of $14,000. The increase in sales and marketing expenses is attributable to additional salary and payroll taxes of $25,000 associated with annual salary increases, an increase in travel of $9,000 in support of meeting with potential and existing customers partially offset by a decrease in marketing expenses of $19,000 on timing of trade shows.

Research and development expenses. R&D expenses were $212,000 for the three months ended March 31, 2010 and $152,000 for the three months ended March 31, 2009, an increase of $60,000. The increase was primarily attributable to higher payroll costs of $42,000 due to an increase in headcount and an increase in spending on research projects of $20,000.

Other income (expense). Other income was $73,000 for the three months ended March 31, 2010 and $270,000 for the three months ended March 31, 2009, a decrease in net other income of $197,000. The decrease was due to lower interest income of $159,000 as a result of lower investment principal and lower interest rates and realized loss on currency translation of $40,000.

LIQUIDITY AND CAPITAL RESOURCES

We historically funded our operations using a combination of issuances of common stock and preferred stock, a working capital line of credit and term loans, and cash generated from our operations.

As of March 31, 2010, we had cash and short term investments totaling $41.5 million, including cash of $1.5 million held in deposits at major banks, $11.0 million invested in money market funds and $29.0 million invested in short term certificates of deposit, state and local bonds, auction-rate securities and put options, and U.S. treasury securities. Our long term investment consists of a $2.0 million investment in Peregrine Semiconductor, Corp. (one of our customers) Series D1 preferred stock. In February 2008, we began experiencing failed auctions of our entire auction-rate securities portfolio, resulting in our inability to sell these securities in the short term. All of the auction-rate securities are AAA rated by one or more of the major credit rating agencies and have contractual maturities from 2036 to 2045. Further, all of these securities are collateralized by student loans, and approximately 99% of the collateral qualifies under the Federal Family Education Loan Program and is guaranteed by the US government. We are receiving the underlying cash flows on all of our auction-rate securities. We are unable to predict if these funds will become available before their maturity dates. We also hold put options associated with an agreement with UBS, AG related to the auction-rate securities purchased through them. It is our intent to exercise these put options at the first available date. Therefore, the auction-rate securities and the related put options have been classified as short-term investments as of March 31, 2010.

In October 2008, we entered into an agreement with UBS, AG, which provides us with certain rights to sell to UBS, AG all of our auction-rate securities that were purchased through them. We have the option to sell these securities to UBS, AG at par value from June 30, 2010 through July 2, 2012. UBS, AG, at its discretion, may purchase or sell these securities on our behalf at any time provided we receive par value for the securities sold. The issuers of the auction-rate securities continue to have the right to redeem the securities at their discretion. The agreement also permits us to establish a demand revolving credit line in an amount equal to the par value of the securities at a net no cost. If our debt is determined to be rated below investment grade or is not rated, the amount that can be borrowed is limited to 75% of the market value of the auction-rate securities. As of March 31, 2010, we had no loans outstanding under this agreement.

Our right to sell the auction-rate securities to UBS, AG commencing on June 30, 2010 represents put options for a payment equal to the par value of the auction-rate securities. We value the put options at their estimated fair value using a discounted cash flow model. During the three months ended March 31, 2010 and 2009, we recorded a realized loss of $55,279 and $505,463, respectively, representing the changes in fair value of the put options. We also recorded during the three months ended March 31 2010 and 2009, a gain of $70,803 and $518,934 respectively, representing the changes in fair value of the auction-rate securities. Both the gain and loss from recording the change in fair value of the put options and auction-rate securities were recorded in gain (loss) on investments in the Consolidated Statements of Operations. We do not expect to need access to the auction-rate securities capital prior to the maturity of the auction-rate security put options.

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Cash flows from operating activities

The following table represents the major components of our cash flows from operating activities for the three months ended March 31, 2010 and 2009:

	Three months ended March 31,
	2010			2009
	(in thousands)
Net income (loss)	$	1,575		$	(3,868	)
Non-cash items:
Depreciation and amortization		1,398			1,296
Stock based compensation and other, net		450			213
Total non-cash items:		1,848			1,509
Working capital:
Accounts receivable		(2,344	)		996
Accounts payable		(371	)		(1,234	)
Other accruals		622			(556	)
Inventories		(38	)		(212	)
Prepaid expenses and other current assets		(568	)		982
Total working capital items:		(2,699	)		(24	)
Net cash provided by (used in) operating activities	$	724		$	(2,383	)

Cash provided by operating activities was $724,000 for the three months ended March 31, 2010. During such period, we generated net income of $1.6 million and we incurred non-cash expenses of $1.8 million, including depreciation and amortization expense of $1.4 million and stock-based compensation expense of $465,000. During such period, cash from net working capital decreased $2.7 million, which was comprised of an increase in accounts receivable of $2.3 million due to higher sales volumes, a decrease in accounts payable of $371,000 due to timing of payments, an increase in other accruals of $622,000 consisting primarily of an increase in accrued payroll of $513,000 from increased headcount and bonus accrual, and an increase in prepaid expenses of $568,000 due to timing of furnace replacement parts.

Cash used in operating activities was $2.4 million for the three months ended March 31, 2009. During such period, we generated a net loss of $3.9 million and we incurred non-cash expenses of $1.5 million, including depreciation and amortization expense of $1.3 million and stock-based compensation expense of $226,000. We experienced a decrease during such period in accounts receivable of $996,000 as sales declined, a decrease in accounts payable of $1.2 million as purchases declined and a decrease in spare parts of $678,000 primarily due to not replenishing stock used due to lower production volumes. We also experienced a decrease in accrued payroll of $301,000 due to pay outs of bonuses earned in the first half of 2008 and a decrease in corporate income and franchise taxes of $183,000 due to payment of 2008 taxes due.

Cash flows from investing activities

Net cash provided by investing activities was $7.9 million and $2.8 million for the three months ended March 31, 2010 and 2009, respectively. During the three months ended March 31, 2010, we used approximately $1.8 million to add crystal growth furnaces, $345,000 toward the purchase of an additional facility, and $302,000 to upgrade our current facilities and add to existing capacity in other areas. We also used approximately $1.4 million in the construction of our facility in Malaysia. This was partially offset by sales of investments of $11.8 million which were used to fund operations and capital spending. During the three months ended March 31, 2009, we used approximately $456,000 to add crystal growth furnaces and approximately $57,000 to upgrade existing capacity in other areas. This was partially offset by sales of investments of $3.4 million which were used to fund operations, capital spending and our stock repurchases. We are planning on expanding our crystal growth facilities in Illinois and are building a facility in Malaysia that will support post crystal growth manufacturing. It is difficult to predict the timing of capital expenditures on these projects, but we anticipate the total cost of these projects to be between $60 million and $65 million to be spent over a two year period, and expect our 2010 capital expenditures to be between $35 million and $45 million.

Cash flows from financing activities

Net cash provided by (used in) financing activities was $34,000 and ($2.6) million for the three months ended March 31, 2010 and 2009, respectively. Net cash provided by financing activities for the three months ended March 31, 2010 reflects proceeds from the exercise of stock options of $151,000 partially offset by deferred offering costs of $118,000. Net cash used in financing activities for the three months ended March 31, 2009 reflects stock repurchases of $2.6 million.

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Future liquidity requirements

We are increasing our production capacity by adding an additional crystal growth facility in Batavia, Illinois and building a post crystal growth operation facility in Malaysia on the parcel of land we purchased in October 2009. We began these expansion projects in the fourth quarter of 2009 and anticipate these new facilities opening in the fourth quarter of 2010. While some new capacity will be available at the time we open these facilities, we anticipate that it will take twelve months from the opening of these facilities to install all necessary equipment and have these facilities fully functional. We believe that our existing cash, cash equivalents, investments, and anticipated cash flows from operating activities will be sufficient to continue our expansion projects for the next twelve months. However, we may seek to secure debt or additional equity financing over the next year to provide additional liquidity. Our cash needs include cash required to fund our operations, taking into account the capital needed to fund our planned expansions in the US and Asia. 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. If we obtain debt financing, a substantial portion of our operating cash flow may be dedicated to the payment of principal and interest on such indebtedness, and the terms of the debt securities issued could impose significant restrictions on our operations. If we are unable to obtain financing on terms favorable to us, we may be unable to successfully execute our business plan.

Contractual obligations

The contractual obligations presented in the table below represent our estimates of future payments under fixed contractual obligations and commitments at March 31, 2010. Changes in our business needs, as well as actions by third parties and other factors, may cause these estimates to change. Because these estimates are complex and necessarily subjective, our actual payments in future periods are likely to vary from those presented in the table. The following table sets forth information relating to our contractual obligations at March 31, 2010:

	Payments due in
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in millions)
Purchase order obligations	$	1,724,000	$	1,724,000		—		—		—
Building purchase and construction obligations	$	11,169,000	$	11,169,000		—		—		—
Total contractual obligations	$	12,893,000	$	12,893,000	$	—	$	—	$	—

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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 from sales of products when:

• Persuasive evidence of an arrangement exists. We require evidence of a purchase order with the customer specifying the terms and specifications of the product to be delivered, typically in the form of a signed quotation or purchase order from the customer.

• Title has passed and the product has been delivered. Title passage and product delivery generally occurs when the product is delivered to a common carrier.

• The price is fixed or determinable. All terms are fixed in the signed quotation or purchase order received from the customer. The purchase orders do not contain rights of cancellation, return, exchanges or refunds.

• Collection of the resulting receivable is reasonably assured. Our standard arrangement with customers includes 30 day payment terms. Customers are subject to a credit review process that evaluates each customer’s financial position and its ability to pay. We determine collectability by considering the length of time the customer has been in business and our history of collections with that customer. If we determine that collection is not probable, no product is shipped and no revenue is recognized unless cash is received in advance.

Contract research revenue is recognized as services are performed. We execute agreements with our customers that clearly describe the scope of the project, the services we will provide, ownership of any tangible or intangible assets generated as part of the project, and the amount of consideration we will receive.

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There are no significant judgments or estimates associated with our revenue recognition policies or processes. All of our revenue is denominated in US dollars.

Inventory valuation

We value our inventory at the lower of cost or market. Market is determined based on net realizable value. Cost is determined for raw materials on a first-in, first-out basis and work in process and finished goods are based on actual costs. 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. Recoveries of previously written-down inventory are recognized only when the related inventory is sold and revenue has been recognized. Inventory reserves decreased in the three months ended March 31, 2010 by $966,000 primarily on disposal of obsolete inventory, resetting of standard costs on certain inventory items to net realizable value and ability to sell previously determined excess quantities. Based on improved demand and pricing of our products, we believe that it is unlikely that significant adjustments for inventory obsolescence will occur in 2010. Our method of estimating excess and obsolete inventory has remained consistent for all periods presented. However, if our recognition of excess or obsolete inventory is, or if our estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory reserves may be required. We determine our normal operating capacity and record as expense costs attributable to lower utilization of equipment and staff. For the three months ended March 31, 2010 and 2009, we determined we were not operating at capacity and recorded as expense costs associated with lower utilization of equipment and staff of $284,000 and $2.9 million, respectively. With the improved demand, we believe that it is unlikely that additional significant adjustments for lower utilization of equipment and staff will occur in 2010.

Investments

We invest available cash primarily in investment grade commercial paper, corporate notes, government securities and auction rate securities. Investments classified as available-for-sale securities are carried at fair market value with unrealized gains and losses recorded in accumulated other comprehensive income (loss). Investments in trading securities are reported at fair value, with both realized and unrealized gains and losses recorded in other income (expense), net in the Consolidated Statement 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. Our long-term investments at March 31, 2010, consist of a $2.0 million investment in Peregrine Semiconductor, Corp. (a customer) Series D-1 Preferred shares.

We review our available-for-sale 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 March 31, 2010, no impairment was recorded.

In October 2008, we entered into an agreement that provides us with the right, but not the obligation, to sell all our auction-rate securities to UBS, AG for par value during the period from June 30, 2010 to July 2, 2012 (the “ARS Put Options”). The ARS Put Options provide us with the opportunity to recover the estimated unrealized loss on our ARS investments. We recorded the fair value of the ARS Put Options upon receipt. It is our intent to exercise these put options at the first available date, therefore, the auction-rate securities and the related put options have been classified as short-term investments as of March 31, 2010. We value the put options at their estimated fair value using a discounted cash flow model. Unrealized gains and losses related to the ARS Put Options are recognized in earnings. We value the auction-rate securities and ARS Put Options using a discounted cash flow model that weights various factors including interest rates and expected holding period. At March 31, 2010, the fair value recorded on the balance sheet of auction-rate securities and ARS Put Options was $8.6 million and $1.1 million, respectively.

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 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. 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. We believe that it is unlikely that significant adjustments to allowances for doubtful accounts will be necessary.

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Stock-based compensation

We expense stock options based upon the fair market 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 will be 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 the vesting term of our options, a review of a peer group of companies, and expected exercise behavior. Until November 2007, we were operating as a private company, and, as a result, we were unable to use our actual price volatility data. Therefore, we estimate the volatility of our common stock based on volatility of similar entities over the expected term of our stock options. We base the risk-free interest rate that we use in the option pricing model on US 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 27.54% was based on our past history of forfeitures.

We allocate stock based compensation costs using a straight-line method which amortizes the fair value of each option on a straight-line basis over the service period.

Based on the variables affecting the valuation of our common stock and the method used for allocating compensation costs, we recognized $465,000 in stock compensation expense during the three months ended March 31, 2010.

Valuation methodologies employed

All option grants made during the three months ended March 31, 2010 and 2009 were granted at an exercise price per share equal to the closing market price of our common stock on 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.

The aggregate intrinsic value of all stock options outstanding at March 31, 2010, based on the fair market value of the common stock at March 31, 2010, was $22.9 million.

RECENT ACCOUNTING PRONOUNCEMENTS

On January 21, 2010 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2010-06, amending Accounting Standards Codification (ASC) 820 (formerly Statement of Financial Accounting Standards No. 157). New disclosures related to transfers in and out of Level 1 and Level 2 measurements and separate disclosures about purchases, shares, issuances, and settlements relating to Level 3 measurements are required. ASU 2010-06 clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, except for the Level 3 measurements disclosures about purchases, shares, issuances, and settlements which is effective for fiscal years beginning after December 15, 2010. The adoption of ASU 2010-06 did not have a material impact on our financial condition or results of operations.

On February 24, 2010 the FASB issued ASU 2010-09, which amends ASC 855 to address certain implementation issues related to an entity’s requirement to perform and disclose subsequent events procedures. ASU 2010-09 requires entities to evaluate subsequent events through the date the financial statements are issued. ASU 210-09 is effective immediately for financial statements that are issued or available to be issued. The adoption of ASU 2010-09 did not have a material impact on our financial condition or results of operations. See Note 10 for disclosures associated with adoption of this standard.

OFF-BALANCE SHEET ARRANGEMENTS

As of March 31, 2010, there have been no material changes in the off-balance sheet arrangements disclosed in the Management’s Discussion and Analysis section of our Annual Report on Form 10-K for the year ended December 31, 2009.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

For the first three months ended March 31, 2010, except as noted below, there were no material changes in the information regarding market risk contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

Foreign currency exchange risk. To date, substantially all of our international sales have been transacted in US dollars. With our expansion in Malaysia, we may have exposure to foreign currency exchange rates. We currently do not enter into foreign currency hedging transactions.

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ITEM 4. CONTROLS AND PROCEDURES

Management’s evaluation of disclosure controls and procedures

Based on evaluations at March 31, 2010, our chief executive officer and chief financial officer, with the participation of the management team, have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that material information relating to the Company is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in internal control over financial reporting

Our management, including our certifying officers, believes that a controls system, no matter how well designed and operated, is based in part upon certain assumptions about the likelihood of future events, and therefore can only provide reasonable, not absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Our certifying officers have concluded that there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the three months ended March 31, 2010, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

From time to time we may be named in claims arising in the ordinary course of business. Currently, there are no legal proceedings or claims pending against us or involving us that, in the opinion of our management, could reasonably be expected to have a material adverse effect on our business or financial condition.

ITEM 1A. RISK FACTORS

Our business is influenced by many factors that are difficult to predict, involve uncertainties that may materially affect actual results and are often beyond our control. We have identified a number of these risk factors in our Annual Report on Form 10-K for the year ended December 31, 2009, which factors should be taken into consideration when reviewing the information contained in this report. There have been no material changes with regard to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sales of Unregistered Securities

None.

Use of Proceeds

Our Registration Statement on Form S-1 (333-145880) covering the initial public offering of our shares of common stock was declared effective by the SEC on November 15, 2007.

The net offering proceeds to us after deducting expenses totaled approximately $81.0 million. As of March 31, 2010, we had used approximately $7.6 million of the net proceeds to repay borrowings outstanding under the revolving line of credit financing agreement with Hercules Technology Growth Capital, Inc. and to pay related fees and expenses. We also have used $5.7 million to repurchase shares of our common stock, $2.0 million to purchase Series D-1 preferred shares of Peregrine Semiconductor Corp. (one of our customers) and $28.1 million on capital expenditures and $1.8 million for working capital and general corporate purposes. We intend to use the remaining $35.8 million of the net proceeds for our production capacity expansion project, working capital and other general corporate purposes.

Issuer Purchases of Equity Securities

In November 2008, we announced a repurchase plan approved by our Board of Directors authorizing the purchase of up to $15.0 million of our outstanding common stock over a period of two years. The stock repurchase program authorizes us to purchase shares of our common stock in the open market at times and prices considered appropriate by us depending upon prevailing market conditions and other corporate considerations. There was no stock repurchased for the three months ended March 31, 2010.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. RESERVED

ITEM 5. OTHER INFORMATION

None.

ITEM 6. 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 Quarterly Report on Form 10-Q and is incorporated by reference.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on May 5, 2010.

Rubicon Technology, Inc.
By	/s/ Raja M. Parvez
	Raja M. Parvez
	Chief Executive Officer and President
By	/s/ William F. Weissman
	William F. Weissman
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

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EXHIBIT INDEX

The Exhibits listed below are filed or incorporated by reference as part of this Quarterly Report on Form 10-Q.

Exhibit No.	Description	Incorporation by Reference
3.1	Eighth Amended and Restated Certificate of Incorporation of Rubicon Technology, Inc.	Filed as Exhibit 3.1 to Amendment No. 2, filed on November 1, 2007, to the registrant’s Registration Statement on Form S-1 (File No. 333-145880)
3.2	Amended and Restated Bylaws of Rubicon Technology, Inc.	Filed as Exhibit 3.2 to Amendment No. 2, filed on November 1, 2007, to the registrant’s Registration Statement on Form S-1 (File No. 333-145880)
10.1	Agreement for Purchase and Sale of Real Estate, dated February 16, 2010, by and between Rubicon Technology, Inc. and Douglas Business Center, LLC.
31.1	Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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EX-10.1

Exhibit 10.1

AGREEMENT FOR PURCHASE

AND SALE OF REAL ESTATE

THIS AGREEMENT FOR PURCHASE AND SALE OF REAL ESTATE is entered into as of February 16, 2010, by and between RUBICON, TECHNOLOGY, INC., a Delaware corporation (“Purchaser”) and DOUGLAS BUSINESS CENTER, LLC, an Illinois limited liability company (collectively, “Seller”).

WITNESSETH:

WHEREAS, Seller is the owner of the Property (as defined below); and

WHEREAS, Purchaser desires to purchase from Seller and Seller desires to sell to Purchaser all of the Property on the terms and conditions set forth below.

NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

ARTICLE 1

AGREEMENT TO PURCHASE AND SELL

Seller agrees to sell and convey to Purchaser, and Purchaser agrees to purchase from Seller, upon the terms and conditions set forth in this Agreement, all of Seller’s right, title and interest in and to the following (collectively, the “Property”):

(i) the land legally described on Exhibit A attached hereto and made a part hereof consisting of approximately 6.16 acres of land and commonly known as 950 Douglas Road, Batavia, Illinois, together with all privileges, rights, easements, hereditaments, and appurtenances belonging to the land, and all right, title and interest of the titleholder thereof in and to any streets, alleys, passages and other rights-of-way included therein or adjacent thereto (before or after the vacation thereof) (collectively, the “Land”);

(ii) all buildings, structures, parking areas and other improvements located on the Land and any and all fixtures attached thereto, including the industrial/office building consisting of approximately 134,400 square feet (collectively, the “Improvements”); and

(iii) all equipment, machinery, apparatus, signs, and other fixtures, if any, owned by Seller and used in connection with the Improvements (collectively, the “Personal Property”).

ARTICLE 2

PURCHASE PRICE

2.1 Purchase Price. The purchase price (the “Purchase Price”) to be paid by Purchaser to Seller for the Property shall be Seven Million and 00/100 Dollars ($7,000,000.00).

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2.2 Earnest Money. Within two (2) business days after the date on which this Agreement is executed and delivered by the last party to do so (the “Effective Date”), Purchaser will pay into a strict joint order escrow with Seller at the Title Insurer the sum of Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) as earnest money (the “Earnest Money”). The Earnest Money may be invested by the Title Insurer as Purchaser directs in either United States Treasury Bills or a federally insured money market account. Seller and Purchaser shall share equally the cost of the joint order escrow, but Purchaser shall bear the cost of any investment fee charged by the Title Insurer as escrowee. If this Agreement is terminated by Purchaser before the end of the Review Period in accordance with Article 3 hereof or because of a default by Seller under this Agreement, then, the Earnest Money shall be promptly returned to Purchaser. Except as provided in the immediately preceding sentence, the Earnest Money shall be paid to the party provided in this Agreement. The Earnest Money shall be applied to the Purchase Price at the Closing.

2.3 Closing Costs. Seller shall pay the cost of: (a) the Title Policy (as defined below), including the cost of extended coverage over the standard printed exceptions; (b) the Survey (as defined below); (c) obtaining and recording any releases of any mortgages, liens; and (d) any stamp or transfer taxes imposed by State or County law. Purchaser shall pay the cost of: (a) any title endorsements; (b) the cost of recording the Deed, and (c) the cost of any local transfer taxes. Purchaser and Seller shall share equally the escrow fees and “New York” style closing fees for the Closing (as defined below). All other closing costs shall be apportioned according to prevailing local custom. Except as expressly provided in this Agreement to the contrary, each party shall pay its own legal fees.

2.4 Closing Prorations and Adjustments. All items of income or expense other than Taxes (as defined below) shall be prorated according to prevailing local custom. Unpaid real estate taxes, current installments of regular assessments, special assessments, sewer charges, and any similar taxes and charges (collectively, “Taxes”) imposed in respect of the Land which are not yet due and payable on the Closing Date shall be prorated to the Closing Date on the basis of 100% of the most recent ascertainable bill or assessment therefor. All prorations shall be final except for Taxes which shall be reprorated when Taxes which are payable for the year in which the Closing Date occurs are known and the party owing any amount as a result shall pay it to the other within 30 days of demand. Each party’s rights and obligations under this Section 2.4 shall survive the Closing.

2.5 Payment of Purchase Price. The Purchase Price plus or minus any adjustments, credits or prorations provided for herein, shall be paid to Seller at the Closing by wire transfer of immediately available funds.

ARTICLE 3

PURCHASER’S DUE DILIGENCE

3.1 Review Period; Termination Right. During the forty (40) day period immediately following the Effective Date (the “Review Period”), Purchaser and its agents, employees, contractors and representatives shall have the right to: (i) enter upon the Land and Improvements to conduct tests, inspections and investigations of the physical condition of the Land, Improvements and Personal Property; and (ii) review other due diligence materials relating to the Property (including copies of all tests and studies done by or for Seller, if any) as may be necessary for Purchaser to determine whether any matter makes the Property unacceptable to Purchaser in Purchaser’s sole and absolute discretion.

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Purchaser shall give Seller reasonable prior oral notice before entering onto the Property pursuant to this Section 3.1. Purchaser shall repair any damage to the Property resulting from Purchaser’s activities on the Property under this Section 3.1. Within five (5) days after the Effective Date, Seller will provide Purchaser with copies of materials in its possession relating to Purchaser’s due diligence investigations, including existing surveys, tax bills, title reports, and environmental reports. In the event Purchaser, in its sole and absolute discretion, determines that any matter makes the Property unacceptable to Purchaser, then Purchaser may terminate this Agreement by delivering written notice of termination to Seller at any time on or before the end of the Review Period and deliver a notice to the Escrowee demanding that the Earnest Money be delivered to Purchaser. If Purchaser so elects to terminate this Agreement during the Review Period, the Earnest Money shall be immediately returned to Purchaser.

Prior to Purchaser or its agents or contractors entering upon the Property pursuant to this Article 3.1, Purchaser shall (i) give Seller twenty-four (24) hours prior notice of such entry, and (ii) provide satisfactory evidence to Seller that Purchaser, or its agents or contractors, have obtained commercial general liability insurance, with limits of not less than $1,000,000.00 per occurrence and $2,000,000.00 in the aggregate; workers compensation insurance in statutory limits and employers liability insurance with limits not less than $1,000,000 each limit. Such liability insurance policy shall be primary and non contributory to any insurance maintained by the Seller; shall be issued by an insurer licensed to write insurance and do business in Illinois; such insurer shall have a Best’s Rating of A- VIII or better and shall include Seller as an additional insured thereunder. Seller shall have the right (but not the obligation) to accompany Purchaser during such inspections and investigations; provided, however, in no event shall any invasive testing or procedures be permitted by Purchaser or its agents or contractors (except customary soil borings and Phase I environmental assessments paid for by Purchaser shall be permitted.

Purchaser shall repair any damage to the Property resulting from Purchaser’s activities on the Property under this Article 3, and shall indemnify, defend, and hold harmless Seller and Seller’s partners, and their respective shareholders, officers, directors, members, managers, employees and agents from and against any and all loss, damage, liability or expense (including reasonable attorneys fees and other litigation expenses and claims and liens of mechanics or materialmen) any of the aforementioned persons may incur as a result of Purchaser’s or Purchaser’s agents’ or contractors’ activities on the Property under this Article 3. The indemnity obligations of Purchaser under this grammatical paragraph shall survive the Closing or a termination of this Agreement, notwithstanding anything contained to the contrary in this Agreement.

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ARTICLE 4

TITLE INSURANCE AND SURVEY

4.1 Title Commitment and Survey. Within twenty-one (21) days after the Effective Date Seller shall deliver to Purchaser: (a) a survey of the Property (the “Survey”) made in compliance with current ALTA/ACSM Land Survey Standards and prepared by an Illinois licensed surveyor selected by Seller (the “Surveyor”); and (b) a preliminary commitment (the “Title Commitment”) for an ALTA Form B owner’s title insurance policy issued by Chicago Title Insurance Company (the “Title Insurer”). Purchaser agrees to take subject to the list of exceptions set forth on Exhibit B attached hereto and made a part hereof which shall constitute the “Permitted Exceptions” hereunder:

4.2 Title Policy. At the Closing, Seller shall deliver to Purchaser an ALTA 2006 Form Owner’s Title Insurance Policy from the Title Insurer or in lieu thereof a marked-up title commitment from the Title Insurer (either being referred to herein as the “Title Policy”) which in either case shall: (i) be dated as of the date of the recording of the Deed; (ii) name Purchaser as the insured; (iii) have a liability amount equal to the Purchase Price; (iv) show Purchaser as the owner of the Property in fee simple subject to no exceptions other than the Permitted Exceptions; and (v) include extended coverage over the standard printed exceptions.

4.3 No Further Liens. Seller agrees that it shall not from and after the Effective Date cause or permit any actions that result in any additional exceptions to title.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES

5.1 Seller’s Representations and Warranties. Seller represents and warrants to Purchaser as follows:

(a) Neither the execution and delivery of this Agreement by Seller nor the consummation of the transactions contemplated hereby will result in any breach or violation of or default under any judgement, decree, order, mortgage, lease, agreement, indenture or other instrument to which Seller is a party.

(b) Seller has the full right, power and authority to enter into this Agreement and all of the documents to be executed and delivered by Seller at the Closing and to consummate the transactions contemplated hereby, and Seller has obtained any and all consents required from Seller’s shareholders, officers, directors and trustees, and all consents required from third parties to enter into this Agreement and to convey the Property pursuant to this Agreement. This Agreement is a valid and binding obligation of Seller and is enforceable against Seller in accordance with its terms.

(c) There are no condemnation or eminent domain proceedings pending, or, to the actual knowledge of Seller, threatened, with regard to the Land or Improvements or any portion thereof.

5.2 Purchaser’s Representations and Warranties. Purchaser represents and warrants to Seller as follows:

(a) Neither the execution and delivery of this Agreement by Purchaser nor the consummation of the transactions contemplated hereby will result in any breach or violation of or default under any judgement, decree, order, mortgage, lease, agreement, indenture or other instrument to which Purchaser is a party.

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(b) Purchaser has the full right, power and authority to enter into this Agreement, to purchase the Property as provided for in this Agreement and to consummate the transactions contemplated hereby. This Agreement is a valid and binding obligation of Purchaser and is enforceable against Purchaser in accordance with its terms.

5.3 Breach of Representations and Warranties. Each party warrants that each of the foregoing representations and warranties made by it in this Article 5 is true as of the date of this Agreement and will also be true, in all materials respects, as of the Closing. All of the respective representations and warranties of Seller shall survive the Closing Date for a period of six (6) months.

ARTICLE 6

RISK OF LOSS

6.1 Casualty. Risk of loss up to and including the Closing Date shall be borne by Seller. Seller shall promptly give Purchaser written notice of any damage to any of the Land or Improvements, describing such damage, stating whether such damage and loss of rents is covered by insurance and the estimated cost of repairing such damage. In the event of any “material damage” (described below) to any of the Land or Improvements, Purchaser may, at its option, by notice to Seller given within ten (10) business days after Seller has provided the above described notice (and if necessary the Closing Date shall be extended to give Purchaser the full ten (10) business day period to make its election): (i) terminate this Agreement, in which case the Earnest Money shall be immediately delivered to Purchaser; or (ii) proceed under this Agreement, receive any insurance proceeds (including any rent loss insurance applicable to any period on and after the Closing Date) due Seller as a result of such damage and receive a credit at Closing for any deductible amount under said insurance policies. If Purchaser fails to timely make such election, Purchaser shall be deemed to have elected to terminate this Agreement. If any of the Land or Improvements is not materially damaged, then (i) Purchaser shall not have the right to terminate this Agreement and (ii) at Closing, Purchaser shall receive any insurance proceeds (including any rent loss insurance applicable to any period on and after the Closing Date) due Seller as a result of such damage and receive a credit at Closing for any deductible amount under said insurance policies. “Material damage” and “materially damaged” means, with respect to any Improvements, damage that: (a) in Purchaser’s reasonable estimation, exceeds $100,000 to repair; (b) in Purchaser’s reasonable estimation, will take longer than sixty (60) days to repair; or (c) is not insured.

6.2 Condemnation. In the event any proceedings in eminent domain are contemplated, threatened or instituted against any portion of the Land or Improvements so as to constitute a “Material Condemnation” (as defined below) by anybody having the power of eminent domain, Purchaser may, at its option, by notice to Seller given within ten (10) business days after Seller providing written notice to Purchaser of such proceedings together with all relevant information concerning such proceedings (and if necessary the Closing Date shall be extended to give Purchaser the full ten (10) business day period to make such election): (i) terminate this Agreement, in which case the Earnest Money shall be immediately delivered to Purchaser, or (ii) proceed under this Agreement, in which event Seller shall, at the Closing, assign to Purchaser its entire right, title and interest in and to any condemnation award, and Purchaser shall have the sole right during the pendency of this Agreement to negotiate and otherwise deal with the condemning authority in respect of such matter. If Purchaser fails to timely make such election, Purchaser shall be deemed to have elected to terminate this Agreement as provided above. “Material Condemnation” means, with respect to any of the Land or Improvements, condemnation by eminent domain which in Purchaser’s reasonable estimation materially and adversely affects the use, operation or value of any property comprising the Land and Improvements.

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ARTICLE 7

PURCHASER’S CONDITIONS TO CLOSING

7.1 Conditions to Purchaser’s Obligation to Close. Purchaser’s obligation to close on the purchase of the Property is conditioned on the following:

(a) Seller shall have performed all of the covenants and obligations to be performed by Seller under this Agreement at or before the Closing, and the representations and warranties of Seller set forth in this Agreement shall be true in all material respects on and as of the Closing Date; and

(b) there shall have been no material adverse change from the Effective Date in the condition of the Property, other than as a result of a casualty or condemnation which shall be governed by Sections 6.1 and 6.2 hereof; and

If one or more of the conditions set forth above in this Section 7.1 has not been satisfied as of the Closing Date, then Purchaser may, in its sole discretion, terminate this Agreement by delivering written notice of such termination to Seller at any time on or before the Closing Date, in which case, the Earnest Money shall be immediately returned to Purchaser and neither party shall have any further rights or obligations hereunder, except that if the failure to satisfy any such condition is due to a breach or default by Seller of any of its covenants, agreements, representations, warranties or other obligations hereunder, then the provisions of Section 9.2 shall apply.

7.2 Waiver of Conditions. At any time or times, Purchaser may elect to waive in writing the benefit of any of the conditions set forth in Section 7.1. Purchaser shall not be deemed to have waived any such condition, unless such waiver is set forth in a written document signed by Purchaser or its agent, and then only to the extent expressly set forth in such writing. If Purchaser waives any such condition, such waiver shall not relieve Seller from, or modify or affect, Seller’s other covenants and obligations under this Agreement, and such covenants and obligations shall survive such waiver and the Closing.

ARTICLE 8

THE CLOSING

8.1 Definition; Time and Place. The performance by Seller and Purchaser of their respective obligations under this Agreement directly or through the completion of the escrow deposits required of them to be made and the delivery of the Purchase Price to Seller by the Closing Escrowee, shall constitute the closing of the sale (the “Closing”). The date of the Closing (the “Closing Date”) shall be fifteen (15) days after expiration of the Review Period. The Closing shall take place at the downtown Chicago office of the Title Insurer.

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8.2 Possession. Possession of the Property shall be delivered at the Closing.

8.3 Escrow. This sale shall be closed through a “New York style” escrow (the “Closing Escrow”) with the Escrowee, in accordance with the general provisions of the usual form of escrow agreement then in use by the Escrowee, with such special provisions inserted in the escrow agreement as may be required to conform with this Agreement (the “Escrow Agreement”). The Closing Escrow and the Escrow Agreement shall be auxiliary to this Agreement, and this Agreement shall not be merged into nor in any manner superseded by the Closing Escrow or the Escrow Agreement. Upon the creation of the Closing Escrow, payment of the Purchase Price and delivery of the Deed and other closing documents shall be made through the Closing Escrow and the Earnest Money shall be deposited in the Closing Escrow. The attorneys for the parties are hereby authorized to execute the Escrow Agreement and any amendments thereto. Each party shall have the right to inspect all documents prior to or at the time of deposit in the Closing Escrow. The escrow fee for the Closing Escrow shall be shared equally by the parties.

8.4 Documents To Be Delivered By Seller At Closing. At the Closing, Seller shall deliver or cause to be delivered to Purchaser directly or, if either party elects, through the Closing Escrow, the following, each of which shall be in form reasonably satisfactory to Purchaser and (if applicable) the Title Insurer:

(a) a special warranty deed (the “Deed”) duly executed and acknowledged by Seller, conveying the Land and Improvements to Purchaser subject only to the Permitted Exceptions;

(b) the Title Policy or a “mark-up” of the Title Commitment;

(c) evidence of the authorization of Seller as to the execution of this Agreement and the sale of the Property to Purchaser and the performance of other acts required hereunder;

(d) an affidavit to the effect that Seller is not a foreign person under Section 1445(b) of the United States Internal Revenue Code;

(e) such other instruments and documents, including, but not limited to, an ALTA Statement and a gap undertaking, as may be reasonably required by the Title Insurer in order to issue the Title Policy in the form required pursuant to Section 4.2 hereof; and

(f) all other documents required to be executed and/or delivered by Seller pursuant to other provisions of this Agreement or the Escrow Agreement.

8.5 Documents To Be Delivered By Purchaser At Closing. At the Closing, Purchaser shall deliver or cause to be delivered to Seller directly, or if either party elects through the Closing Escrow, the following, each of which shall be in form reasonably satisfactory to Seller and (if applicable) the Title Insurer:

(a) the Purchase Price, plus or minus adjustments, credits and prorations as provided for herein;

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(b) all other documents required to be executed and/or delivered by Purchaser pursuant to other provisions of this Agreement or the Escrow Agreement.

8.6 Documents to be Jointly Delivered by Seller and Purchaser at Closing. At the Closing, Seller and Purchaser shall each execute and deliver, directly, or if either party elects, through the Closing Escrow, the following, each of which shall be in form reasonably satisfactory to both parties and (if applicable) the Title Insurer:

(a) applicable transfer tax declarations for the State of Illinois, Kane County, Illinois and any necessary municipal transfer tax declarations; and

(b) a Closing Statement (in triplicate).

ARTICLE 9

DEFAULTS; REMEDIES

9.1 Purchaser’s Default. If Purchaser is in default under this Agreement and such default is not cured within five (5) days after written notice of such default is given by Seller to Purchaser, then Seller may, as its sole and exclusive remedy, terminate this Agreement, in which case, the Earnest Money shall be delivered to Seller as liquidated damages and as Seller’s sole and exclusive remedy. The parties acknowledge that Seller’s actual damages in the event of a default by Purchaser under this Agreement will be difficult to ascertain, and that Seller’s receipt of the Earnest Money as liquidated damages represents the parties’ best estimate of such damages. The parties agree that the foregoing provisions of this Section 9.1 are reasonable in light of the intent and circumstances surrounding the execution of this Agreement, and Seller expressly acknowledges and agrees that its rights and remedies shall be limited as set forth above in this Section 9.1.

9.2 Seller’s Default. If Seller is in default under this Agreement and such default is not cured within five (5) days after written notice of such default is given by Purchaser to Seller, then Purchaser may: (a) terminate this Agreement, in which case, Purchaser shall receive a return of all of the Earnest Money, and Seller shall immediately reimburse Purchaser for all of Purchaser’s reasonable documented out-of-pocket expenses incurred in connection with this transaction, including its legal fees and due diligence investigations, provided Seller’s liability for all of the aforesaid expenses shall not exceed $25,000.00 in the aggregate; or (b) pursue against Seller an action to compel Seller’s specific performance of this Agreement. The parties agree that the foregoing provisions of this Section 9.2 are reasonable in light of the intent and circumstances surrounding the execution of this Agreement, and Seller expressly acknowledges and agrees that its rights and remedies shall be limited as set forth above in this Section 9.2.

9.3 Costs of Enforcement. In the event any action or proceeding is brought by either party to enforce the terms of this Agreement, the prevailing party in such action or proceeding shall be entitled to have all of its reasonable costs, fees (including, without limitation, reasonable attorneys’ fees) and expenses, paid or reimbursed by the non-prevailing party.

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ARTICLE 10

MISCELLANEOUS

10.1 Payment of Real Estate Brokers and Consultants. Each party represents to the other that other than Seller’s broker, Darwin Realty & Development and Purchaser’s broker, Jones Lang LaSalle, no real estate broker has been used in connection with this transaction. Seller agrees to pay a broker’s commission to Darwin Realty & Development and Jones Lang LaSalle pursuant to the terms of a separate agreement. Other than Jones Lang LaSalle, Purchaser agrees to indemnify, defend and hold Seller harmless from and against any claim for a real estate broker’s commission or fee by any party claiming to have represented Purchaser in connection with this transaction. Seller agrees to indemnify, defend and hold Purchaser harmless from and against any claim for a real estate broker’s commission or fee by any party claiming to have represented Seller in connection with this transaction. The indemnification obligations under this Section 10.1 shall survive the Closing or any termination of this Agreement for any reason whatsoever.

10.2 Notices. All notices and other communications which are required to be, or which may be, given under this Agreement shall be in writing, and shall be delivered at the addresses set out hereinbelow. Notice may be given by personal delivery, nationally recognized overnight courier, or by facsimile transmission. Notice shall be deemed to have been duly given (a) if by personal delivery, on the first to occur of the date of actual receipt or refusal of delivery by any person at the intended address, (b) if by overnight courier, on the first (1st) Business Day after being delivered to a nationally-recognized overnight courier, (c) if by facsimile transmission, on the day and at the time transmitted, as evidenced by the confirmation slip generated by the sender’s facsimile machine, addressed as follows:

If to Seller:	Panattoni Development Company, Inc. Attn: John Pagliari & Jason Rosenberg 6250 N. River Road, Suite 4050 Rosemont, IL 60018 Facsimile: 847-292-4511
With a copy to:	Keith J. Wenk, Esq. Mason, Wenk & Berman, L.L.C. 1033 Skokie Boulevard, Suite 250 Northbrook, IL 60062 Facsimile: 847-656-6067
With a copy to:	Peter von Elten, Esq. CVM Law Group 8795 Folsom Blvd., Suite 200 Sacramento, CA 95826 Facsimile: (916)381-1109

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If to Purchaser:	Rubicon Technology, Inc. 9931 Franklin Avenue Franklin Park, Illinois 60131 Attn: William Weissman Facsimile: 847-295-7555
With a copy to:	Paul E. Fisher, Esq. McGuireWoods, LLP 77 West Wacker Drive Suite 4100 Chicago, IL 60601 Facsimile: 312-849-3690

or to such other address as either party may from time to time specify as its address for the receipt of notices hereunder, in a notice to the other party.

10.3 Assignment. Purchaser may not assign this Agreement without Seller’s prior written consent. Subject to the foregoing provisions of this Section 10.3, this Agreement shall be binding upon the undersigned and each of their respective successors and assigns.

10.4 Entire Agreement. This Agreement embodies the entire understanding of the parties and there are no further or other agreements or understandings, written or oral, in effect between the parties relating to the subject matter hereof, except as may be set forth in a written instrument executed by all parties contemporaneously with or subsequent to this Agreement. This Agreement shall not be construed more strictly against one party hereto than against the other party merely by virtue of the fact that it may have been prepared primarily by counsel for one of the parties. It is understood and recognized that both parties have contributed substantially and materially to the preparation of this Agreement.

10.5 Severability. If any term or provision of this Agreement or any application thereof shall be invalid or unenforceable, the remainder of this Agreement and other applications thereof shall not be affected thereby.

10.6 Captions; Number. The captions contained in this Agreement are for the convenience of reference only, and shall not affect the meaning, interpretation or construction of this Agreement. As used in this Agreement, the singular form shall include the plural and the plural shall include the singular, to the extent that the context renders it appropriate.

10.7 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.

10.8 Governing Law; Venue. This Agreement has been executed and delivered, and is to be performed, in the State of Illinois, and this Agreement and all rights, obligations and liabilities hereunder shall be governed by, and construed in accordance with, the internal laws of the State of Illinois. Each party hereby irrevocably waives any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement brought in any federal or state court sitting in Cook County, Illinois.

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10.9 Time of the Essence. Time is of the essence of this Agreement.

10.10 Modification. The provisions of this Agreement may not be amended, changed or modified orally, but only by an agreement in writing signed by all of the parties hereto.

10.11 Waiver. Except as otherwise expressly provided in this Agreement, no waiver by a party of any breach of this Agreement or of any warranty or representation hereunder by the other party shall be deemed to be a waiver of any other breach by such other party (whether preceding or succeeding and whether or not of the same or similar nature) and no acceptance of payment or performance by a party after any breach by the other party shall be deemed to be a waiver of any breach of this Agreement or of any representation or warranty hereunder by such other party whether or not the first party knows of such breach at the time it accepts such payment or performance. Except as otherwise expressly provided in this Agreement, no failure or delay by a party to exercise any right it may have by reason of the default of the other party shall operate as a waiver of default or modification of this Agreement or shall prevent the exercise of any right by the first party while the other party continues to be so in default.

10.12 Business Days. If any date specified in this Agreement for the Closing Date or for commencement or expiration of time periods for termination or approvals or for notice occurs on a day other than a Business Day, then any such date shall be postponed to the next following Business Day. As used herein, “Business Day” shall mean any day other than a Saturday, Sunday or a holiday observed by national banks or the Title Insurer.

10.13 Offer; Effective Date. The execution of this Agreement by the first party to do so and delivery thereof to the other party constitutes an offer to purchase or sell, as the case may be, and shall be automatically revoked unless the party to which the offer is made shall execute and deliver at least two (2) copies of this Agreement to the offering party at the address given for notice herein on or before 5:00 p.m. local time, on the date which is 3 days after the date on which the offering party has executed this Agreement as first set forth above.

10.14 “AS-IS” CONDITION; WAIVER OF ALL WARRANTIES. THE PURCHASER HAS MADE THOROUGH AND EXHAUSTIVE INSPECTION, INVESTIGATION, ANALYSIS, TESTING, STUDY, EVALUATION AND EXAMINATION OF THE PROPERTY. ANYTHING UNDER APPLICABLE LAW OR IN THIS AGREEMENT TO THE CONTRARY NOTWITHSTANDING, THE SALE AND CONVEYANCE OF THE PROPERTY PURSUANT HERETO IS MADE ON AN “AS-IS” BASIS AS OF THE EFFECTIVE DATE. THE PURCHASER EXPLICITLY AGREES THAT THE PURCHASER IS ACQUIRING THE PROPERTY IN “AS-IS” CONDITION AS OF THE EFFECTIVE DATE. NO IMPLIED WARRANTIES AS TO THE CONDITION, SUITABILITY, DEVELOPMENT POTENTIAL, FITNESS, MERCHANTABILITY, MARKETABILITY, HABITABILITY, GOOD OR FAIR CONDITION, GOOD WORKMANLIKE CONSTRUCTION, QUALITY OR QUANTITY OF THE PROPERTY ARE CREATED OR INTENDED TO BE CREATED BY THE SELLER OR BY THIS AGREEMENT OR ARE ANTICIPATED, EXPECTED OR RELIED UPON BY THE PURCHASER. THE PURCHASER EXPLICITLY WAIVES ANY AND ALL RIGHTS UNDER AND RELEASES THE SELLER FROM ANY AND ALL DUTIES IN CONNECTION WITH ANY WARRANTIES OF WHATSOEVER KIND OR NATURE INCLUDING AS AFOREDESCRIBED, WHICH MAY ARISE INDEPENDENT OF THIS AGREEMENT AS A MATTER OF LAW. THE ONLY WARRANTIES MADE BY THE SELLER WITH RESPECT TO THE PROPERTY ARE THOSE THAT ARE EXPRESSLY SET FORTH IN THIS AGREEMENT, WHICH WARRANTIES SHALL SURVIVE AND REMAIN IN FULL FORCE AND EFFECT ONLY FOR SO LONG AS IS ELSEWHERE PROVIDED IN THIS AGREEMENT. FURTHER, THE SELLER MAKES NO WARRANTIES AS TO THE ABILITY OF THE PURCHASER TO OCCUPY, DEVELOP OR OPERATE THE PROPERTY OTHER THAN AS ARE EXPRESSLY SET FORTH IN THIS AGREEMENT. THE PURCHASER ACKNOWLEDGES AND UNDERSTANDS THE EFFECT OF THIS PARAGRAPH AND EXPLICITLY AGREES TO THE PROVISIONS OF THIS PARAGRAPH KNOWINGLY AND WITH ADVICE OF LEGAL COUNSEL.

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10.15 Cooperation In Exchange. In the event that Seller or Purchaser are under contract with a qualified intermediary at any time through the date of Closing for the purpose of effecting a tax-deferred exchange in accordance with Section 1031 of the United States Internal Revenue Code of 1986, as most recently amended, each party consents to the assignment of this Agreement to such intermediary. Furthermore, each party shall cooperate with the other to accomplish such exchange and perform any acts reasonably necessary to assist in such exchange, provided that neither party shall be required to accept title to any property other than the Land, expend any additional amounts of money above those amounts required pursuant to this Agreement, extend the Closing Date, and further provided that each party defend, indemnify and hold the other harmless from and against expenses, costs and damages of any kind (including attorney’s fees) suffered by either by reason of the performance of, or failure to perform, any acts of cooperation necessitated by this Section. Each party agrees to sign a Notice of Assignment prior to Closing confirming that such party has received the Notice of Assignment and consents to the assignment.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

SELLER:
DOUGLAS BUSINESS CENTER, LLC, an Illinois limited liability company
By: Douglas Business Center PG, LLC, an Illinois limited liability company, its Manager
	By:	JP Portfolio, LLC, an Illinois limited liability company, its Manager
	By:
		John Pagliari, Manager
PURCHASER:
RUBICON TECHNOLOGY, INC., a Delaware corporation
By:
Its:	CFO

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EXHIBIT A

LEGAL DESCRIPTION OF THE LAND

PARCEL 1: LOT 2 OF BATAVIA INDUSTRIAL PROPERTIES RESUBDIVISION NO. 4, ACCORDING TO THE PLAT THEREOF RECORDED MARCH 31 1997 AS DOCUMENT 97K19640, IN THE CITY OF BATAVIA, KANE COUNTY, ILLINOIS.

PARCEL 2: NON-EXCLUSIVE RAILROAD SPUR EASEMENT FOR THE BENEFIT OF PARCEL ONE AS CREATED BY GRANT RECORDED AS DOCUMENT 1384201 AND AS SHOWN ON THE PLAT OF BATAVIA INDUSTRIAL CENTER UNIT 4.

PARCEL 3: LOT 1 IN BATAVIA INDUSTRIAL PROPERTIES RESUBDIVISION NO. 4, ACCORDING TO THE PLAT THEREOF RECORDED MARCH 31, 1997 AS DOCUMENT NUMBER 97K019640, EXCEPT THAT PART DESCRIBED AS FOLLOWS:

COMMENCING AT THE SOUTHEAST CORNER OF SAID LOT 1; THENCE SOUTH 89 DEGREES 03 MINUTES 04 SECONDS WEST 202.37 FEET ALONG THE SOUTH LINE OF SAID LOT 1 TO THE POINT OF BEGINNING; THENCE CONTINUING SOUTH 89 DEGREES 03 MINUTES 04 SECONDS WEST 339.10 FEET ALONG THE SOUTH LINE OF SAID LOT 1 TO THE SOUTHWEST CORNER OF SAID LOT 1; THENCE NORTH 00 DEGREES 19 MINUTES 42 SECONDS WEST 113.59 FEET ALONG THE WEST LINE OF SAID LOT 1; THENCE NORTHWESTERLY ALONG SAID WEST LINE, SAID LINE BEING A CURVE CONCAVE TO THE WEST HAVING A RADIUS OF 3713.13 FEET AND AN ARC LENGTH OF 400.70 FEET; THENCE NORTH 06 DEGREES 25 MINUTES 33 SECONDS WEST 44.53 FEET ALONG SAID WEST LINE TO THE NORTHWEST CORNER OF SAID LOT 1; THENCE NORTH 89 DEGREES 02 MINUTES 07 SECONDS EAST 360.47 FEET ALONG THE NORTH LINE OF SAID LOT 1 TO A POINT; THENCE SOUTH 00 DEGREES 50 MINUTES 37 SECONDS EAST 558.14 FEET ALONG A LINE PARALLEL TO THE EAST LINE OF SAID LOT 1 TO THE POINT OF BEGINNING, ALL IN THE CITY OF BATAVIA, KANE COUNTY, ILLINOIS.

PERMANENT TAX NOS.

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EXHIBIT B

PERMITTED EXCEPTIONS

1. GENERAL REAL ESTATE TAXES, GENERAL AND SPECIAL ASSESSMENTS AND ANY SIMILAR TAXES OR CHARGES IMPOSED IN RESPECT OF THE PROPERTY WHICH ARE NOT THEN DUE AND OWING;

2. ACTS DONE OR SUFFERED TO BE DONE BY PURCHASER;

3. COVENANTS, CONDITIONS AND RESTRICTIONS CONTAINED IN DECLARATION OF PROTECTIVE COVENANTS BATAVIA INDUSTRIAL CENTER DATED OCTOBER 26, 1987 AND RECORDED NOVEMBER 6, 1987 AS DOCUMENT 1877109 MADE BY SUBURBAN TRUST AND SAVINGS BANK, AS TRUSTEE UNDER TRUST NUMBER 4050, SUBURBAN TRUST AND SAVINGS BANK, AS TRUSTEE UNDER TRUST NUMBER 4053 AND L & B CORPORATION, (BUT OMITTING ANY SUCH COVENANT OR RESTRICTION BASED ON RACE, COLOR, RELIGION, SEX, HANDICAP, FAMILIAL STATUS OR NATIONAL ORIGIN UNLESS AND ONLY TO THE EXTENT THAT SAID COVENANT (A) IS EXEMPT UNDER CHAPTER 42, SECTION 3607 OF THE UNITED STATES CODE OR (B) RELATES TO HANDICAP BUT DOES NOT DISCRIMINATE AGAINST HANDICAPPED PERSONS), RELATING TO DEVELOPMENT OF THE LAND; CREATION OF THE BATAVIA INDUSTRIAL CENTER PROPERTY OWNERS ASSOCIATION AND ASSESSMENTS THEREUNDER; AND GENERAL ARCHITECTURAL CONTROL PROVISIONS, TOGETHER WITH SUCH FURTHER PROVISIONS CONTAINED THEREIN, AND AMENDED BY AMENDMENT RECORDED FEBRUARY 24, 1988 AS DOCUMENT 1895280.

4. 40 FOOT RAILROAD SPUR EASEMENT AS SHOWN ON PLAT OF DOCUMENT 97K19640 AND EASEMENT RECORDED NOVEMBER 3, 1976 AS DOCUMENT NUMBER 1384201 WITH VARIOUS TERMS AND PROVISIONS, INCLUDING BUT NOT LIMITED TO, PROVISIONS THEREIN AS TO USE AND COSTS OF THE RAILROAD SPUR.

(AFFECTS THE EASTERLY 20 FEET OF PARCEL 1)

5. PUBLIC UTILITIES EASEMENTS RESERVED AND GRANTED TO THE CITY OF BATAVIA AND TO PUBLIC UTILITY COMPANIES OPERATING UNDER FRANCHISE FROM THE CITY OF BATAVIA, INCLUDING BUT NOT LIMITED TO THE ILLINOIS BELL TELEPHONE COMPANY, NORTHERN ILLINOIS GAS COMPANY, THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, FOR PUBLIC UTILITY PURPOSES AS SHOWN ON PLAT OF DOCUMENT 97K19640 WHICH REFERS TO PLAT DOCUMENT 90K04030.

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AFFECTS THE NORTH 10 FEET AND THE WEST 10 FEET OF THE EAST 30 FEET.

(AFFECTS PARCEL 1)

6. BUILDING LINE AS SHOWN ON PLAT OF DOCUMENT 97K19640 OVER THE NORTH 30 FEET.

(AFFECTS PARCEL 1)

7. PUBLIC UTILITIES EASEMENT SHOWN ON PLAT OF SUBDIVISION DOCUMENT 97K19640, WHICH REFERS TO A NOTE ON PLAT OF SUBDIVISION KNOWN AS BATAVIA INDUSTRIAL CENTER UNIT 4 RECORDED JANUARY 22, 1990 AS DOCUMENT 90K04030, A 10 FOOT PUBLIC UTILITY EASEMENT IS GRANTED ALONG BOTH SIDES OF ALL ROADS. (EXCEPT NEXT TO THE “NOT INCLUDED” PARCEL) EXCEPT WHERE SHOWN TO BE 15 FEET.

(AFFECTS NORTH 10 FEET OF PARCEL 1)

8. (A) TERMS, PROVISIONS, AND CONDITIONS RELATING TO THE EASEMENT DESCRIBED AS PARCEL 2 CONTAINED IN THE INSTRUMENT CREATING SAID EASEMENT.

(B) RIGHTS OF THE ADJOINING OWNER OR OWNERS TO THE CONCURRENT USE OF SAID EASEMENT.

(AFFECTS PARCEL 2)

9. UTILITY EASEMENT TO CITY OF BATAVIA PER DOCUMENT 91K61745 AND SHOWN ON PLAT DOCUMENT 97K19640 AFFECTS NORTH 10 FEET OF THE SOUTH 20 FEET

(AFFECTS PARCEL 1)

10. OVERHEAD WIRES ALONG WESTERLY LINE OF RAILROAD EASEMENT RUNNING ALONG THE EASTERLY LINE SHOWN ON SURVEY NUMBER 5904.122 MADE BY COMPASS LAND SURVEYING AND MAPPING DATED MARCH 21, 2006.

(AFFECTS PARCEL 1)

11. PUBLIC UTILITY EASEMENTS AS SHOWN ON PLAT OF BATAVIA INDUSTRIAL CENTER UNIT 4 RECORDED JANUARY 22, 1990 AS DOCUMENT 90K04030 AND SHOWN ON PLAT DOCUMENT 97K019640 AND AS SHOWN ON PLAT DOCUMENT 2004K065118 ALONG THE NORTH 10 FEET OF THE LAND.

(AFFECTS PARCEL 3)

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12. BUILDING LINES AS SHOWN ON PLAT OF BATAVIA INDUSTRIAL CENTER UNIT 4 RECORDED JANUARY 22, 1990 AS DOCUMENT 90K04030 AND PLAT DOCUMENT 97K019640 AND PLAT DOCUMENT 2004K65118 ALONG THE NORTH 30 FEET OF THE LAND.

(AFFECT PARCEL 3)

13. PUBLIC UTILITIES EASEMENT RECORDED NOVEMBER 12, 1991 AS DOCUMENT 91K61745 GRANTED TO THE CITY OF BATAVIA OVER THE NORTH 10 FEET OF THE SOUTH 20 FEET OF THE LAND, ALSO SHOWN ON PLAT DOCUMENT 97K19640, ALSO SHOWN ON PLAT DOCUMENT 2004K065118.

NOTE: NO PERMANENT BUILDINGS SHALL BE PLACED ON THE EASEMENT AREA.

(AFFECTS PARCEL 3)

14. DECLARATION OF EASEMENT FOR INGRESS AND EGRESS OF FIRE AND OTHER EMERGENCY VEHICLES OVER THE SOUTH 10 FEET OF THE LAND RECORDED DECEMBER 23, 1991 AS DOCUMENT 91K70394, ALSO SHOWN ON PLAT DOCUMENT 97K19640, ALSO SHOWN ON PLAT DOCUMENT 2004K065118.

NO BUILDINGS OR OTHER OBSTRUCTIONS SHALL BE PLACED ON THE EASEMENT AREA.

(AFFECTS THE SOUTH 10 FEET OF PARCELS 1 AND 3)

15. EXISTING UNRECORDED LEASES AND ALL RIGHTS THEREUNDER OF THE LESSEES AND OF ANY PERSON OR PARTY CLAIMING BY, THROUGH OR UNDER THE LESSEES.

16. ENCROACHMENT OF THE PARKING SPACES LOCATED MAINLY ON THE LAND ONTO THE EASEMENT SHOWN HEREIN AT EXCEPTION REFERENCE LETTER(S) K AND O AS SHOWN ON PLAT OF SURVEY NUMBER 5904.128 PREPARED BY COMPASS SURVEYING LTD. DATED AUGUST 11, 2008.

17. ENCROACHMENT OF THE SIGN LOCATED MAINLY ON THE LAND ONTO THE PUBLIC RIGHT OF WAY NORTH AND ADJOINING BY APPROXIMATELY 0.4 FEET, AS SHOWN ON PLAT OF SURVEY NUMBER 5904.128 PREPARED BY COMPASS SURVEYING LTD. DATED AUGUST 11, 2008.

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18. ENCROACHMENT OF THE SIGN LOCATED MAINLY ON THE LAND ONTO THE EASEMENT SHOWN HEREIN AT EXCEPTION REFERENCE LETTER(S) G, I AND M AS SHOWN ON PLAT OF SURVEY NUMBER 5904.128 PREPARED BY COMPASS SURVEYING LTD. DATED AUGUST 11, 2008.

TO BE COMPLETED PROMPTLY AFTER SELLER’S RECEIPT OF THE TITLE COMMITMENT

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FIRST AMENDMENT TO

AGREEMENT FOR PURCHASE AND SALE OF REAL ESTATE

THIS FIRST AMENDMENT TO AGREEMENT FOR PURCHASE AND SALE OF REAL ESTATE (this “Amendment”) is made as of March 24, 2010 by and between DOUGLAS BUSINESS CENTER, LLC, an Illinois limited liability company (“Seller”), and RUBICON TECHNOLOGY, INC, a Delaware corporation (“Purchaser”).

W H E R E A S:

A. Seller and Purchaser entered into that certain Agreement for Purchase and Sale of Real Estate dated February 16, 2010 (the “Purchase Agreement”), pursuant to which Seller agreed to sell and Purchaser agreed to buy the Property. Capitalized terms that are used but not defined herein shall have the meanings ascribed to them in the Purchase Agreement.

B. The Review Period is scheduled to expire at 5:00 P.M. (Chicago time) on March 29^th, 2010.

C. Seller and Purchaser wish to extend the Review Period and amend the Closing Date.

NOW, THEREFORE, in consideration of the promises herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Seller and Purchaser hereby agree as follows:

1. Review Period. The Review Period shall expire at 5:00 P.M. (Chicago time) on April 5^th, 2010.

2. Closing Date. The Closing Date shall be April 13^th, 2010.

3. Miscellaneous.

(a) Entire Agreement. This Amendment supersedes any prior agreement or understanding between the parties with respect to the subject matter hereof. Except as expressly modified hereby, the Purchase Agreement remains unmodified, in full force and effect, and is hereby ratified and confirmed by Seller and Purchaser. In the event that conflicts exist between the provisions of the Purchase Agreement and this Amendment, the terms and conditions of this Amendment shall govern.

(b) Captions. Captions contained in this Amendment in no way define, limit or extend the scope or intent of this Amendment.

(c) Severability. If any provision of this Amendment, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of this Amendment, or the application of such provision to other persons or circumstances, shall not be affected thereby.

(d) Counterparts. This Amendment may be executed in several counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same document.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

SELLER:
DOUGLAS BUSINESS CENTER, LLC, an Illinois limited liability company
By: Douglas Business Center PG, LLC, an Illinois limited liability company, its Manager
By: JP Portfolio, LLC, an Illinois limited liability company, its Manager
By:
	Name: John Pagliari
	Title: Manager
PURCHASER:
RUBICON TECHNOLOGY, INC., a Delaware corporation
By:
	Name: William Weissman Title: CFO

2

SECOND AMENDMENT TO

AGREEMENT FOR PURCHASE AND SALE OF REAL ESTATE

THIS SECOND AMENDMENT TO AGREEMENT FOR PURCHASE AND SALE OF REAL ESTATE (this “Amendment”) is made as of April 1st, 2010 by and between DOUGLAS BUSINESS CENTER, LLC, an Illinois limited liability company (“Seller”), and RUBICON TECHNOLOGY, INC, a Delaware corporation (“Purchaser”).

W H E R E A S:

A. Seller and Purchaser entered into that certain Agreement for Purchase and Sale of Real Estate dated February 16, 2010, as amended by a First Amendment to Agreement for Purchase and Sale of Real Estate dated March 22, 2010 (collectively, the “Purchase Agreement”), pursuant to which Seller agreed to sell and Purchaser agreed to buy the Property. Capitalized terms that are used but not defined herein shall have the meanings ascribed to them in the Purchase Agreement.

B. The Review Period is scheduled to expire at 5:00 P.M. (Chicago time) on April 5^th, 2010.

C. Seller and Purchaser wish to extend the Review Period and amend the Closing Date.

NOW, THEREFORE, in consideration of the promises herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Seller and Purchaser hereby agree as follows:

1. Review Period. The Review Period shall expire at 5:00 P.M. (Chicago time) on April 19^th, 2010. Notwithstanding anything to the contrary contained in the Purchase Agreement, it is expressly agreed by the parties that Purchaser may only terminate the Purchase Agreement during the Review Period if it is unable to enter into an agreement with Batavia Power, which agreement is acceptable to Purchaser in its sole discretion, on or before April 19, 2010. Except for the forgoing, Purchaser waives all of its rights under Section 3.1 of the Purchase Agreement, and Purchaser accepts the condition of the Property as of the date of this Amendment.

2. Closing Date. The Closing Date shall be April 30^th, 2010.

3. Miscellaneous.

(a) Entire Agreement. This Amendment supersedes any prior agreement or understanding between the parties with respect to the subject matter hereof. Except as expressly modified hereby, the Purchase Agreement remains unmodified, in full force and effect, and is hereby ratified and confirmed by Seller and Purchaser. In the event that conflicts exist between the provisions of the Purchase Agreement and this Amendment, the terms and conditions of this Amendment shall govern.

(b) Captions. Captions contained in this Amendment in no way define, limit or extend the scope or intent of this Amendment.

(c) Severability. If any provision of this Amendment, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of this Amendment, or the application of such provision to other persons or circumstances, shall not be affected thereby.

(d) Counterparts. This Amendment may be executed in several counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same document.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

SELLER:
DOUGLAS BUSINESS CENTER, LLC, an Illinois limited liability company
By: Douglas Business Center PG, LLC, an Illinois limited liability company, its Manager
By: JP Portfolio, LLC, an Illinois limited liability company, its Manager
By:
	Name: John Pagliari
	Title: Manager
PURCHASER:
RUBICON TECHNOLOGY, INC., a Delaware corporation
By:
	Name: William Weissman
	Title: CFO

2

EX-31.1

Exhibit 31.1

Certifications

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Raja M. Parvez, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Rubicon Technology, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 5, 2010	By:	/s/ Raja M. Parvez
		Raja M. Parvez President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, William F. Weissman, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Rubicon Technology, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 5, 2010	By:	/s/ William F. Weissman
		William F. Weissman Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant To Section 906 of The Sarbanes-Oxley Act of 2002,

18 U.S.C. Section 1350

In connection with the Quarterly Report of Rubicon Technology, Inc. (the “Company”) on Form 10-Q for the three months ended March 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Raja M. Parvez, President and Chief Executive Officer of the Company, and I, William F. Weissman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 5, 2010	By:	/s/ Raja M. Parvez
		Raja M. Parvez President and Chief Executive Officer
Date: May 5, 2010	By:	/s/ William F. Weissman
		William F. Weissman Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.