Three
Months Ended
December
31,
|
|||||||
2005
|
2004
|
||||||
|
|||||||
Revenue
|
$
|
39,891
|
$
|
26,964
|
|||
Cost
of revenue
|
33,055
|
24,889
|
|||||
Gross
profit
|
6,836
|
2,075
|
|||||
|
|||||||
Operating
expenses:
|
|||||||
Selling,
general and administrative
|
7,263
|
5,560
|
|||||
Research
and development
|
4,434
|
5,059
|
|||||
Total
operating expenses
|
11,697
|
10,619
|
|||||
|
|||||||
Operating
loss
|
(4,861
|
)
|
(8,544
|
)
|
|||
|
|||||||
Other
(income) expenses:
|
|||||||
Interest
income
|
(330
|
)
|
(233
|
)
|
|||
Interest
expense
|
1,297
|
1,202
|
|||||
Loss
from convertible subordinated notes exchange offer
|
1,078
|
-
|
|||||
Equity
in net loss of Velox investment
|
182
|
-
|
|||||
Equity
in net income of GELcore investment
|
(547
|
)
|
(372
|
)
|
|||
Total
other expenses
|
1,680
|
597
|
|||||
|
|||||||
Net
loss
|
$
|
(6,541
|
)
|
$
|
(9,141
|
)
|
|
|
|||||||
Per
share data
|
|||||||
|
|||||||
Net
loss per basic and diluted share
|
$
|
(0.14
|
)
|
$
|
(0.19
|
)
|
|
|
|||||||
Weighted
average number of shares outstanding used in
basic
and diluted per share calculations
|
48,181
|
46,994
|
|
As
of
December
31, 2005
|
As
of
September
30, 2005
|
|||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
15,239
|
$
|
19,525
|
|||
Restricted
cash
|
645
|
547
|
|||||
Marketable
securities
|
18,300
|
20,650
|
|||||
Accounts
receivable, net
|
25,455
|
22,633
|
|||||
Receivables,
related parties
|
4,437
|
4,197
|
|||||
Inventory,
net
|
20,441
|
18,348
|
|||||
Prepaid
expenses and other current assets
|
3,589
|
3,638
|
|||||
|
|||||||
Total
current assets
|
88,106
|
89,538
|
|||||
|
|||||||
Property,
plant and equipment, net
|
55,487
|
56,957
|
|||||
Goodwill
|
35,630
|
34,643
|
|||||
Intangible
assets, net
|
6,951
|
5,347
|
|||||
Investments
in unconsolidated affiliates
|
13,064
|
12,698
|
|||||
Receivables,
related parties
|
169
|
169
|
|||||
Other
assets, net
|
7,093
|
6,935
|
|||||
|
|||||||
Total
assets
|
$
|
206,500
|
$
|
206,287
|
|||
|
|||||||
LIABILITIES
and SHAREHOLDERS’ EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
19,536
|
$
|
15,587
|
|||
Accrued
expenses and other current liabilities
|
16,415
|
19,078
|
|||||
Convertible
subordinated notes, current portion
|
1,350
|
1,350
|
|||||
|
|||||||
Total
current liabilities
|
37,301
|
36,015
|
|||||
|
|||||||
Convertible
subordinated notes
|
95,797
|
94,701
|
|||||
Capitalized
lease obligation, net of current portion
|
75
|
8
|
|||||
|
|||||||
Total
liabilities
|
133,173
|
130,724
|
|||||
|
|||||||
Commitments
and contingencies
|
-
|
-
|
|||||
|
|||||||
Shareholders’
equity:
|
|||||||
Preferred
stock, $0.0001 par, 5,882 shares authorized, no shares
outstanding
|
-
|
-
|
|||||
Common
stock, no par value, 100,000 shares authorized,
48,653
shares issued and 48,633 shares outstanding at December 31,
2005;
48,023
shares issued and 48,003 shares outstanding at September
30,
2005
|
396,771
|
392,466
|
|||||
Accumulated
deficit
|
(322,512
|
)
|
(315,971
|
)
|
|||
Treasury
stock, at cost; 20 shares
|
(932
|
)
|
(932
|
)
|
|||
|
|||||||
Total
shareholders’ equity
|
73,327
|
75,563
|
|||||
|
|||||||
Total
liabilities and shareholders’ equity
|
$
|
206,500
|
$
|
206,287
|
Three
Months Ended
December
31,
|
|||||||
|
2005
|
2004
|
|||||
|
|||||||
Cash
flows from operating activities:
|
|||||||
Net
loss
|
$
|
(6,541
|
)
|
$
|
(9,141
|
)
|
|
Adjustments
to reconcile net loss to net cash used for operating
activities:
|
|||||||
Stock-based
compensation expense
|
1,130
|
-
|
|||||
Depreciation
and amortization expense
|
3,050
|
3,600
|
|||||
Accretion
of loss from convertible subordinated notes exchange offer
|
18
|
-
|
|||||
Loss
on convertible subordinated notes exchange offer
|
1,078
|
-
|
|||||
Provision
for doubtful accounts
|
79
|
15
|
|||||
Equity
in net income of equity method investments
|
(365
|
)
|
(373
|
)
|
|||
Compensatory
stock issuances
|
88
|
181
|
|||||
Reduction
of note receivable due for services received
|
130
|
130
|
|||||
Total
non-cash adjustments
|
5,208
|
3,553
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
(2,451
|
)
|
(115
|
)
|
|||
Receivables,
related parties
|
(240
|
)
|
10
|
||||
Inventory
|
(1,293
|
)
|
(1,137
|
)
|
|||
Prepaid
expenses and other current assets
|
88
|
389
|
|||||
Other
assets
|
(449
|
)
|
(82
|
)
|
|||
Accounts
payable
|
3,479
|
(1,739
|
)
|
||||
Accrued
expenses and other current liabilities
|
(3,730
|
)
|
(2,251
|
)
|
|||
Total
change in operating assets and liabilities
|
(4,596
|
)
|
(4,925
|
)
|
|||
|
|||||||
Net
cash used for operating activities
|
(5,929
|
)
|
(10,513
|
)
|
|||
|
|||||||
Cash
flows from investing activities:
|
|||||||
Purchase
of plant and equipment
|
(760
|
)
|
(1,204
|
)
|
|||
Investment
in K2 Optronics
|
-
|
(1,000
|
)
|
||||
Cash
purchase of businesses, net of cash acquired
|
(500
|
)
|
(1,084
|
)
|
|||
Purchase
of marketable securities
|
(50
|
)
|
(6,375
|
)
|
|||
Funding
of restricted cash
|
(98
|
)
|
-
|
||||
Sale
of marketable securities
|
2,400
|
12,125
|
|||||
|
|||||||
Net
cash provided by investing activities
|
992
|
2,462
|
|||||
|
|||||||
Cash
flows from financing activities:
|
|||||||
Payments
on capital lease obligations
|
(8
|
)
|
(13
|
)
|
|||
Proceeds
from exercise of stock options
|
436
|
73
|
|||||
Proceeds
from employee stock purchase plan
|
326
|
495
|
|||||
Convertible
debt/equity issuance costs
|
(103
|
)
|
-
|
||||
|
|||||||
Net
cash provided by financing activities
|
651
|
555
|
|||||
|
|||||||
Net
decrease in cash and cash equivalents
|
(4,286
|
)
|
(7,496
|
)
|
|||
Cash
and cash equivalents, beginning of period
|
19,525
|
19,422
|
|||||
|
|||||||
Cash
and cash equivalents, end of period
|
$
|
15,239
|
$
|
11,926
|
|||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
|||||||
Cash
paid during the period for interest
|
$
|
2,466
|
$
|
2,402
|
|||
Issuance
of common stock in conjunction with an acquisition
|
$
|
2,325
|
$
|
-
|
|||
|
|||||||
NON-CASH
INVESTING AND FINANCING ACTIVITIES
|
|||||||
Acquisition
of property and equipment under capital leases
|
$
|
70
|
$
|
-
|
Shares
|
Weighted
Exercise
Price
|
Average
Remaining
Life
|
Aggregate
Intrinsic Value ($000s)
|
|
|||||||||
|
|||||||||||||
Outstanding
as of October 1, 2003
|
5,751,066
|
$
|
3.98
|
||||||||||
Granted
|
1,920,950
|
3.03
|
|||||||||||
Exercised
|
(1,327,819
|
)
|
1.98
|
||||||||||
Cancelled
|
(842,884
|
)
|
3.47
|
||||||||||
|
|||||||||||||
Outstanding
as of September 30, 2004
|
5,501,313
|
4.21
|
|||||||||||
Granted
|
1,793,900
|
3.23
|
|||||||||||
Exercised
|
(482,881
|
)
|
1.94
|
||||||||||
Cancelled
|
(646,106
|
)
|
3.64
|
||||||||||
|
|||||||||||||
Outstanding
as of September 30, 2005
|
6,166,226
|
4.16
|
|||||||||||
Granted
|
279,507
|
6.35
|
|||||||||||
Exercised
|
(152,552
|
)
|
2.85
|
||||||||||
Cancelled
|
(75,909
|
)
|
3.21
|
||||||||||
Outstanding
as of December 31, 2005
|
6,217,272
|
$
|
4.30
|
7.05
|
$
|
22,941
|
|||||||
Exercisable
as of December 31, 2005
|
2,848,165
|
$
|
5.70
|
5.12
|
$
|
8,455
|
|||||||
Non-vested
as of December 31, 2005
|
3,369,107
|
$
|
3.12
|
8.69
|
$
|
14,486
|
Exercise
Price
|
Options
Outstanding
|
Weighted
Average Remaining
Contractual
Life (Years)
|
|
Weighted
Average
Exercise
Price
|
||||||
|
||||||||||
<$1
|
1,920
|
1.93
|
$
|
0.23
|
||||||
$1<
to <$5
|
4,581,973
|
7.77
|
2.67
|
|||||||
$5<
to <$10
|
1,407,039
|
5.16
|
6.79
|
|||||||
>$10
|
226,340
|
4.29
|
22.07
|
|||||||
|
6,217,272
|
7.05
|
$
|
4.30
|
Exercise
Price
|
Options
Exercisable
|
Weighted
Average Remaining
Contractual
Life (Years)
|
|
Weighted
Average
Exercise
Price
|
||||||
|
||||||||||
<$1
|
1,920
|
1.93
|
$
|
0.23
|
||||||
$1<
to <$5
|
1,454,606
|
5.96
|
2.12
|
|||||||
$5<
to <$10
|
1,165,299
|
4.24
|
7.01
|
|||||||
>$10
|
226,340
|
4.29
|
22.07
|
|||||||
|
2,848,165
|
5.12
|
$
|
5.70
|
|
Number
of Shares
|
|||
|
||||
Original
amount of shares reserved for the ESPP
|
1,000,000
|
|||
|
||||
Number
of shares issued in December 2000 for calendar year 2000
|
(16,534
|
)
|
||
Number
of shares issued in December 2001 for calendar year 2001
|
(48,279
|
)
|
||
Number
of shares issued in December 2002 for calendar year 2002
|
(89,180
|
)
|
||
Number
of shares issued in December 2003 for calendar year 2003
|
(244,166
|
)
|
||
Number
of shares issued in June 2004 for first half of calendar
year
2004
|
(166,507
|
)
|
||
Number
of shares issued in December 2004 for second half of calendar
year
2004
|
(167,546
|
)
|
||
Number
of shares issued in June 2005 for first half of calendar
year
2005
|
(174,169
|
)
|
||
Number
of shares issued in December 2005 for second half of calendar
year
2005
|
(93,619
|
)
|
||
|
||||
Remaining
shares reserved for the ESPP as of December 31, 2005
|
-
|
|
Number
of Shares
|
|||
|
||||
For
exercise of outstanding warrants to purchase common stock
|
31,535
|
|||
For
exercise of outstanding common stock options
|
6,217,272
|
|||
For
conversion of subordinated notes
|
12,340,436
|
|||
For
future common stock option awards
|
248,574
|
|||
|
||||
Total
reserved
|
18,837,817
|
(in thousands, except per share amounts) |
Three Months Ended
December
31, 2004
|
|||
Reported
net loss
|
$
|
(9,141
|
)
|
|
Less:
Pro forma stock-based compensation expense determined
under the fair value based method, net of tax
|
(623
|
)
|
||
Pro
forma net loss
|
$
|
(9,764
|
)
|
|
|
||||
Reported
net loss per basic and diluted share
|
$
|
(0.19
|
)
|
|
Pro
forma net loss per basic and diluted share
|
$
|
(0.21
|
)
|
(in
thousands, except per share amounts)
|
Three Months Ended
December 31, 2005
|
|||
Stock-based
compensation expense by award type:
|
||||
Employee
stock options
|
$
|
1,008
|
||
Employee
stock purchase plan
|
122
|
|||
Total
stock-based compensation expense
|
$
|
1,130
|
||
Net
effect on net loss
|
$
|
1,130
|
||
Net
effect on net loss per basic and diluted share
|
$
|
(0.02
|
)
|
Stock-Based
Compensation Expense by Segment
For
the three months ended December 31, 2005
(in
thousands)
|
COGS
|
|
|
SG&A
|
|
|
R&D
|
|
|
Total
|
|||
Fiber
Optics
|
$
|
206
|
$
|
327
|
$
|
245
|
$
|
778
|
|||||
Photovoltaics
|
64
|
124
|
28
|
216
|
|||||||||
Electronic
Materials and Devices
|
75
|
33
|
28
|
136
|
|||||||||
Total
stock-based compensation expense
|
$
|
345
|
$
|
484
|
$
|
301
|
$
|
1,130
|
Stock
Option Plans
For
the three months ended December 31,
|
2005
|
2004
|
|||||
|
|||||||
Expected
dividend yield
|
0
|
%
|
0
|
%
|
|||
Expected
stock price volatility
|
103.8
- 105.0
|
%
|
108.7
|
%
|
|||
Weighted
average price volatility
|
104.2
|
%
|
108.7
|
%
|
|||
Risk-free
interest rate
|
4.25
- 4.55
|
%
|
3.49
|
%
|
|||
Expected
term (in years)
|
3.0
- 6.5
|
5.0
|
|||||
Accounts
Receivable, net
(in
thousands)
|
As
of
December
31, 2005
|
As
of
September
30, 2005
|
|||||
|
|||||||
Accounts
receivable
|
$
|
23,123
|
$
|
21,721
|
|||
Accounts
receivable - unbilled
|
2,758
|
1,240
|
|||||
Subtotal
|
25,881
|
22,961
|
|||||
Allowance
for doubtful accounts
|
(426
|
)
|
(328
|
)
|
|||
|
|||||||
Total
|
$
|
25,455
|
$
|
22,633
|
Receivables,
Related Parties
(in
thousands)
|
As
of
December
31, 2005
|
As
of
September
30, 2005
|
|||||
|
|||||||
Current
assets:
|
|||||||
GELcore-related
|
$
|
196
|
$
|
185
|
|||
Velox-related
|
435
|
249
|
|||||
Employee
loans
|
3,000
|
3,000
|
|||||
Employee
loans - interest portion
|
806
|
763
|
|||||
Subtotal
|
4,437
|
4,197
|
|||||
Long-term
assets:
|
|||||||
Employee
loans
|
169
|
169
|
|||||
|
|||||||
Total
|
$
|
4,606
|
$
|
4,366
|
Inventory,
net
(in
thousands)
|
As
of
December
31, 2005
|
As
of
September
30, 2005
|
|||||
|
|||||||
Raw
materials
|
$
|
16,651
|
$
|
15,482
|
|||
Work-in-process
|
4,260
|
5,101
|
|||||
Finished
goods
|
6,527
|
5,911
|
|||||
Subtotal
|
27,438
|
26,494
|
|||||
Less:
reserves
|
(6,997
|
)
|
(8,146
|
)
|
|||
|
|||||||
Total
|
$
|
20,441
|
$
|
18,348
|
Property,
Plant, and Equipment, net
(in
thousands)
|
As
of
December
31, 2005
|
As
of
September
30, 2005
|
|||||
|
|||||||
Land
|
$
|
1,502
|
$
|
1,502
|
|||
Building
and improvements
|
38,402
|
37,944
|
|||||
Equipment
|
71,754
|
71,854
|
|||||
Furniture
and fixtures
|
5,002
|
5,002
|
|||||
Leasehold
improvements
|
2,537
|
2,935
|
|||||
Construction
in progress
|
4,451
|
3,390
|
|||||
Property
and equipment under capital lease
|
466
|
466
|
|||||
|
|||||||
Subtotal
|
124,114
|
123,093
|
|||||
Less:
accumulated depreciation and amortization
|
(68,627
|
)
|
(66,136
|
)
|
|||
|
|||||||
Total
|
$
|
55,487
|
$
|
56,957
|
(in
thousands)
|
Fiber
Optics
|
Photovoltaics
|
Total
|
|||||||
|
||||||||||
Balance
as of September 30, 2005
|
$
|
14,259
|
$
|
20,384
|
$
|
34,643
|
||||
Acquisition
- Force Inc.
|
800
|
-
|
800
|
|||||||
Acquisition
- Earn out payments
|
187
|
-
|
187
|
|||||||
Balance
as of December 31, 2005
|
$
|
15,246
|
$
|
20,384
|
$
|
35,630
|
(in
thousands)
|
As
of December 31, 2005
|
As
of September 30, 2005
|
|||||||||||||||||
|
Gross
Assets
|
Accumulated
Amortization
|
Net
Assets
|
Gross
Assets
|
Accumulated
Amortization
|
Net
Assets
|
|||||||||||||
|
|||||||||||||||||||
Fiber
Optics:
|
|||||||||||||||||||
Patents
|
$
|
368
|
$
|
(146
|
)
|
$
|
222
|
$
|
368
|
$
|
(136
|
)
|
$
|
232
|
|||||
Ortel
acquired IP
|
3,274
|
(1,908
|
)
|
1,366
|
3,274
|
(1,746
|
)
|
1,528
|
|||||||||||
JDSU
acquired IP
|
1,650
|
(192
|
)
|
1,458
|
1,650
|
(110
|
)
|
1,540
|
|||||||||||
Alvesta
acquired IP
|
193
|
(116
|
)
|
77
|
193
|
(107
|
)
|
86
|
|||||||||||
Molex
acquired IP
|
558
|
(251
|
)
|
307
|
558
|
(223
|
)
|
335
|
|||||||||||
Corona
acquired IP
|
1,000
|
(317
|
)
|
683
|
1,000
|
(267
|
)
|
733
|
|||||||||||
Phasebridge
acquired IP
|
700
|
-
|
700
|
-
|
-
|
-
|
|||||||||||||
Force
acquired IP
|
1,200
|
-
|
1,200
|
-
|
-
|
-
|
|||||||||||||
Subtotal
|
8,943
|
(2,930
|
)
|
6,013
|
7,043
|
(2,589
|
)
|
4,454
|
|||||||||||
|
|||||||||||||||||||
Photovoltaics:
|
|||||||||||||||||||
Patents
|
271
|
(111
|
)
|
160
|
271
|
(101
|
)
|
170
|
|||||||||||
Tecstar
acquired IP
|
1,900
|
(1,445
|
)
|
455
|
1,900
|
(1,350
|
)
|
550
|
|||||||||||
Subtotal
|
2,171
|
(1,556
|
)
|
615
|
2,171
|
(1,451
|
)
|
720
|
|||||||||||
|
|||||||||||||||||||
Electronic
Materials & Devices:
|
|||||||||||||||||||
Patents
|
552
|
(229
|
)
|
323
|
390
|
(217
|
)
|
173
|
|||||||||||
|
|||||||||||||||||||
Total
|
$
|
11,666
|
$
|
(4,715
|
)
|
$
|
6,951
|
$
|
9,604
|
$
|
(4,257
|
)
|
$
|
5,347
|
Amortization
Expense
(in
thousands)
|
||||
|
||||
Period
ending:
|
||||
9-month
period ended September 30, 2006
|
$
|
1,816
|
||
Year
ended September 30, 2007
|
2,015
|
|||
Year
ended September 30, 2008
|
1,324
|
|||
Year
ended September 30, 2009
|
917
|
|||
Year
ended September 30, 2010
|
624
|
|||
Thereafter
|
255
|
|||
Total
future amortization expense
|
$
|
6,951
|
Accrued
Expenses and Other Current Liabilities
(in
thousands)
|
As
of
December
31, 2005
|
As
of
September
30, 2005
|
|||||
|
|||||||
Compensation-related
|
$
|
4,892
|
$
|
4,974
|
|||
Interest
|
628
|
1,814
|
|||||
Warranty
|
1,522
|
1,268
|
|||||
Deferred
revenue and customer deposits
|
2,633
|
1,539
|
|||||
Professional
fees
|
966
|
1,082
|
|||||
Royalty
|
871
|
551
|
|||||
Acquisition-related
|
2,949
|
5,006
|
|||||
Self
insurance
|
765
|
646
|
|||||
Other
|
1,189
|
2,198
|
|||||
Total
|
$
|
16,415
|
$
|
19,078
|
Warranty
Reserve
(in
thousands)
|
||||
Balance
as of October 1, 2005
|
$
|
1,268
|
||
Accruals
for warranty expense
|
351
|
|||
Reversals
due to use or expiration of liability
|
(97
|
)
|
||
Balance
as of December 31, 2005
|
$
|
1,522
|
· |
EMCORE's
Fiber Optics revenues are derived primarily from sales of
optical
components and subsystems for cable television (CATV), fiber
to the
premise (FTTP), enterprise routers and switches, telecom
grooming
switches, core routers, high performance servers, supercomputers,
and
satellite communications data links.
|
· |
EMCORE's
Photovoltaics revenues are derived primarily from the sales
of solar power
conversion products, including solar cells, covered interconnect
solar
cells, and solar panels.
|
· |
EMCORE's
Electronic Materials and Devices revenues are derived primarily
from sales
of wireless components, such as radio frequency (RF) materials
including
hetero-junction bipolar transistors and enhancement-mode
pseudomorphic
high electron mobility transistors, GaN materials for wireless
base
stations, and process development
technology.
|
Revenues
by Segment
For
the three months ended December 31,
(in
thousands)
|
2005
|
2004
|
|||||||||||
|
Revenue
|
%
of Revenue
|
Revenue
|
%
of Revenue
|
|||||||||
Fiber
Optics
|
$
|
25,006
|
62.7
|
%
|
$
|
17,689
|
65.6
|
%
|
|||||
Photovoltaics
|
10,724
|
26.9
|
7,448
|
27.6
|
|||||||||
Electronic
Materials and Devices
|
4,161
|
10.4
|
1,827
|
6.8
|
|||||||||
Total
revenues
|
$
|
39,891
|
100.0
|
%
|
$
|
26,964
|
100.0
|
%
|
Geographic
Revenues
For
the three months ended December 31,
(in
thousands)
|
2005
|
2004
|
|||||||||||
Revenue
|
|
|
%
of Revenue
|
|
|
Revenue
|
|
|
%
of Revenue
|
||||
North
America
|
$
|
33,938
|
85.1
|
%
|
$
|
20,699
|
76.8
|
%
|
|||||
Asia
and South America
|
5,368
|
13.4
|
4,326
|
16.0
|
|||||||||
Europe
|
585
|
1.5
|
1,939
|
7.2
|
|||||||||
Total
revenues
|
$
|
39,891
|
100.0
|
%
|
$
|
26,964
|
100.0
|
%
|
Operating
Loss by Segment
For
the three months ended December 31,
(in
thousands)
|
2005
|
2004
|
|||||
|
|||||||
Operating
loss by segment:
|
|||||||
Fiber
Optics
|
$
|
(2,706
|
)
|
$
|
(5,236
|
)
|
|
Photovoltaics
|
(1,611
|
)
|
(1,058
|
)
|
|||
Electronic
Materials and Devices
|
(544
|
)
|
(2,250
|
)
|
|||
Total
operating loss
|
(4,861
|
)
|
(8,544
|
)
|
|||
|
|||||||
Other
(income) expenses:
|
|||||||
Interest
expense, net
|
967
|
969
|
|||||
Loss
from convertible subordinated notes exchange offer
|
1,078
|
-
|
|||||
Equity
in net loss of Velox investment
|
182
|
-
|
|||||
Equity
in net income of GELcore investment
|
(547
|
)
|
(372
|
)
|
|||
Total
other expenses
|
1,680
|
597
|
|||||
|
|||||||
Net
loss
|
$
|
(6,541
|
)
|
$
|
(9,141
|
)
|
Long-Lived
Assets
(in
thousands)
|
As
of
December
31, 2005
|
As
of
September
30, 2005
|
|||||
|
|||||||
Fiber
Optics
|
$
|
57,734
|
$
|
56,261
|
|||
Photovoltaics
|
37,576
|
37,861
|
|||||
Electronic
Materials and Devices
|
2,758
|
2,825
|
|||||
Total
|
$
|
98,068
|
$
|
96,947
|
· |
The
ability of EMCORE Corporation (EMCORE) to remain competitive
and a leader
in its industry and the future growth of the company, the industry,
and
the economy in general;
|
· |
Difficulties
in integrating recent or future acquisitions into our
operations;
|
· |
The
expected level and timing of benefits to EMCORE from on-going
cost
reduction efforts, including (i) expected cost reductions and
their impact
on our financial performance, (ii) our continued leadership
in technology
and manufacturing in its markets, and (iii) our belief that
the cost
reduction efforts will not impact product development or manufacturing
execution;
|
· |
Expected
improvements in our product and technology development
programs;
|
· |
Whether
our products will (i) be successfully introduced or marketed,
(ii) be
qualified and purchased by our customers, or (iii) perform
to any
particular specifications or performance or reliability standards;
and/or
|
· |
Guidance
provided by EMCORE regarding our expected financial performance
in current
or future periods, including, without limitation, with respect
to
anticipated revenues, income, or cash flows for any period
in fiscal 2006
and subsequent periods.
|
· |
EMCORE’s
cost reduction efforts may not be successful in achieving their
expected
benefits, or may negatively impact our
operations;
|
· |
The
failure of our products (i) to perform as expected without
material
defects, (ii) to be manufactured at acceptable volumes, yields,
and cost,
(iii) to be qualified and accepted by our customers, and (iv)
to
successfully compete with products offered by our competitors;
and/or
|
· |
Other
risks and uncertainties described in EMCORE’s filings with the Securities
and Exchange Commission (SEC) such as: cancellations, rescheduling,
or
delays in product shipments; manufacturing capacity constraints;
lengthy
sales and qualification cycles; difficulties in the production
process;
changes in semiconductor industry growth; increased competition;
delays in
developing and commercializing new products; and other
factors.
|
· |
High-speed
fiber optics for telephony and Internet core and metro
networks;
|
· |
High-speed
fiber optics for large enterprise data communications, super
computing,
and storage area networks;
|
· |
Next-generation
CATV and FTTP “triple play”
networks;
|
· |
Satellite
communications, in space and on the
ground;
|
· |
Advanced
transistors and amplifiers used in high-bandwidth wireless
communications
systems, such as WiMAX and Wi-Fi Internet access and 3G mobile
handsets and PDA devices; and
|
· |
Solid
state lighting for specialty and commercial
illumination.
|
· |
Broadcast:
Multi-format digital, IP and baseband video signal aggregation,
processing, and transport;
|
· |
Satellite
Communications:
Downlinks and uplinks for direct broadcast, CATV distribution,
and
satellite teleports;
|
· |
Private
Video Networks:
Intra-studio, studio-to-studio, studio-to-transmitter, and
studio-to-headend signal transport;
and
|
· |
CATV:
High-definition television digital and broadband analog signal
transport
|
· |
CATV:
Direct modulated analog transmitters for broadcasting transmission
over
HFC networks;
|
· |
FTTP:
Broadcast video overlay for advanced video
services;
|
· |
Telecommunications:
Access, metro edge, metro transport, long haul, or ultra
long haul direct
modulated transmitters at speeds of 2.5 Gb/s to 10
Gb/s;
|
· |
Storage
Area Networks:
Quad rate (4.25 Gb/s) Fibre Channel applications
|
· |
EMCORE's
Fiber Optics revenues are derived primarily from sales of
optical
components and subsystems for CATV, FTTP, enterprise routers
and switches,
telecom grooming switches, core routers, high performance
servers,
supercomputers and satellite communications data links.
|
· |
EMCORE's
Photovoltaics revenues are derived primarily from the sales
of solar power
conversion products, including solar cells, covered interconnect
solar
cells, and solar panels.
|
· |
EMCORE's
Electronic Materials and Devices revenues are derived primarily
from sales
of wireless components, such as RF materials including hetero-junction
bipolar transistors and enhancement-mode pseudomorphic high
electron
mobility transistors, GaN materials for wireless base stations,
and
process development technology.
|
Revenues
by Segment
For
the three months ended December 31,
(in
thousands)
|
2005
|
2004
|
|||||||||||
|
Revenue
|
%
of Revenue
|
Revenue
|
%
of Revenue
|
|||||||||
Fiber
Optics
|
$
|
25,006
|
62.7
|
%
|
$
|
17,689
|
65.6
|
%
|
|||||
Photovoltaics
|
10,724
|
26.9
|
7,448
|
27.6
|
|||||||||
Electronic
Materials and Devices
|
4,161
|
10.4
|
1,827
|
6.8
|
|||||||||
Total
revenues
|
$
|
39,891
|
100.0
|
%
|
$
|
26,964
|
100.0
|
%
|
Geographic
Revenues
For
the three months ended December 31,
(in
thousands)
|
2005
|
2004
|
|||||||||||
Revenue
|
|
|
%
of Revenue
|
|
|
Revenue
|
|
|
%
of Revenue
|
||||
North
America
|
$
|
33,938
|
85.1
|
%
|
$
|
20,699
|
76.8
|
%
|
|||||
Asia
and South America
|
5,368
|
13.4
|
4,326
|
16.0
|
|||||||||
Europe
|
585
|
1.5
|
1,939
|
7.2
|
|||||||||
Total
revenues
|
$
|
39,891
|
100.0
|
%
|
$
|
26,964
|
100.0
|
%
|
Operating
Loss by Segment
For
the three months ended December 31,
(in
thousands)
|
2005
|
2004
|
|||||
|
|||||||
Operating
loss by segment:
|
|||||||
Fiber
Optics
|
$
|
(2,706
|
)
|
$
|
(5,236
|
)
|
|
Photovoltaics
|
(1,611
|
)
|
(1,058
|
)
|
|||
Electronic
Materials and Devices
|
(544
|
)
|
(2,250
|
)
|
|||
Total
operating loss
|
(4,861
|
)
|
(8,544
|
)
|
|||
|
|||||||
Other
(income) expenses:
|
|||||||
Interest
expense, net
|
967
|
969
|
|||||
Loss
from convertible subordinated notes exchange offer
|
1,078
|
-
|
|||||
Equity
in net loss of Velox investment
|
182
|
-
|
|||||
Equity
in net income of GELcore investment
|
(547
|
)
|
(372
|
)
|
|||
Total
other expenses
|
1,680
|
597
|
|||||
|
|||||||
Net
loss
|
$
|
(6,541
|
)
|
$
|
(9,141
|
)
|
Long-Lived
Assets
(in
thousands)
|
As
of
December
31, 2005
|
As
of
September
30, 2005
|
|||||
|
|||||||
Fiber
Optics
|
$
|
57,734
|
$
|
56,261
|
|||
Photovoltaics
|
37,576
|
37,861
|
|||||
Electronic
Materials and Devices
|
2,758
|
2,825
|
|||||
Total
|
$
|
98,068
|
$
|
96,947
|
Stock-Based
Compensation Expense by Segment
For
the three months ended December 31, 2005
(in
thousands)
|
COGS
|
|
|
SG&A
|
|
|
R&D
|
|
|
Total
|
|||
Fiber
Optics
|
$
|
206
|
$
|
327
|
$
|
245
|
$
|
778
|
|||||
Photovoltaics
|
64
|
124
|
28
|
216
|
|||||||||
Electronic
Materials and Devices
|
75
|
33
|
28
|
136
|
|||||||||
Total
stock-based compensation expense
|
$
|
345
|
$
|
484
|
$
|
301
|
$
|
1,130
|
Statement
of Operations Data
For
the three months ended December 31,
|
2005
|
2004
|
|||||
|
|||||||
Revenue
|
100.0
|
%
|
100.0
|
%
|
|||
Cost
of revenue
|
82.9
|
92.3
|
|||||
Gross
profit
|
17.1
|
7.7
|
|||||
|
|||||||
Operating
expenses:
|
|||||||
Selling,
general and administrative
|
18.2
|
20.6
|
|||||
Research
and development
|
11.1
|
18.8
|
|||||
Total
operating expenses
|
29.3
|
39.4
|
|||||
|
|||||||
Operating
loss
|
(12.2
|
)
|
(31.7
|
)
|
|||
|
|||||||
Other
(income) expenses:
|
|||||||
Interest
expense, net
|
2.4
|
3.6
|
|||||
Loss
from convertible subordinated notes exchange offer
|
2.7
|
-
|
|||||
Equity
in net income from equity method investments
|
(0.9
|
)
|
(1.4
|
)
|
|||
Total
other expenses
|
4.2
|
2.2
|
|||||
|
|||||||
Net
loss
|
(16.4
|
)%
|
(33.9
|
)%
|
· |
In
May 2005, EMCORE acquired the CATV and RF over fiber specialty
businesses
from JDSU.
|
· |
In
November 2005, EMCORE acquired privately held Phasebridge, Inc.
of
Pasadena, California.
|
· |
In
December 2005, EMCORE acquired privately held Force, Inc. of
Christiansburg, Virginia.
|
· |
In
January 2006, EMCORE acquired privately held K2 Optronics, Inc.
of
Sunnyvale, California
|
· |
In
the FTTP market, EMCORE has developed an integrated PON transceiver
utilizing Ortel’s industry leading video technology. EMCORE’s PON
transceiver has been customer qualified and is now in
production.
|
· |
In
the photovoltaics market, EMCORE has developed a high efficiency
solar
cell product for terrestrial applications. Intended for use in
concentrated sunlight, these cells have been measured at greater
than 35%
efficiency at 500 suns.
|
Exhibit
No.
|
Description
|
2.1
|
Merger
Agreement, dated January 12, 2006, by and among K2 Optronics, Inc.,
EMCORE
Corporation, and EMCORE Optoelectronics Acquisition Corp. (incorporated
by
reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K filed
on January 19, 2006).
|
4.1
|
Note,
dated as of November 16, 2005, in the amount of $16,580,460 (incorporated
by reference to Exhibit 4.5 to Registrant’s Annual Report on Form 10-K for
the fiscal year ended September 30, 2005).
|
4.2
|
Indenture,
dated as of November 16, 2005, between Registrant and Deutsche
Bank Trust
Company Americas, as Trustee (incorporated by reference to Exhibit
4.6 to
Registrant’s Annual Report on Form 10-K for the fiscal year ended
September 30, 2005).
|
10.1†
|
Fiscal
2006 Executive Bonus Plan (incorporated by reference to Registrant’s
Current Report on Form 8-K filed on October 25, 2005).
|
10.2†
|
Outside
Directors’ Cash Compensation Plan, dated as of October 20, 2005
(incorporated by reference to Exhibit 10.1 to Registrant’s Current Report
on Form 8-K filed on October 25, 2005).
|
10.3
|
Exchange
Agreement, dated as of November 10, 2005, by and between Alexandra
Global
Master Fund Ltd. and Registrant (incorporated by reference to Exhibit
10.15 to Registrant’s Annual Report on Form 10-K for the fiscal year ended
September 30, 2005).
|
Certification
by Chief Executive Officer pursuant to Rule 13a-14(a) under the
Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
|
|
Certification
by Chief Financial Officer pursuant to Rule 13a-14(a) under the
Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
|
|
Certification
by Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
Certification
by Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
EMCORE
CORPORATION
|
|
Date: February
9, 2006
|
By:
/s/ Reuben F. Richards, Jr.
|
Reuben
F. Richards, Jr.
President
& Chief Executive Officer
(Principal
Executive Officer)
|
|
Date: February
9, 2006
|
By:
/s/ Thomas G. Werthan
|
Thomas
G. Werthan
Executive
Vice President & Chief Financial Officer
(Principal
Accounting and Financial
Officer)
|
Exhibit
No.
|
Description
|
2.1
|
Merger
Agreement, dated January 12, 2006, by and among K2 Optronics,
Inc., EMCORE
Corporation, and EMCORE Optoelectronics Acquisition Corp.
(incorporated by
reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K filed
on January 19, 2006).
|
4.1
|
Note,
dated as of November 16, 2005, in the amount of $16,580,460
(incorporated
by reference to Exhibit 4.5 to Registrant’s Annual Report on Form 10-K for
the fiscal year ended September 30, 2005).
|
4.2
|
Indenture,
dated as of November 16, 2005, between Registrant and Deutsche
Bank Trust
Company Americas, as Trustee (incorporated by reference to
Exhibit 4.6 to
Registrant’s Annual Report on Form 10-K for the fiscal year ended
September 30, 2005).
|
10.1†
|
Fiscal
2006 Executive Bonus Plan (incorporated by reference to Registrant’s
Current Report on Form 8-K filed on October 25, 2005).
|
10.2†
|
Outside
Directors’ Cash Compensation Plan, dated as of October 20, 2005
(incorporated by reference to Exhibit 10.1 to Registrant’s Current Report
on Form 8-K filed on October 25, 2005).
|
10.3
|
Exchange
Agreement, dated as of November 10, 2005, by and between
Alexandra Global
Master Fund Ltd. and Registrant (incorporated by reference
to Exhibit
10.15 to Registrant’s Annual Report on Form 10-K for the fiscal year ended
September 30, 2005).
|
Certification
by Chief Executive Officer pursuant to Rule 13a-14(a) under
the Securities
Exchange Act of 1934, as adopted pursuant to Section 302
of the
Sarbanes-Oxley Act of 2002.*
|
|
Certification
by Chief Financial Officer pursuant to Rule 13a-14(a) under
the Securities
Exchange Act of 1934, as adopted pursuant to Section 302
of the
Sarbanes-Oxley Act of 2002.*
|
|
Certification
by Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
Certification
by Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
1.
|
I
have reviewed this Quarterly Report on Form 10-Q
of EMCORE Corporation ("Report");
|
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 officers 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 an
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(s) 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 the 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: February
9, 2006
|
By:
|
/s/
Reuben F. Richards, Jr.
|
|
Reuben
F. Richards, Jr.
|
|
|
President
and CEO
|
|
|
(Principal
Executive Officer)
|
1.
|
I
have reviewed this Quarterly Report on Form 10-Q
of EMCORE Corporation ("Report");
|
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 officers 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 an
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(s) 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 the 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:
February 9, 2006
|
By:
|
/s/
Thomas G. Werthan
|
|
Thomas
G. Werthan
|
|
|
Executive
Vice President & Chief Financial Officer
|
|
|
(Principal
Financial and Accounting
Officer)
|
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:
February 9, 2006
|
By:
|
/s/
Reuben F. Richards, Jr.
|
|
||
|
Reuben
F. Richards, Jr.
|
|
|
President
& CEO
|
|
|
(Principal
Executive Officer)
|
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:
February 9, 2006
|
By:
|
/s/
Thomas G. Werthan
|
|
||
|
Thomas
G. Werthan
|
|
|
Executive
Vice President & Chief Financial Officer
|
|
|
(Principal
Financial and Accounting
Officer)
|