UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

(Mark one):
     [X]  ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR 15(d)  OF THE  SECURITIES
          EXCHANGE ACT OF 1934

             For the fiscal year ended September 30, 1997

     [ ]  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: 0-22175

                               EMCORE CORPORATION
             (Exact name of registrant as specified in its charter)


<TABLE>
<S>                                                                       <C>
                            NEW JERSEY                                                 22-2746503
  (State or other jurisdiction of incorporation or organization)          (I.R.S. Employer Identification No.)
                    394 ELIZABETH AVENUE, SOMERSET, NJ 08873
               (Address of principal executive offices) (zip code)

Registrant's telephone number, including area code:                      (732) 271-9090
Securities registered pursuant to Section 12(b) of the Act:              NONE
Securities registered pursuant to Section 12(g) of the Act:              COMMON STOCK, NO PAR VALUE
</TABLE>


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 if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of the registrant's  knowledge,  in definitive  proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The  aggregate  market  value of  common  stock  held by  non-affiliates  of the
registrant as of December 22, 1997 was approximately  $89,429,417  (based on the
closing sale price of $16 1/2 per share).

The number of shares  outstanding of the  registrant's no par value common stock
as of December 22, 1997 was 9,317,740.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  registrant's  definitive  Proxy  Statement  for the 1998 Annual
Meeting of Shareholders (to be filed with the Securities and Exchange Commission
on or before January 28, 1998) are incorporated by reference in Part III of this
Form 10-K.

<PAGE>

PART I


ITEM 1.  BUSINESS

Company Overview

     EMCORE  Corporation  ("EMCORE" or the "Company"),  founded in 1984, designs
and develops compound  semiconductor  materials and process  technology and is a
leading   manufacturer  of  production   systems  used  to  fabricate   compound
semiconductor  wafers. The Company provides its customers,  both in the U.S. and
internationally,  with  materials  science  expertise,  process  technology  and
compound  semiconductor  production  systems  that  enable  the  manufacture  of
commercial volumes of  high-performance  electronic and optoelectronic  devices.
Recently,  in response to the growing need of its customers to cost  effectively
get to market  faster  with high  volumes of new and  improved  high-performance
products,  the Company  expanded  its product  offerings  to include the design,
development and production of compound  semiconductor  wafers and  package-ready
devices.  In March 1997,  the Company  completed an initial  public  offering of
2,875,000  shares of common stock  (including the exercise of the  Underwriter's
overallotment option). Prior to the Offering, there was no public market for the
Company's common stock.

Industry Overview

     Recent advances in information technologies have created a growing need for
power efficient,  high-performance  electronic systems that operate at very high
frequencies,  have  increased  storage  capacity and  computational  and display
capabilities, and can be produced cost-effectively in commercial volumes. In the
past,  electronic  systems  manufacturers  have  relied on  advances  in silicon
semiconductor  technology  to meet many of these  demands.  However,  the newest
generation  of  high-performance   electronic  and  optoelectronic  applications
require certain functions which are generally not achievable using silicon-based
components. To address these market demands, electronic system manufacturers are
increasingly  incorporating new electronic and optoelectronic devices into their
products in order to improve performance or enable new applications.

     Compound  semiconductors have emerged as an enabling technology to meet the
complex  requirements  of  today's  advanced   information   systems.   Compound
semiconductor  devices can be used to perform  individual  functions as discrete
devices,  such as high-brightness  laser-emitting  diodes ("HBLEDs"),  laser and
solar cells, or can be combined into integrated circuits,  such as transmitters,
receivers and alpha-numeric displays. Many compound semiconductor materials have
unique  physical  properties  that allow  electrons  to move at least four times
faster than through silicon-based devices. This higher electron mobility enables
a compound  semiconductor  device to operate at much higher  speeds than silicon
devices with lower power consumption and less noise and distortion. In addition,
unlike silicon-based devices, compound semiconductor devices have optoelectronic
capabilities that enable them to emit and detect light. As a result, electronics
manufacturers are increasingly  integrating compound  semiconductor devices into
their  products  in order to achieve  higher  performance  in a wide  variety of
applications, including wireless communications,  telecommunications, computers,
and consumer and automotive electronics.

     Recent  advances in a type of  semiconductor  laser called a Vertical
Cavity Surface Emitting Laser ("VCSEL") are expected to enable higher modulation
frequencies,  better coupling into optical fibers,  easier  fabrication of laser
arrays, and lower cost solutions. With these advantages,  VCSELs will be used in
large  volume  applications  for  telecommunication,  data  communication,  data
storage,  scanning,  printing,  and for micro-area networks such as chip-to-chip
and board-to-board communications.

     Wireless  Communications.  Compound  semiconductor  devices  have  multiple
applications in wireless communication products,  including cellular telephones,
pagers,  PCS  handsets,  DBS systems and global  positioning  systems.  Compound
semiconductor  devices are used in high  frequency  transmitters,  receivers and
power amplifiers to increase  capacity,  improve signal to noise performance and
lower power  consumption,  which in turn reduces network  congestion,  increases
roaming  range  and  extends  battery  life.  In  addition,  HB LEDs are used in
electronic  displays on these products in order to reduce size, weight and power
consumption  and to improve  display  visibility.  In satellite  communications,
compound  semiconductor  devices  are  used in  ultra-high  frequency  satellite
up-converters and  down-converters to  cost-effectively  deliver  information to
fixed and  mobile  users  over wide  geographic  areas.  In  addition,  compound
semiconductor  solar cells are used to power these  satellites  because they are
more  tolerant  to  radiation  levels in space and have  higher  power-to-weight
ratios than silicon-based  solar cells,  thereby  increasing  satellite life and
payload capacity.

     Telecommunications.  To accommodate the exponential  growth in voice,  data
and video  traffic  and the  increased  demand  for higher  transmission  rates,
telecommunications companies and Internet service providers are relying on fiber
optic  networks   utilizing   high  speed   switching   technologies.   Compound
semiconductor   components  such  as  lasers  and  LEDs,  coupled  with  optical
detectors,   are  used  within   these   networks  to  enable  high  speed  data
transmission, increase overall network capacity and reduce equipment costs.

     Computers.  Computer  manufacturers  are  increasingly  seeking  to achieve
higher  clock  speeds  than  the  architecture  prevalent  in  today's  advanced
multimedia  computer systems.  Higher  processing speeds  necessitate the use of
larger cache memory to enable higher transmission rates. Computer  manufacturers
are  increasingly  utilizing  compound  semiconductor  devices to achieve  these
results. In addition, today's advanced multimedia applications require increased
data storage  capacity,  which is commonly  addressed by the use of CD-ROMs.  To
achieve  these  higher  storage   capabilities,   computer   manufacturers   are
increasingly utilizing compound semiconductor lasers and optical detectors. As a
result of the  migration of  multimedia  applications  into  consumer  products,
computer  manufacturers are also incorporating  compound  semiconductor infrared
emitters into their products to replace bulky wires and cables.

     Consumer Electronics. Consumer electronics manufacturers are using compound
semiconductor  devices to improve the performance of many existing  products and
to develop new applications.  For example,  next generation compact disc players
are  utilizing  shorter  wavelength  compound  semiconductor  lasers to read and
record  information  on high  density  DVDs which store at least four times more
information   than  a   conventional   compact  disc.   In  addition,   compound
semiconductor   devices  are   increasingly   being  used  in  advanced  display
technologies.  Ultra-thin LED flat panel displays are being used in a variety of
applications,  including point-of-purchase displays and outdoor advertising with
live-action billboards,  and are being developed for use in laptop computers and
flat panel television screens.

     Automotive  Electronics.  Compound  semiconductor  devices are increasingly
being used by automotive  manufacturers  to improve  vehicle  performance  while
reducing  weight and costs  through lower power  consumption.  These devices are
utilized  in a wide  variety  of  applications,  including  dashboard  displays,
indicator lights, engine sensors, anti-lock braking systems and other electronic
systems. In addition, the Company believes that the use of electronic components
within  automobiles is likely to increase as  manufacturers  design  vehicles to
comply with state and federal  environmental and safety regulations.  Automotive
production  cycles  generally  last three to five years,  providing a relatively
predictable  source  of  demand  for  compound  semiconductor  devices  once  an
electronic component is designed into a specific vehicle model.

     The high-performance  characteristics of compound semiconductors,  combined
with  the  requirements  of  advanced  information  systems,  have  led  to  the
widespread deployment of compound  semiconductor devices within a broad range of
electronic  systems.  The  Company  believes  that the  following  factors  have
resulted in an increased demand for compound  semiconductor  production systems,
wafers and devices which enable  electronic  systems  manufacturers to reach the
market faster with high volumes of high-performance products and applications:

     o    Launch of new wireless  services  such as PCS and wireless  high speed
          data systems;

     o    Rapid build-out of satellite communications systems;

     o    Widespread  deployment of fiber optic  networks and the increasing use
          of optical systems;

     o    Increasing use of infrared  emitters and optical detectors in computer
          systems;

     o    Emergence of advanced consumer electronics applications,  such as DVDs
          and flat panel displays; and,

     o    Increasing use of high-performance electronic devices in automobiles.

The EMCORE Solution

     EMCORE  provides its customers with materials  science  expertise,  process
technology  and MOCVD  (metal  organic  chemical  vapor  deposition)  production
systems that enable the  manufacture of commercial  volumes of  high-performance
compound semiconductor wafers and devices.  EMCORE believes that its proprietary
TurboDiscTM  deposition technology makes possible one of the most cost-effective
production  systems for the commercial  volume  manufacture of  high-performance
compound  semiconductor  wafers  and  devices.  EMCORE  is  capitalizing  on its
technology  base to address the critical need of  electronics  manufacturers  to
cost-effectively  get to market  faster  with high  volumes of new and  improved
high-performance products. EMCORE offers its customers a broad range of products
and services  and a vertically  integrated  product line which  includes  device
design, materials and process development,  MOCVD production systems,  epitaxial
wafers and package-ready  devices.  The Company believes that its knowledge base
and  materials  science  expertise  uniquely  position  the  Company to become a
valuable  source for a broad array of solutions  for the compound  semiconductor
industry.

Recent Developments

     On December 5, 1997, the Company purchased the privately-held  MicroOptical
Devices,  Inc.  ("MODE").  MODE is one of the  market  leaders in the design and
development of  high-quality  optical  components and subsystems  based on VCSEL
technology,  which offers superior  performance at lower cost over  conventional
semiconductor  laser  technologies.  MODE's  microlasers and optical  subsystems
provide design, performance and significant cost advantages over their technical
predecessors such as edge-emitting  solid state lasers.  Through the integration
of VCSELs  with  leading  OEM  systems  design,  VCSELs are  expected to provide
enhanced  performance  benefits to market  applications such as Internet access,
onboard photonics,  gigabit ethernet,  local area networks,  microarea networks,
DVD and fiberoptic  switching.  MODE's Gigalase(TM) and Gigarray(TM)  technology
developments  to date are currently being evaluated by a variety of domestic and
international   OEM   customers   in   the   areas   of   data   communications,
telecommunications, optical storage and sensing.

     Under the terms of the agreement,  the Company issued  1,461,866  shares of
common  stock,  200,966  common stock  purchase  options and 47,118 common stock
purchase warrants in exchange for 100% of the outstanding capital stock of MODE.
The  acquisition  purchase price amounted to  approximately  $32.8 million.  The
acquisition  will be recorded  under the  purchase  method of  accounting  and a
significant  portion of the purchase price will be taken as a one-time charge by
EMCORE related to the write-off of in-process  research and  development  costs.
MODE will operate as a separate wholly-owned subsidiary of EMCORE.

Strategy

     The Company believes that its close  collaborations with its customers over
the past twelve  years have  contributed  to its  position in the MOCVD  process
technology  and  production  systems  market.  The  Company's  objective  is  to
capitalize  on  this   position  to  become  a  leading   supplier  of  compound
semiconductor  wafers  and  package-ready  devices.  The  key  elements  of  the
Company's strategy include:

     Provide   Complete   Compound   Semiconductor   Solutions.   The  Company's
vertically-integrated  product  offerings allow it to provide complete  compound
semiconductor  solutions to a broad range of electronics  manufacturers in order
to meet their diverse technology  requirements.  The Company plans to capitalize
on the growing need of electronics  manufacturers to reach the market faster and
more cost-efficiently with high volumes of end products. The Company assists its
customers with device design,  process development and optimal  configuration of
production  systems.  Moreover,  the Company can also serve its  customers  as a
reliable source for high-volume  production of wafers or package-ready  devices.
Through its materials  science  expertise,  process  technology  and  commercial
production  systems,  the  Company  intends  to become an  integral  part of its
customers' compound semiconductor product life cycle.

     Form  Strategic   Relationships  with  Customers.  By  developing  enabling
technologies,  the Company seeks to form strategic  alliances with its customers
in order to obtain long-term  development and high volume production  contracts.
For example,  the Company  currently has a strategic  relationship  with General
Motors  under which it has  developed  and  enhanced  the device  structure  and
production  process for,  and is  manufacturing  and shipping  magneto-resistive
("MR") sensor products for use in General Motors'  automotive  applications.  In
addition,   the   Company   has   been   integrally   involved   with  a   large
telecommunication  concern  in  connection  with the  development  of solar cell
technologies  for satellites  and is currently  shipping  commercial  volumes of
products  based on these  technologies.  Throughout  its  association  with this
customer, the Company has successfully customized its production systems to meet
the customer's special high-performance device requirements. The Company intends
to actively  seek similar  strategic  relationships  with other key customers in
order to further expand its technological and production base.

     Expand Technology  Leadership.  The Company has developed and optimized its
compound semiconductor processes and has developed higher performance production
systems through substantial investments in research and development. The Company
works closely with its customers to identify  specific  performance  criteria in
its production systems, wafers and package-ready devices. The Company intends to
continue to expend substantial resources in research and development in order to
enhance the  performance  of its  production  systems and to further  expand its
process and materials  science  expertise,  including the development of new low
cost, high volume wafers and package-ready devices for its customers.

Products

     Production  Systems  and  Materials  Processes.  The  Company  is a leading
supplier of MOCVD compound semiconductor production systems, and, in 1996, had a
23%  share of this  market  according  to VLSI  Research  Inc.  which  regularly
publishes research on this market. The Company has shipped more than 190 systems
to date and believes  that its  TurboDiscTM  systems offer  significant  cost of
ownership advantages over competing systems. The Company believes that its MOCVD
production  systems  produce  materials  with superior  uniformity of thickness,
electrical properties and material  composition.  EMCORE has a variety of models
that are optimized for the application and throughput of the customer.

     The  Company  believes  that  the  high  throughput   capabilities  of  its
TurboDiscTM  systems  make  possible  the  lowest  cost  of  ownership  for  the
manufacture   of   compound   semiconductor   materials   as  well  as  superior
reproducibility  of  thickness,  composition,   electrical  profiles  and  layer
accuracy  required for  electronic  and  optoelectronic  devices.  The Company's
production  systems  also achieve a high degree of  reliability  with an average
time available for production, based on customer data, of approximately 95%.

     Wafer and Device Fabrication.  Since its inception,  the Company has worked
closely with its customers in designing and developing materials processes to be
used in production  systems for its customers' end-use  applications.  Recently,
the Company has begun to leverage its process and  materials  science  knowledge
base to manufacture  wafers and package-ready  devices in its own facility.  The
Company's  expansion  into wafer and  package-ready  device  production has been
spurred almost  entirely by requests from customers  whose epitaxial wafer needs
exceed their available in-house production capabilities.  The Company fabricates
wafers and package-ready devices at its facility in Somerset, New Jersey and has
a combined clean room area totaling 7,500 square feet.

     The  Company  is  working  with  its  customers  to  design,  engineer  and
manufacture  commercial  quantities  of  wafers  and/or  package-ready  compound
semiconductor  devices such as MR sensors,  HBTs, HEMTs,  FETs, HB LEDs, VCSELs,
solar cells and other electronic and  optoelectronic  devices.  In 1996, General
Motors and the Company entered into an agreement under which General Motors paid
the  Company  approximately  $1.6  million to  develop  and  enhance  certain MR
position sensors for commercial  production.  In June 1996, the Company achieved
positive  test  results  in  its  development  of MR  sensors  and  successfully
completed the General Motors Pre-Production  Approval Process in September 1996.
In November  1996,  the Company  received a purchase  order from General  Motors
pursuant to which it began production of these  package-ready  position sensors.
In January 1997,  the Company began  shipping these devices and had shipped over
2,000,000 devices as of September 30, 1997.

     In  addition,   the  Company  is  working   closely   with  several   large
telecommunications  concerns to assist these customers in developing  solar cell
and other process technology for use on their  communications  satellites.  As a
result of this  collaboration,  the Company's  technology  has produced  gallium
arsenide  solar  cells that are not only  approximately  50% more  efficient  in
light-to-power  conversion  than  silicon-based  solar  cells  but also are more
radiation-resistant.  The resulting  advance allows a satellite  manufacturer to
increase the useful life and payload  capacity of its satellites.  Over the last
two years,  the Company's  customers  have  purchased  several MOCVD  production
systems for this purpose.  In the summer of 1996, a customer  requested that the
Company begin  producing  epitaxial  wafers for use in the  manufacture of solar
cells for satellites.  In May 1997, the Company qualified its production systems
for the  manufacture  of such  wafers  and in June  1997  began  production  and
shipment of commercial  volumes of such wafers to this  customer.  Additionally,
the Company has  completed  an initial  process  development  phase with a large
telecommunications  concern. This collaboration has resulted in prototype wafers
for solar  cells that may lead to more  efficient  wafers  than those  currently
being used.

Customers

     The  Company's  customers  include  several of the  largest  semiconductor,
telecommunications and computer manufacturing  companies in the world. In fiscal
year 1995, two customers  accounted for more than 10% of the Company's revenues;
sales to these customers accounted for 28.9% and 11.5% of the Company's revenues
during  fiscal 1995. In fiscal year 1996,  only one customer  accounted for more
than 10% of the Company's  revenues;  sales to this customer accounted for 23.6%
of the  Company's  revenues  in fiscal  1996.  For the  fiscal  year  1997,  two
customers accounted for more than 10% of the Company's revenues;  sales to these
customers  accounted for 15.0% and 10.2% of the Company's revenues during fiscal
year 1997.

     In  fiscal  1996,  the  Company  adopted  a  comprehensive   Total  Quality
Management Program with special emphasis on total customer satisfaction.  In its
continuing effort to maintain and enhance its relationships  with its customers,
the Company is seeking ISO and QS 9000 quality certification.

Sales and Marketing

     The Company  markets and sells its products  through its direct sales force
in Europe,  North America and through  representatives and distributors in Asia.
In July  1995,  the  Company  signed  a  seven  year  exclusive  distributorship
agreement  with  Hakuto & Co.,  Ltd.  ("Hakuto")  , its  Asian  distributor  for
TurboDisc(TM)   system  products,   whose  territory   encompasses  seven  Asian
countries.  Hakuto has marketed and serviced the Company's  products since 1988,
is a minority shareholder in the Company, and Hakuto's Chairman of the Board and
CEO is a member of the Company's Board of Directors.

     International sales as a percentage of total sales in fiscal 1995, 1996 and
1997 were 36.0%, 42.5% and 42.0%,  respectively.  Sales to customers in the U.S.
in fiscal 1995, 1996 and 1997 were approximately,  $11.6 million,  $16.0 million
and $27.7 million, respectively,  while the Company's sales in Asia for the same
time periods were $4.0 million,  $8.2 million and $14.6  million,  respectively,
and  sales  in  Europe  were  $2.5  million,  $3.6  million  and  $5.5  million,
respectively. The Company receives all payments for all products and services in
U.S. dollars.

Service and Support

     The  Company  maintains  an  international   service  and  support  network
responsible  for  on-site   maintenance  and  process  monitoring  on  either  a
contractual or time-and-materials  basis.  Customers may purchase annual service
contracts  under which the Company is  required  to  maintain  an  inventory  of
replacement parts and to service the equipment upon the request of the customer.
The Company also sells  replacement parts from inventory for customer needs. The
Company  pursues a program of system  upgrades  for  customers  to increase  the
performance  of older  systems.  The Company  generally  does not offer extended
payment terms to its customers and generally  adheres to a warranty policy of up
to one year.  Consistent  with  industry  practice,  the  Company  maintains  an
inventory of components for servicing  systems in the field and it believes that
its  inventory  is  sufficient  to  satisfy   foreseeable   short-term  customer
requirements.

Research and Development

     To maintain and improve its competitive  position,  the Company's  research
and  development  efforts are focused on  designing  new  proprietary  products,
improving the performance of existing systems,  wafers and package-ready devices
and  reducing  costs in the  product  manufacturing  process.  The  Company  has
dedicated  14  in-house  EMCORE  TurboDiscTM   systems  for  both  research  and
production which are capable of processing virtually all compound  semiconductor
materials.  The research and development staff utilizes  state-of-the-art x-ray,
optical and electrical  characterization  equipment  which provide  instant data
allowing for  shortened  development  cycles and rapid  customer  response.  The
Company's  research and development  expenses in fiscal 1995, 1996 and 1997 were
approximately  $1.9 million,  $5.4 million and $9.0 million,  respectively.  The
Company  expects  that it will  continue  to  expend  substantial  resources  on
research and development.

Intellectual Property and Licensing

     The Company's success and competitive position both for production systems,
wafers and  package-ready  devices depend  materially on its ability to maintain
trade  secrets,  patents  and other  intellectual  property  protections.  Trade
secrets are  routinely  employed in the  Company's  manufacturing  processes.  A
"trade secret" is  information  that has value to the extent it is not generally
known,  not  readily  ascertainable  by others  through  legitimate  means,  and
protected in a way that  maintains  its  secrecy.  In order to protect its trade
secrets,  the Company takes certain  measures to ensure their  secrecy,  such as
executing non-disclosure agreements with its employees, customers and suppliers.

     To date,  the Company has been issued six U.S.  patents.  Provided that all
requisite maintenance fees are paid, these U.S. patents will expire between 2005
and 2013. None of these U.S. patents claim any material aspect of the current or
planned commercial versions of the Company's systems, wafers or devices.

Environmental Regulations

     The  Company is subject to  federal,  state and local laws and  regulations
concerning the use, storage, handling, generation, treatment, emission, release,
discharge and disposal of certain materials used in its research and development
and  production   operations,   as  well  as  laws  and  regulations  concerning
environmental  remediation  and  employee  health and  safety.  The  Company has
retained an  environmental  consultant to advise it in complying with applicable
environmental  and health and safety laws and regulations,  and believes that it
is currently,  and in the past has been, in substantial compliance with all such
laws and regulations.

 Backlog

     As of September 30, 1997, the Company had an order backlog of approximately
$24.4 million compared to backlog of $23.6 million as of September 30, 1996. The
Company  includes  in backlog  only  customer  purchase  orders  which have been
accepted by the Company and for which shipment  dates have been assigned  within
the  twelve  months to follow  and  research  contracts  that are in  process or
awarded.  Wafer and device agreements extending longer than one year in duration
are included in backlog only for the ensuing 12 months. Some of these agreements
currently  extend over five years. The Company receives partial advance payments
or irrevocable letters of credit on most production system orders.

Manufacturing

     The  Company's  manufacturing  operations  are  located  at  the  Company's
headquarters  in  Somerset,  New  Jersey and  include  systems  engineering  and
production,  wafer  fabrication,  and design  and  production  of  package-ready
devices. Many of the Company's  manufacturing  operations are computer monitored
or controlled, enhancing reliability and yield. The Company manufactures its own
systems and  outsources  some  components and  sub-assemblies,  but performs all
final system integration, assembly and testing.

Competition

     The  markets in which the  Company  competes  are highly  competitive.  The
Company  competes with several  companies  for sales of MOCVD systems  including
Aixtron,  Nippon-Sanso  and  Thomas  Swann.  The  primary  competitors  for  the
Company's wafer foundry include  Epitaxial  Products Inc., Kopin Corporation and
Q.E.D.  The Company also faces  competition  from  manufacturers  that implement
in-house systems for their own use. In addition,  the Company competes with many
research institutions and universities for research contract funding.

     The Company believes that the primary competitive factors in the markets in
which the Company's products compete are yield,  throughput,  capital and direct
costs, system  performance,  size of installed base, breadth of product line and
customer satisfaction, as well as customer commitment to competing technologies.
The  Company  believes  that in  order to  remain  competitive,  it must  invest
significant   financial   resources  in  developing  new  product  features  and
enhancements and in maintaining customer satisfaction worldwide.

Risk Factors

     Ownership  of the  Company's  Common Stock is subject to a number of risks,
including,  without limitation:  a history of operating losses,  fluctuations in
operating results, dependence on key personnel, increased competition,  reliance
on trade secrets, risk of technological obsolescence,  reliance on international
sales,  governmental  regulations  and  approvals,   environmental  regulations,
manufacturing and marketing capabilities,  uncertainty of additional funding and
certain anti-takeover provisions.


I
TEM 2.  PROPERTIES

     The Company's  executive office and  manufacturing  facility are located in
Somerset,  New Jersey,  where the Company  leases a 75,000 square foot facility.
This facility  lease expires on February 29, 2000. The Company has two five-year
renewal options.  The Company believes that its current facilities are adequate,
well maintained and in good condition.


ITEM 3.  LEGAL PROCEEDINGS

     The  Company  is aware of no pending or  threatened  litigation  against it
which would have a material adverse effect on its business,  financial condition
and results of operations.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Not applicable.



PART II.


ITEM 5.  MARKET  FOR THE  REGISTRANT'S  COMMON  EQUITY AND  RELATED  SHAREHOLDER
         MATTERS

     The Company's  Common Stock is quoted on the NASDAQ  National  Market under
the symbol  "EMKR".  The following  table sets forth the quarterly  high and low
sales prices for the Company's Common Stock since its initial public offering in
March 1997.

                   MARKET PRICE
- ---------------------------------------------------
     Quarters ended           High         Low
- ---------------------------------------------------

March 31, 1997               12 1/4      10 1/3
June 30, 1997                19 1/2      11
September 30, 1997           25          16 1/4
- ---------------------------------------------------

     The Company has never  declared or paid dividends on its Common Stock since
its  formation.  The Company  currently  does not intend to pay dividends in the
foreseeable  future so that it may reinvest its earnings in the  development  of
its  business.  The payment of  dividends,  if any, in the future will be at the
discretion of the Board of Directors.

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

     The selected  financial  data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and notes thereto included
elsewhere in this report.  The following table shows selected financial data for
the most recent five years:

<TABLE>
<CAPTION>


(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)                          YEARS ENDED SEPTEMBER 30,
                                                 ------------------------------------------------------------
                                                    1993       1994        1995         1996        1997
                                                    ----       ----        ----         ----        ----
<S>                                                 <C>         <C>        <C>          <C>         <C>     
STATEMENT OF INCOME DATA:
     Revenue                                        $ 8,180     $ 9,038    $ 18,137     $ 27,779    $ 47,753
        Cost of sales                                 4,772       5,213       9,927       18,607      30,094
                                                 ------------------------------------------------------------
        Gross profit                                  3,408       3,825       8,210       9,172      17,659
                                                                              
     Operating expenses:
        Selling, general and administrative           2,849       2,645       4,452       6,524       9,347
        Research and development                      1,024       1,064       1,852       5,401       9,001
                                                 ------------------------------------------------------------
            Total operating expenses                  3,873       3,709       6,304       11,925      18,348
                                                 ------------------------------------------------------------
     Operating (loss) income                          (465)         116       1,906       (2,753)       (689)
                                                        242         286         255          297         519
     Imputed warrant interest, non-cash                   -           -           -          126       3,988
     Other (income) expense                           (100)           -          10            -           -
                                                 ------------------------------------------------------------
     (Loss) income before income taxes and
        extraordinary item                            (607)       (170)       1,641       (3,176)     (5,196)
     Provision for income taxes                           -           -         125            -         137
     Extraordinary loss                                   -           -           -            -         286
                                                 ------------------------------------------------------------
     Net (loss) income                             $  (607)    $  (170)   $   1,516    $ (3,176)    $ (5,619)
                                                 ============================================================
     Net (loss) income per share                   $ (0.40)    $ (0.11)   $    0.48    $   (0.72)   $  (1.12)
                                                 ============================================================
     Shares used in computing net (loss)
        income per share                              1,502       1,502       3,145        4,438       5,030
                                                 ------------------------------------------------------------

(IN THOUSANDS)                                                       AS OF SEPTEMBER 30,
                                                 ------------------------------------------------------------
                                                    1993       1994        1995         1996        1997
                                                    ----       ----        ----         ----        ----
BALANCE SHEET DATA:
     Working capital                               $    840     $ 1,041   $   2,208    $   1,151    $ 12,156
     Total assets                                     3,171       5,415      10,143       20,434      39,463
     Long-term obligations                            2,000       3,000       3,000        8,947       7,577
                                                                                                  
     Redeemable preferred stock                      14,825      16,274           -            -           -
     Shareholders' equity (deficit)                      12         (96)      1,509          522      21,831
                                                 ------------------------------------------------------------
</TABLE>


<PAGE>




ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Overview

     EMCORE,  founded  in 1984,  designs  and  develops  compound  semiconductor
materials and process  technology  and is a leading  manufacturer  of production
systems used to fabricate compound semiconductor wafers. Compound semiconductors
are  used  in  a  broad  range  of  applications  in  wireless   communications,
telecommunications,  computers,  and consumer and  automotive  electronics.  The
Company  provides  its  customers,  both  in the US  and  internationally,  with
materials  science  expertise,  process  technology  and compound  semiconductor
production  systems  that  enable  the  manufacture  of  commercial  volumes  of
high-performance electronic and optoelectronic devices. Recently, in response to
the growing need of its customers to cost  effectively get to market faster with
higher  volumes of new and  improved  high  performance  products,  the  Company
expanded its product offerings to include the design, development and production
of compound semiconductor wafers and package-ready devices.

RESULTS OF OPERATIONS:

     The following  table sets forth the Statement of Income Data of the Company
expressed as a percentage of total revenues for the fiscal years ended September
30, 1995, 1996 and 1997.

<TABLE>
<CAPTION>

                                                                                     YEARS ENDED SEPTEMBER 30,
                                                                     ----------------------------------------------------
                                                                             1995              1996              1997
                                                                             ----              ----              ----
<S>                                                                          <C>               <C>               <C>   
Revenues                                                                     100.0%            100.0%            100.0%
Cost of Sales                                                                 54.8              67.0              63.0
                                                                     ---------------   ---------------   -------------
        Gross profit                                                          45.2              33.0              37.0
Operating expenses:
        Selling, general and administrative                                   24.5              23.5              19.6
        Research and development                                              10.2              19.4              18.8
                                                                     ---------------   ---------------   -------------
Operating income (loss)                                                       10.5              (9.9)             (1.4)
Stated interest expense, net                                                   1.4               1.1               1.1
Imputed warrant interest, non-cash                                             -                 0.4               8.4
Other expense (income)                                                         0.1               -                 -
                                                                     ---------------   ---------------   -----------
        Income (loss) before income taxes and extraordinary item               9.0             (11.4)            (10.9)
Provision for income taxes                                                     0.6               -                 0.3
                                                                     ---------------   ---------------   -------------
        Net income (loss) before extraordinary item                            8.4             (11.4)            (11.2)
Extraordinary item                                                             -                 -                (0.6)
                                                                     ---------------   ---------------   --------------
        Net income (loss) before extraordinary item                            8.4%            (11.4)%           (11.8)%
                                                                     ==============    ===============   ===============
</TABLE>


COMPARISON OF FISCAL YEARS ENDED SEPTEMBER 30, 1996 AND 1997

Revenues

     The Company's  revenues for fiscal 1997 increased  71.9% from $27.8 million
to $47.8  million  for the fiscal year ended  September  30,  1996.  The revenue
increase was  primarily  attributable  to increased  demand of MOCVD systems and
package-ready  devices,  as well as the  introduction of compound  semiconductor
wafer products.  International sales accounted for approximately 42.5% and 42.0%
of  revenues  for  the  fiscal  years  ended   September   30,  1996  and  1997,
respectively.

     The Company  believes  that in the future its  revenues  and  consequential
results of  operations  in a given  quarterly  period  could be  impacted by the
timing of customer  development  projects  and related  purchase  orders for the
Company's varied  products,  new merchandise  announcements  and releases by the
Company,  and  conditions  in  the  economy,   generally  and  in  the  compound
semiconductor industry environment, specifically.

Cost of Sales/Gross Profit

     Cost  of  sales  includes  direct  material  and  labor  costs,   allocated
manufacturing and service overhead,  and installation and warranty costs.  Gross
profit  increased from 33.0% of revenue to 37.0% of revenue for the fiscal years
ended  September 30, 1996 and 1997,  respectively.  The gross profit  percentage
increase  was  attributable  to higher  margins on wafer,  device and  licensing
revenues.

Selling, General and Administrative

     Selling,  general and administrative  expenses increased by 43.3% from $6.5
million for the year ended  September  30,  1996,  to $9.3  million for the year
ended  September  30,  1997.  The  increase  was largely due to sales  personnel
headcount  increases  to support both  domestic and foreign  markets and general
headcount additions to sustain the internal administrative support necessary for
the Company's  increased  business as well as higher  expenses  attributable  to
increased  revenues.   As  a  percentage  of  revenue,   selling,   general  and
administrative  expenses  decreased  from 23.5% of revenue during fiscal 1996 to
19.6% of revenue for fiscal 1997.

Research and Development

     Research and development  expenses increased by 66.6% from $5.4 million for
the year ended  September 30, 1996, to $9.0 million for the year ended September
30, 1997.  The increase was  primarily  attributable  to increased  staffing and
equipment  costs  necessary  to  enhance  current   products  and  research  and
development  activities for the emulation of the Company's two new product lines
(epitaxial  wafers and  package-ready  devices).  As a  percentage  of  revenue,
research and development  expenses decreased from 19.4% of revenue during fiscal
1996 to 18.8% of  revenue  for  fiscal  1997.  To  maintain  growth  and  market
leadership in epitaxial technology,  the Company expects to continue to invest a
significant amount of its resources in research and development.

Operating Income (Loss)

     During fiscal 1997,  operating  loss  decreased $2.1 million from a loss of
$2.8 million for the fiscal year ended  September  30,  1996,  to a loss of $0.7
million for the year ended  September 30, 1997. The change in operating loss was
primarily due to higher revenues generating greater overall gross profit.

Other Expense

     During  fiscal 1996,  the Company  issued  detachable  warrants  along with
subordinated notes to certain of its existing shareholders. In the first quarter
of fiscal year 1997, the Company also issued detachable warrants in return for a
$10.0 million demand note facility (the "Facility") guarantee by the Chairman of
the Board of the Company, who provided collateral for the Facility.  The Company
subsequently  assigned a value to these  detachable  warrants  issued  using the
Black-Scholes  Option Pricing Model. The Company recorded the subordinated notes
at a carrying value that is subject to periodic  accretions,  using the interest
method,  and reflected the Facility's  detachable warrant value as debt issuance
cost. The consequent  expense of these  subordinated  note accretion amounts and
the now terminated  Facility's debt issuance cost is charged to "Imputed warrant
interest, non-cash," and amounted to approximately $126,000 and $4.0 million for
the fiscal years ended September 30, 1996 and 1997, respectively.

     Borrowings  totaling  $8.0 million under the Facility were utilized to fund
capital   expenditures  in  connection  with  the  build-out  of  the  Company's
manufacturing facility during the six months ended March 31, 1997. The resultant
interest  expense was the primary  reason for the  increase in "Stated  interest
expense" for the year ended  September 30, 1997.  The  outstanding  $8.0 million
under this demand note facility was repaid in March 1997.

Extraordinary Item

     The Company repaid $10.0 million of its outstanding debt with proceeds from
its IPO. The entire $8.0 million outstanding of its Facility was repaid and $2.0
million was used to repay a portion of the  Company's  outstanding  subordinated
notes due May 1,  2001.  In  connection  with this  discharge  of the  Company's
subordinated notes, an extraordinary loss of $286,000 was recognized.

Income Taxes

     The  Company's  effective  income tax rate was 2.6% in fiscal  1997 up from
0.0% in fiscal  1996.  The  effective  rate was 7.6% in fiscal  1995 which was a
direct result of AMT and state taxes.  The lower  effective rate in fiscal 1996,
relative to fiscal 1997, was attributable to a federal income tax benefit offset
by net operating loss and expenses not utilized or deductible for tax purposes.

Net Income (Loss)

     Net loss increased $2.4 million from $3.2 million for the fiscal year ended
September  30,  1996,  to $5.6 million for the fiscal year ended  September  30,
1997.   This   year-to-date   increase  was   primarily   attributable   to  the
aforementioned $4.0 million of non-cash imputed warrant interest associated with
certain financing transactions.

COMPARISON OF FISCAL YEARS ENDED SEPTEMBER 30, 1995 AND 1996

     Revenues.  Revenues  increased  53.6% from $18.1  million in fiscal 1995 to
$27.8  million  in  fiscal  1996.  Revenues  derived  from  international  sales
increased  81.5%  from $6.5  million in fiscal  1995 to $11.8  million in fiscal
1996.  These  increases  were  primarily  due to greater  sales of the Company's
compound  semiconductor  production systems resulting from broader acceptance of
these   products,   coupled  with  an  increased   market  demand  for  compound
semiconductor devices, and to a lesser extent, increased service revenues, which
include  parts and  service  contracts,  resulting  from the  Company's  growing
installed  base. In addition,  in fiscal 1996, the Company's  research  contract
revenues  increased as a result of an  arrangement  with General  Motors whereby
General  Motors paid the Company $1.6 million to develop and enhance  certain MR
package-ready devices for commercial production.

     Cost of Sales/Gross Profit. Cost of sales increased 87.9% from $9.9 million
in fiscal 1995 to $18.6  million in fiscal  1996.  Gross profit  decreased  from
45.2% of  revenues in fiscal  1995 to 33.0% of  revenues  in fiscal  1996.  This
decrease was  principally  attributable  to: (i) the sale of three  systems at a
loss for strategic  reasons;  (ii)  competitive  pricing  conditions  prevailing
generally in the market and a resulting decrease in the average selling price of
the Company's  production systems;  (iii) increased  production costs associated
with  system  enhancements;  and  (iv)  an  increase  in the  Company's  cost of
obtaining  certain  components.  The sales for  strategic  reasons  were made to
several leading  universities  in key geographic  areas in order to increase the
Company's  visibility  and to  enhance  its  reputation  in the  technology  and
research community. The Company believes that the three sales made for strategic
reasons resulted in an approximately 4% decline in gross profit in fiscal 1996.

     Selling,  General and Administrative.  Selling,  general and administrative
expenses  increased  44.4% from $4.5  million in fiscal 1995 to $6.5  million in
fiscal 1996.  This increase was primarily  due to increased  marketing  expenses
associated with the Company's  higher level of production  systems sales and the
hiring of additional personnel to support the Company's expanded activities.  As
a percentage of revenues, selling, general and administrative expenses decreased
from 24.5% in fiscal 1995 to 23.5% in fiscal 1996.

     Research and  Development.  Research  and  development  expenses  increased
184.2% from $1.9  million in fiscal 1995 to $5.4  million in fiscal  1996.  This
increase was primarily due to the Company's  increased  research and development
activities  relating to the  initiation  of its wafer and  package-ready  device
product lines. As a percentage of revenues,  research and  development  expenses
increased from 10.2% in fiscal 1995 to 19.4% in fiscal 1996.

Backlog

     The  Company's  order  backlog  increased  3.4% from $23.6  million for the
fiscal year ended September 30, 1996, to $24.4 million for the fiscal year ended
September  30,  1997.  The Company  includes in backlog only  customer  purchase
orders which have been accepted by the Company and for which shipment dates have
been assigned within the twelve months to follow and research contracts that are
in process or awarded.  Wafer and device contract  agreements  extending  longer
than one year in duration are included in backlog only for the ensuing 12 months
and 3 months, respectively.  Some of these agreements currently extend over five
years. The Company  receives partial advance payments or irrevocable  letters of
credit on most  production  system  orders  and has never  experienced  an order
cancellation.  Although the Company has increased its capacity to meet continued
increased  production needs,  there can be no assurance that the Company will be
consistently able to increase its capacity to meet its scheduled needs.

Liquidity And Capital Resources

     Cash and cash  equivalents  increased  by $2.3 million from $1.4 million at
September 30, 1996, to $3.7 million at September 30, 1997.  For fiscal 1997, net
cash used by operations amounted to $6.9 million, primarily due to the Company's
increase in accounts  receivable,  decrease  in  accounts  payable and  advanced
billings,  offset by an increase in accrued expenses and certain non-cash items,
including depreciation,  amortization, and detachable warrant accretion and debt
issuance  cost.  Net cash  used in  investment  activities  during  fiscal  1997
amounted to $11.9 million due to the purchase and  manufacture  of new equipment
for the  facilitation  of the Company's  wafer and package ready device  product
lines and to new facility clean room  modifications  and  enhancements.  For the
fiscal  year  ended  September  30,  1997,  net cash from  financing  activities
amounted to $21.1  million,  primarily  the $22.8  million net proceeds from the
Company's  initial public offering,  accounted for the majority of the resulting
net cash increase.

     On March 31, 1997, the Company entered into a $10.0 million  revolving loan
and security  agreement  (the  "Agreement")  with First Union National Bank. The
Agreement  bears  interest at the rate of First Union's prime rate plus 50 basis
points and expires on September  30,  1998.  There are  presently no  borrowings
under the Agreement.

     The  Company  believes  that  its  current  liquidity,  together  with  the
Agreement, will be sufficient to meet its cash needs for working capital through
fiscal 1998.  Thereafter,  if cash generated from  operations is insufficient to
satisfy the  Company's  liquidity  requirements,  the Company may be required to
raise  funds  through  equity  or debt  offerings  or obtain  additional  credit
facilities.  Additional  funding  may not be  available  when needed or on terms
acceptable  to the Company,  which could have a material  adverse  effect on the
Company's financial conditions and operations.

Staffing

     At September 30, 1997, the Company  employeed 271 full-time  employees,  up
46.5% from 185 as of  September  30, 1996 and up 243.0% from the 79 employees at
fiscal 1995. The increase in the number of employees  since the end of 1995 is a
direct result of the Company's increased  manufacturing  operation needs to meet
the  demand  for its  compound  semiconductor  production  systems,  wafers  and
package-ready  devices.  None  of  the  Company's  employees  are  covered  by a
collective bargaining agreement. The Company considers its relationship with its
employees to be good.

Outlook

     On December 5, 1997, in line with the Company's  strategic growth plan, the
Company purchased the privately-held  MicroOptical Devices, Inc. ("MODE").  MODE
is one of the  market  leaders in the design  and  development  of  high-quality
components and subsystems based on VCSEL technology,  which is expected to offer
superior   performance  and  higher   efficiency  over   conventional   compound
semiconductor technologies.

     MODE's microlasers and optical  subsystems provide design,  performance and
significant   cost  advantages  over  their  technical   predecessors   such  as
edge-emitting solid state lasers. Through the integration of VCSELs with leading
OEM systems design, VCSELs are expected to provide enhanced performance benefits
to market  applications  such as Internet  access,  onboard  photonics,  gigabit
ethernet,  local area  networks,  microarea  networks such as  chip-to-chip  and
board-to-board  applications,  DVD and fiberoptic switching. MODE's Gigalase(TM)
and Gigarray(TM)  technology  developments to date are currently being evaluated
by a variety of domestic and  international  OEM  customers in the areas of data
communications, telecommunications, optical storage and sensing.

     The  Company  believes  that  VCSEL  technology  may  address  a number  of
technical  bandwidth  challenges  applicable  to the  high-speed  computing  and
communications markets,  allowing  optoelectronic  applications to perform their
functions  at higher  speeds  with lower costs than  traditional  optoelectronic
systems. It believes that with the acquisition of MODE, the Company will be well
positioned to actively  participate in the  development  of the  next-generation
optoelectronic laser market which is estimated to grow to one billion dollars by
the year 2000.

     Under the terms of the agreement,  the Company issued  1,461,866  shares of
Common  Stock,  200,966  common stock  purchase  options and 47,118 common stock
purchase warrants in exchange of 100% of the outstanding  capital stock of MODE.
The  acquisition  purchase price amounted to  approximately  $32.8 million.  The
acquisition  will be recorded  under the  purchase  method of  accounting  and a
significant  portion of the purchase price will be taken as a one time charge of
approximately  $29.3  million  by  the  Company  related  to  the  write-off  of
in-process research and development.  The proposed transaction is expected to be
accretive   within  the  first  twelve  months.   Upon  the  completion  of  the
transaction,  MODE is expected to operate as a separate wholly-owned  subsidiary
of EMCORE.

     In fiscal 1997, the Company entered into a non-exclusive and non-refundable
technology licensing and royalty agreement with Uniroyal Technology  Corporation
("UTC") for the process technology to manufacture high brightness light emitting
diodes ("LEDs").  During fiscal 1997,  revenue associated with the UTC licensing
agreement  amounted  to $2.5  million.  UTC's  Chairman  and CEO is a member  of
EMCORE's  Board of Directors and EMCORE's  Chairman is on the Board of Directors
of UTC.  Over the next 12 to 36  months,  the  Company  may  realize  up to $5.5
million  in  license  fees  and  related  royalties  in  connection  with  these
agreements.  Additionally, the Company and a wholly-owned subsidiary of UTC have
agreed in  principle  to form a new  venture  in which the  Company  will have a
minority interest,  for the production and marketing of products related to this
licensed technology. Subsequent to September 30, 1997, the Company's outstanding
related party  accounts  receivable  was paid in full and the payments under the
terms of the licensing agreement are not refundable.

     Historically  the  Company  has  generated  significant  revenues  from its
TurboDisc(TM)  product  line from  Asian  customers.  Continued  economic  and
currency-related  uncertainty  in the region could impact the  Company's  future
TurboDisc(TM)  sales in this  market.  However,  the Company  believes  that a
potential drop in such sales could allow the Company to begin selling  epitaxial
wafers and  package-ready  devices to this market  despite the recent  financial
volatility in the area.

     The  Company  believes  it  possesses  the  technological   "know  how"  to
capitalize  on all of  these  market  opportunities.  However,  there  can be no
assurance  that the Company will maintain  sufficient  growth in sales levels to
support the associated labor, equipment and facility costs.

Information Relating to Forward Looking Statements

     Management's  Discussions and Analysis and the business description in Item
1 of this Report include  forward-looking  statements that reflect the Company's
current  expectations or beliefs concerning future results and events. The words
"expects", "intends", "believes",  "anticipates",  "likely", "will", and similar
expressions   identify   forward-looking   statements.   These   forward-looking
statements  are  subject to certain  risks and  uncertainties  which could cause
actual  results and events to differ  materially  from those  anticipated in the
forward-looking statements.  Factors that might cause such a difference include,
but are not limited to,  statements  about future  financial  performance of the
Company and MODE and the effect of the  acquisition  on the Company's  business;
continued acceptance of the Company's MOCVD technologies,  as well as the market
success of VCSEL  technologies;  the Company's  ability to achieve and implement
the planned enhancements of products and services on a timely and cost-effective
basis  and  customer   acceptance  of  those  product   introductions;   product
obsolescence  due to  advances  in  technology  and  shifts  in  market  demand;
competition and resulting price  pressures;  business  conditions;  economic and
stock market  conditions,  particularly in the U.S., Europe and Japan, and their
impact on sales of the Company's  products and services;  risks  associated with
foreign operations,  including currency and political risks; and such other risk
factors as may have been or may be included  from time to time in the  Company's
reports filed with the Securities and Exchange Commission.




<PAGE>



I
TEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>

                                                    EMCORE CORPORATION
                                                      BALANCE SHEET
                                            AS OF SEPTEMBER 30, 1996 AND 1997
<CAPTION>

                                                                                       ------------------    -------------
                                                                                             1996                1997
                                                                                       ------------------    -------------
                                        ASSETS
<S>                                                                                         <C>              <C>         
Current assets:
   Cash and cash equivalents                                                                  $1,367,386     $  3,653,145
   Restricted cash                                                                                     -
                                                                                                                  312,500
   Accounts receivable, net of allowance for doubtful accounts of approximately
     $310,000 and $697,000 at September 30, 1996 and 1997, respectively                        3,025,171        8,439,704
   Accounts receivable - related party                                                                 -        2,500,000
   Inventories, net
                                                                                               7,645,040        7,185,626
   Costs in excess of billings on uncompleted contracts                                           19,322                -
   Prepaid expenses and other current assets                                                      59,935          120,393
                                                                                       ------------------    -------------
Total current assets
                                                                                              12,116,854       22,211,368
Property and equipment, net
                                                                                               7,796,832       16,797,833
Other assets, net
                                                                                                 520,735          453,608
                                                                                       ------------------    -------------

        Total assets                                                                         $20,434,421      $39,462,809
                                                                                       ==================    =============
                         LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                                           $5,660,438       $4,050,216
   Accrued expenses
                                                                                               1,986,646        3,867,589
   Advanced billings
                                                                                               3,306,462        1,998,183
   Unearned service revenue
                                                                                                  12,315          124,279
   Capitalized lease obligation - current                                                              -           15,030
                                                                                       ------------------    -------------
        Total current liabilities
                                                                                              10,965,861       10,055,297
Long-term debt:
   Subordinated notes, net
                                                                                               8,946,971        7,499,070
   Capitalized lease obligation                                                                        -           77,870
                                                                                       ------------------    -------------

        Total liabilities                                                                     19,912,832       17,632,237
                                                                                       ------------------    -------------
Commitments and contingencies
Shareholders' equity:
Common stock, no par value,  23,529,411 shares  authorized,  2,994,461 shares
   issued and outstanding in 1996 and 6,000,391 shares issued and outstanding in
   1997                                                                                       18,977,566       45,816,774
Accumulated deficit                                                                          (18,158,291)     (23,777,658)
                                                                                       ------------------    -------------
                                                                                                 819,275       22,039,116
Notes receivable from warrant issuances and stock sales                                         (297,686)        (208,544)
                                                                                       ------------------    -------------
        Total shareholders' equity                                                               521,589       21,830,572
                                                                                       ------------------    -------------
        Total liabilities and shareholders' equity                                           $20,434,421      $39,462,809
                                                                                       ==================    =============

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>




<PAGE>

<TABLE>

                                               EMCORE CORPORATION
                                            STATEMENTS OF OPERATIONS
                             FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997

                                                        ------------------   ----------------- -----------------
                                                              1995                 1996              1997
                                                        ------------------   ----------------- -----------------
<S>                                                            <C>                 <C>             <C>         
Revenues:
   Systems and materials                                      $16,616,236         $24,066,506       $45,591,287
   Services                                                     1,520,431           3,712,379         2,161,285
                                                        ------------------   ----------------- -----------------

        Total revenues                                         18,136,667          27,778,885        47,752,572
Cost of sales:
   Systems and materials                                        8,782,674          16,132,335        29,308,788
   Services                                                     1,144,297           2,474,085           785,227
                                                        ------------------   ----------------- -----------------

        Total cost of sales                                     9,926,971          18,606,420        30,094,015
                                                        ------------------   ----------------- -----------------

        Gross profit                                            8,209,696           9,172,465        17,658,557
                                                        ------------------   ----------------- -----------------

Operating expenses:
   Selling, general and administrative                          4,451,534           6,524,482         9,346,329
   Research and development                                     1,851,798           5,401,413         9,001,188
                                                        ------------------   ----------------- -----------------

        Operating income (loss)                                 1,906,364          (2,753,430)         (688,960)
                                                        ------------------   ----------------- -----------------
Other expenses:
   Stated interest, net of interest income of $84,101,
        $71,460 and $236,945 for the years ended
        September 30, 1995, 1996 and 1997, respectively           255,384             297,093           519,422
   Imputed warrant interest, non-cash                                   -             125,791         3,988,390
   Other                                                           10,000                   -                 -
                                                        ------------------   ----------------- -----------------
        Income (loss) before income taxes and
            extraordinary item                                  1,640,980          (3,176,314)       (5,196,772)
Provision for income taxes                                        125,000                   -           137,000  
                                                        ------------------   ----------------- -----------------
        Net income (loss) before extraordinary item             1,515,980          (3,176,314)       (5,333,772) 
                                                                                  
Extraordinary item - loss on early extinguishment of
   debt                                                                 -                   -           285,595
                                                        ------------------   ----------------- -----------------
        Net income (loss)                                      $1,515,980          $(3,176,314)    $(5,619,367)
                                                        ==================   ================= =================

Per share data:
 Shares used in computation of net income (loss)                3,145,292           4,438,403         5,029,806
Net income (loss) per share before extraordinary item               $0.48             $(0.72)           $(1.06)
                                                        ==================   ================= =================
Net income (loss) per share                                         $0.48             $(0.72)           $(1.12)
                                                        ==================   ================= =================

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>


<PAGE>

<TABLE>
                                                   EMCORE CORPORATION
                                      STATEMENTS OF SHAREHOLDERS' (DEFICIT) EQUITY
                                         AS OF SEPTEMBER 30, 1995, 1996 AND 1997
<CAPTION>
                                                                                                                             
                                                                                                                             
                                         Common Stock                     Class I Preferred Stock            Accumulated     
                               ----------------------------------------------------------------------------
                                   Shares           Amount          Shares        Amount        Discount       Deficit       
                               ----------------------------------------------------------------------------------------------
<S>                                  <C>        <C>                 <C>       <C>           <C>           <C>            
BALANCE AT                                                                                                                 
   SEPTEMBER 30, 1994                  58,364     $   301,924         693,900   $  1,235,142  $ 934,454)    $ (16,497,957) 

Warrants exercised and
   conversions                         30,586          92,554         528,450                                              

Repurchase of Class I
   Preferred Stock                                                                                                         

November 1994 preferred
 stock  conversions  
 into common stock 
 and retirement of
 preferred treasury 
 shares                               149,572      15,350,689     (1,222,350)    (1,235,142)       934,454                 

August 1995 conversion
   of Class A preferred
   stock into common
   stock                            2,755,939         892,399                                                              

Net income                                                                                                      1,515,980  
                               --------------------------------------------------------------------------------------------
BALANCE AT
     SEPTEMBER 30, 1995             2,994,461      16,637,566               -              -             -    (14,981,977) 

Issuance of common
   stock purchase
   warrants                                         2,340,000                                                              

Notes receivable due
   from shareholders in
   connection with
   issuance of detachable
   warrants                                                                                                                

Net loss                                                                                                       (3,176,314) 
                               --------------------------------------------------------------------------------------------
BALANCE AT
   SEPTEMBER 30, 1996               2,994,461      18,977,566               -              -             -    (18,158,291) 

Issuance of common
   stock purchase
   warrants                                         3,601,455                                                              

Issuance of common
   stock in initial public
   offering, net of
   issuance cost of
   $3,110,345                       2,875,000      22,764,655                                                              

Issuance of common
   stock on exercise
   of warrants                         94,124         384,027                                                              

Issuance of common
   stock on exercise
   of stock options                    34,965          53,640                                                              

Redemptions of notes
   receivable from
   shareholders                                                                                                            

Forgiveness of notes
   receivable from
   shareholder                                                                                                             

401(k) matching
   contribution                         1,841          35,431                                                              

Net loss                                                                                                        (5,619,367)
                               --------------------------------------------------------------------------------------------
BALANCE AT
   SEPTEMBER 30, 1997            $  6,000,391   $ 45,816,774               -              -             -    $(23,777,658) 
                               ============================================================================================

<PAGE>
STATEMENTS OF SHAREHOLDERS (DEFICIT) EQUITY (CONTINUED)                                                                           
- --------------------------------------------------------
<CAPTION>

                                               Shareholders'      Total
                                    Treasury       Notes      Shareholders'         
                                      Stock      Receivable    Equity/(Deficit)       
                                    -----------------------------------------       
<S>                              <C>            <C>            <C>
BALANCE AT                                                                   
   SEPTEMBER 30, 1994             $  (28,104)    $(146,107)     (16,069,556) 
                                                                             
Warrants exercised and                                                       
   conversions                                                      92,554   
                                                                             
Repurchase of Class I                                                        
   Preferred Stock                   (12,645)                      (12,645)  
                                                                             
November 1994 preferred                                                      
 stock  conversions                                                          
 into common stock                                                           
 and retirement of                                                           
 preferred treasury                                                          
 shares                               40,749                    15,090,750   
                                                                             
August 1995 conversion                                                       
   of Class A preferred                                                      
   stock into common                                                         
   stock                                                           892,399   
                                                                             
Net income                                                       1,515,980   
                                 ------------------------------------------- 
                                                                             
BALANCE AT                                                                   
     SEPTEMBER 30, 1995                    -      (146,107)       1,509,482  
                                                                             
Issuance of common                                                           
   stock purchase                                                            
   warrants                                                       2,340,000  
                                                                             
Notes receivable due                                                         

   from shareholders in                                                      
   connection with                                                           
   issuance of detachable                                                    
   warrants                                       (151,579)       (151,579)  
                                                                             
Net loss                                                        (3,176,314)  
                                 ------------------------------------------- 
                                                                             
BALANCE AT                                                                   
   SEPTEMBER 30, 1996                      -      (297,686)         521,589  
                                                                             
Issuance of common                                                           
   stock purchase                                                            
   warrants                                                       3,601,455  
                                                                             
Issuance of common                                                           
   stock in initial public                                                   
   offering, net of                                                          
   issuance cost of                                                          
   $3,110,345                                                    22,764,655  
                                                                             
Issuance of common                                                           
   stock on exercise                                                         
   of warrants                                                      384,027  
                                                                             
Issuance of common                                                           
   stock on exercise                                                         
   of stock options                                                  53,640  
                                                                             
Redemptions of notes                                                         
   receivable from                                                           
   shareholders                                      31,842          31,842  
                                                                             
Forgiveness of notes                                                         
   receivable from                                                           
   shareholder                                       57,300          57,300  
                                                                             
401(k) matching                                                              
   contribution                                                      35,431  
                                                                             
Net loss                                                         (5,619,367) 
                                 ------------------------------------------- 
BALANCE AT                                                                   
   SEPTEMBER 30, 1997                      -  $  (208,544)     $21,830,572   
                                 =========================================== 
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

<PAGE>

<TABLE>
                                               EMCORE CORPORATION
                                            STATEMENTS OF CASH FLOWS
                              FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
<CAPTION>
                                                           1995                 1996                 1997
                                                     ------------------  -------------------  --------------------
<S>                                                     <C>                  <C>                   <C>       
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                      $     1,515,980    $     (3,176,314)    $      (5,619,367)
Adjustments to reconcile net income (loss) to
   net cash provided by (used for) operating
   activities:
        Depreciation and amortization                          887,132            1,871,016             3,187,755
        Provision for doubtful accounts                         95,430              146,418               515,000
        Provision for inventory valuation                       15,379              105,000               120,000
        Detachable warrant accretion and debt
        issuance cost                                                -              125,792             3,988,390
        Extraordinary loss on early extinguishment                   -                    -
        of debt                                                      -                    -               285,595
        401(k) matching contribution                                 -                    -                35,431
        Write-off note receivable due from
        shareholder                                                  -                    -                57,300
Change in assets and liabilities:
        Accounts receivable - trade                           (353,895)          (1,041,956)           (5,929,533)
        Accounts receivable - related party                          -                    -            (2,500,000)
        Inventories                                         (2,209,540)          (4,410,566)              339,414
        Costs in excess of billings on uncompleted
          contracts                                             17,282              (2,882)                19,322
        Prepaid expenses and other current assets              (18,858)             (26,784)              (60,458)
        Other assets                                            (8,988)            (468,565)               27,568
        Accounts payable
                                                             1,100,338            3,398,078            (2,029,154)
        Accrued expenses                                       538,719              777,899             1,880,943
        Advanced billings                                    1,176,831            1,122,667            (1,308,279)
        Billings in excess of costs on uncompleted                                               
          contracts                                            306,359             (306,359)                    -
        Unearned service revenue                                     -               12,315               111,964
                                                     ------------------  -------------------  --------------------
Total adjustments                                            1,546,189            1,302,073            (1,258,742)
                                                     ------------------  -------------------  --------------------

Net cash and cash equivalents
       provided by (used for) operating activities           3,062,169           (1,874,241)           (6,878,109)
                                                     ------------------  -------------------  --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of property, plant, and equipment             (1,316,968)          (7,090,869)          (11,631,642)
     Funding of Restricted Cash                                      -                    -              (312,500)
                                                     ------------------  -------------------  --------------------

Net cash and cash equivalents used for
     investing activities                                   (1,316,968)          (7,090,869)          (11,944,142)
                                                     ------------------  -------------------  --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from initial public offering, net of
          issuance cost of $3,110,345                                -                    -            22,764,655
     Proceeds from demand note facility                              -                    -             8,000,000
     Proceeds from subordinated note issuance                        -           11,009,600                     -
     Payments on demand note facility and
       subordinated debt                                             -                    -          (10,000,000)
     Proceeds from exercise of stock purchase
       warrants                                                102,554                    -                85,121
     Proceeds from exercise of stock options                         -                    -                53,640
     Repurchase of Class I preferred stock                     (12,645)                   -                     -
     Payments on capital lease obligations                           -          (3,000,000)                (5,723)
     Reduction in notes receivable from shareholders                 -                    -               210,317
                                                     ------------------  -------------------  --------------------
Net cash and cash equivalents provided by
      financing activities                                      89,909            8,009,600            21,108,010
                                                     ------------------  -------------------  --------------------

Net increase (decrease) in cash and cash equivalents         1,835,110             (955,510)            2,285,759
Cash and cash equivalents at beginning of year                 487,786            2,322,896             1,367,386
                                                     ------------------  -------------------  --------------------
Cash and cash equivalents at end of year                    $2,322,896           $1,367,386            $3,653,145
                                                     ==================  ===================  ====================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest                                        $285,413             $276,012              $599,925
Cash paid for income taxes                                           -               55,000                     -
Non-cash expenditures for purchases of property and
    equipment included in accounts payable                           -              328,000               418,932

Reference  is made to  Note 7 -  Long-Term  Debt - for  disclosure  relating  to
certain non-cash warrant issuance.

Reference is made to Note 10 - Stockholders' Equity - for disclosure relating to
certain  non-cash equity  transactions.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>


<PAGE>
                               EMCORE Corporation

                          Notes to Financial Statements

NOTE 1.  DESCRIPTION OF BUSINESS

     EMCORE is a designer and developer of compound semiconductor  materials and
process  technology and a manufacturer  of production  systems used to fabricate
compound semiconductor wafers. Compound semiconductors are used in a broad range
of applications in wireless communications,  telecommunications,  computers, and
consumer and automotive electronics. The Company has recently capitalized on its
technology  base by  expanding  into  the  design  and  production  of  compound
semiconductor wafers and package-ready  devices and under specific  arrangements
has licensed  certain process  technologies.  The Company offers its customers a
complete,   vertically-integrated  solution  for  the  design,  development  and
production of compound semiconductor wafers and devices.

     The Company's  operations  are subject to a number of risks,  including but
not limited to a history of losses,  future  capital  needs,  dependence  on key
personnel,  competition  and risk of  technological  obsolescence,  governmental
regulations and approvals,  developing compound semiconductor  manufacturing and
marketing  capabilities and a concentration of international  sales in Asia. The
Company's  operations  for the year ended  September  30, 1997,  were  primarily
funded through the initial public offering completed in March 1997, resulting in
$22.8 million of net proceeds.  A portion of the proceeds was used to extinguish
$8.0  million  of debt  under a line of credit  agreement  and to  paydown  $2.0
million  of debt  under  the  subordinated  notes  (see Note 7).  The  Company's
operating  and financing  plans  include,  among other things (i)  attempting to
improve  operating cash flow through  increased sales of compound  semiconductor
systems,  wafers and package-ready  devices, (ii) managing its cost structure to
its  anticipated  level of revenues and (iii) seeking  equity and debt financing
sufficient  to meet its  obligations  on a long-term  basis in order to fund its
expansion  plans.  On March 31, 1997,  the Company  entered into a $10.0 million
revolving loan agreement to finance its operating and capital requirements.

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Cash  and  Cash  Equivalents.  The  Company  considers  all  highly  liquid
short-term  investments  purchased with an original  maturity of three months or
less  to be  cash  equivalents.  The  Company  had  approximately  $106,000  and
$2,254,000 in cash equivalents at September 30, 1996 and 1997, respectively.  As
of September 30, 1997, the Company had restricted cash in the amount of $312,500
due to contractual obligations.

     Inventories.  Inventories  are  stated  at the  lower  of  FIFO  (first-in,
first-out) cost or market.  Reserves are established for slow moving or obsolete
inventory based upon historical and anticipated usage.

     Property  and  Equipment.  Property  and  equipment  are  stated  at  cost.
Significant  renewals and betterments are  capitalized.  Maintenance and repairs
which do not extend  the useful  lives of the  respective  assets are  expensed.
Depreciation  is recorded  using the  straight-line  method  over the  estimated
useful  lives of the  applicable  assets,  which range from three to five years.
Leasehold  improvements  are amortized using the  straight-line  method over the
term of the related  leases or the estimated  useful lives of the  improvements,
whichever is less.  Depreciation  expense  includes the  amortization of capital
lease assets.  When assets are retired or otherwise  disposed of, the assets and
related  accumulated  depreciation  accounts are adjusted  accordingly,  and any
resulting gain or loss is recorded in current operations.

     Long-Lived  Assets.  Statement of financial  Accounting  Standards No. 121,
"Accounting for the Improvement of Long-Lived Assets and Long-Lived Assets to be
Disposed  of  ("SFAS121")  requires  that  long-lived  assets  be  reviewed  for
impairment  whenever  events of changes  in  circumstances  indicate  that their
carrying  amounts  may  not  be  recoverable.   In  the  event  that  facts  and
circumstance  indicate that the value of assets may be impaired an evaluation of
recoverability is performed.  If an evaluation is required, the estimated future
undiscounted  cash flows  associated  with the asset  would be  compared  to the
assets  carrying  amount to determine if an adjustment to the carrying amount is
required. SFAS 121 was adopted in fiscal 1997 and did not have a material effect
on the Company's results of operations, cash flows or financial position.

     Deferred  Costs.  Included in other  assets are deferred  costs  related to
obtaining product patents and long-term debt  refinancing.  Such costs are being
amortized over a three to five year period,  respectively.  Amortization expense
amounted  to  approximately  $58,000,  $128,000  and $40,000 for the years ended
September 30, 1995, 1996 and 1997, respectively.

     Income Taxes.  The Company accounts for income taxes under the provision of
Statement of Financial  Accounting  Standards ("SFAS") No. 109.  "Accounting for
Income  Taxes." SFAS No. 109  requires  utilization  of the asset and  liability
method of  accounting  for income taxes.  Under the asset and liability  method,
deferred  income taxes are  recognized  for the tax  consequences  of "temporary
differences" by applying enacted  statutory tax rates applicable to future years
to  differences  between the financial  statement  carrying  amounts and the tax
bases of existing  assets and  liabilities.  Under SFAS No.  109,  the effect on
deferred  taxes of a change in tax rates is  recognized  in income in the period
that includes the enactment date.

     Revenue and Cost  Recognition--Systems,  Components  and Service  Revenues.
Revenue from systems sales is recognized upon shipment, when title passes to the
customer.   Subsequent  to  product   shipment,   the  Company   incurs  certain
installation  costs at the  customer's  facility  and  warranty  costs which are
estimated and accrued at the time the sale is  recognized.  Component  sales and
service  revenues are recognized when goods are shipped or services are rendered
to the customer. Service revenue under contracts with specified service terms is
recognized as earned over the service period in accordance with the terms of the
applicable  contract.  Costs in connection with the procurement of the contracts
are charged to expense as incurred.

     Revenue and Cost  Recognition--Contract  Revenue.  The  Company's  research
contracts  require the  development or evaluation of new materials  applications
and have a duration of six to 36 months.  For research  contracts  with the U.S.
Government and commercial  enterprises with duration's  greater than six months,
the  Company  recognizes  revenue  to the  extent  of  costs  incurred  plus the
estimated  gross profit as  stipulated  in such  contracts,  based upon contract
performance.  Contracts  with a duration of six months or less are accounted for
on the completed  contract  method.  A contract is considered  complete when all
costs,  except  insignificant  items,  have  been  incurred,  and  the  research
reporting requirements to the customer have been met. Contract costs include all
direct  material and labor costs and those  indirect  costs  related to contract
performance,  such as indirect labor, supplies,  tools, repairs and depreciation
costs,  as well  as  coverage  of  certain  general  and  administrative  costs.
Provisions for estimated losses on uncompleted  contracts are made in the period
in which  such  losses are  determined.  Revenues  from  contracts  amounted  to
approximately $1,321,000,  $3,295,000 and $614,000 for the years ended September
30, 1995, 1996 and 1997, respectively.

     Research and  Development.  Research and  development  costs related to the
development of both present and future products and Company sponsored  materials
application research are charged to expense as incurred.

     Fair Value of Financial  Instruments.  The Company estimates the fair value
of its financial  instruments based upon discounted cash flow analyses using the
Company's  incremental  borrowing  rate on similar  instruments  as the discount
rate.  As of September 30, 1997,  the fair value of the  Company's  subordinated
notes exceeded the carrying  value of such  instruments  by  approximately  $1.7
million. As of September 30, 1997, the carrying values of the Company's cash and
cash equivalents, receivables and accounts payable as reflected on the Company's
accompanying balance sheet approximates fair value.

     Use of Estimates.  The  preparation  of financial  statements in conformity
with  generally  accepted  accounting  principles  requires  management  to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the financial statements. Estimates also affect the reported amounts of revenues
and expenses during the reporting  period.  Actual results may differ from those
estimates.   The  Company's  most  significant   estimates  relate  to  accounts
receivable and inventory valuation reserves, warranty and installation accruals,
estimates of cost and related  gross profits on certain  research  contracts and
the valuation of long-lived assets.

     Net (Loss)  Income Per Share.  Net income (loss) per share data included in
accompanying  statement of operations was calculated  pursuant to the Securities
and Exchange  Commission Staff Accounting  Bulletin No. 64 ("SAB No. 64"). Under
the provisions of SAB No. 64, common stock and common  equivalent  shares issued
by the Company at prices below the initial public offering price within one year
or in  contemplation  of the  Company's  offering  are  treated  as if they were
outstanding  for all  periods  presented  (using  the  treasury  stock  method).
Accordingly,  the  weighted  average  number  of  shares  outstanding  has  been
increased by 1,443,936  equivalent shares,  reflecting the common stock purchase
warrants and stock options issued during the twelve months  preceding the filing
date of the  Company's  registration  statement  related to its  initial  public
offering.  The historic per share data in the following table, has been computed
based on the  income or loss for the  period  divided  by the  weighted  average
number of shares of common stock  outstanding and common stock  equivalents,  if
diluted.  The weighted average number of shares outstanding  excludes the number
of common  shares  issuable upon the exercise of  outstanding  stock options and
warrants and preferred stock in periods in which they were anti-dilutive.

<TABLE>
<CAPTION>
                                                                                          Years ended September 30,
                                                                           --------------------------------------------------------
                                                                                1995                1996                     1997
                                                                           ------------         ------------          -------------
<S>                                                                        <C>                  <C>                   <C>          
Weighted average number of common shares outstanding .............            1,701,355            2,994,461              4,668,822
                                                                           ============         ============          =============
Net income (loss) per share ......................................                $0.89               $(1.06)                $(1.20)
                                                                           ============         ============          =============
</TABLE>


     New  Accounting  Standards.  In February  1997,  the  Financial  Accounting
Standards Board issued SFAS No. 128, "Earnings per Share" ("SFAS No. 128"). SFAS
No. 128  establishes  standards for computing and presenting  earnings per share
("EPS") for periods ending after December 15, 1997.  SFAS No. 128 is designed to
improve EPS  information  provided in financial  statements by  simplifying  the
existing  computational  guidelines,   revising  disclosure  requirements,   and
increasing the comparability of EPS on an international basis. Basic and diluted
earnings per share,  calculated pursuant to SFAS No. 128, are not expected to be
materially  different  from net  income  per common  share as  reflected  in the
accompanying statements of operations.

     Reclassifications.  Prior period balances have been reclassified to conform
with the current period financial statement presentation.

NOTE 3.  CONCENTRATION OF CREDIT RISK

     The Company  sells its compound  semiconductor  products  domestically  and
internationally.  The Company's  international  sales are  generally  made under
letter of credit arrangements.

     For the years ended  September  30, 1995,  1996 and 1997,  the Company sold
36%, 43% and 42% of its products to foreign customers, respectively.

     The Company's world-wide sales to major customers were as follows:

                                           As of September 30,
                          ------------------------------------------------------
                               1995               1996               1997
                          ---------------   -----------------  -----------------

Customer A                     $5,238,620         $6,558,930         $4,872,540
Customer B                        887,390          2,075,722                  -
Customer C                      1,036,000          1,530,000          3,085,000
Customer D                      2,092,986                  -          2,990,476
Customer E                              -                  -          7,158,619
                          ---------------   -----------------  -----------------
          Total                $9,254,996        $10,164,652        $18,106,635
                          ===============   =================  =================

     The Company performs material  application research under contract with the
U.S. Government or as a subcontractor of U.S. Government funded projects.

     The Company performs ongoing credit evaluations of its customers' financial
condition and collateral is not requested.  The Company  maintains  reserves for
potential  credit  losses  based upon the credit  risk of  specified  customers,
historical  trends  and other  information.  To reduce  credit  risk and to fund
manufacturing  costs, the Company requires  periodic  prepayments or irrevocable
letters of credit on most production system orders. Credit losses have generally
not exceeded the Company's expectations.

     The  Company  has   maintained   cash  balances   with  certain   financial
institutions  in excess of the  $100,000  insured  limit of the Federal  Deposit
Insurance Corporation.

NOTE 4.  INVENTORIES

     The components of inventories consisted of the following:

                                               As of September 30,
                                       -------------------------------------
                                             1996                1997
                                       ------------------  -----------------

Raw materials                                 $4,964,917         $6,513,379
Work-in-process                                2,680,123            672,247
                                       ------------------  -----------------
                Total                         $7,645,040         $7,185,626
                                       ==================  =================

NOTE 5.  PROPERTY AND EQUIPMENT

        Major classes of property and equipment are summarized below:

                                                   As of September 30,
                                       -------------------------------------
                                               1996               1997
                                       ------------------ ------------------

Equipment                                    $11,748,577        $19,190,770
Equipment under capital lease                          -             98,623
Furniture and fixtures                         1,650,488          2,300,146
Leasehold improvements                         2,147,034          6,085,256
                                       ------------------ ------------------
                                              15,546,099         27,674,795
Less: accumulated depreciation and
amortization                                  (7,749,267)       (10,876,962)
                                       ------------------ ------------------
                Total                         $7,796,832        $16,797,833
                                       ================== ==================

     At September 30, 1997,  minimum future lease payments due under the capital
leases are as follows:

Period ending September 30,
     1998                                                          $27,480
     1999                                                           27,480
     2000                                                           27,480
     2001                                                           27,480
     2002 and thereafter                                            18,320
                                                         ------------------

Total minimum lease payments                                       128,240

Less: amount representing interest
(imputed interest rate of 14.4%)                                   (35,340)
                                                         ------------------

Net minimum lease payments                                          92,900

Less:  current portion                                             (15,030)
                                                         ------------------

Long-term portion                                                $  77,870
                                                         ==================

     The provisions for depreciation and amortization  amounted to approximately
$829,000, $1,743,000 and $3,148,000 for the years ended September 30, 1995, 1996
and 1997,  respectively.  Accumulated  amortization  on assets  accounted for as
capital lease amounted to approximately $5,000 as of September 30, 1997.

     Included in  equipment  above are ten systems and  fourteen  systems with a
combined net book value of approximately  $2,124,000 and $5,057,000 at September
30, 1996 and 1997, respectively. Such systems are utilized for the production of
compound  semiconductor  wafers  and  package-ready  devices  for  sale to third
parties,  systems  demonstration  purposes,   system  sales  support,   in-house
materials applications,  internal research and contract research funded by third
parties.

NOTE 6.  ACCRUED EXPENSES

        Accrued expenses consisted of the following:

                                                 As of September 30,
                                        --------------------------------
                                               1996             1997
                                        ----------------  --------------

Accrued payroll, vacation and other                         
employee expenses                             $990,538      $1,659,428
Installation and warranty costs                562,231       1,411,120
Interest                                       269,315         272,445
Other                                          164,562         524,596
                                       ----------------  --------------

                Total                       $1,986,646      $3,867,589
                                       ================  ==============

NOTE 7.  LONG-TERM DEBT

     On March 31, 1997, the Company entered into a $10.0 million  revolving loan
agreement (the  "Agreement").  The Agreement bears interest at the rate of Prime
plus 50 basis  points  (9.0% at  September  30,  1997) and has a revolving  loan
maturity date and expires on September 30, 1998. As of September 30, 1997, there
were no amounts outstanding under this facility.

     On October 25, 1996,  the Company  entered into a $10.0 million demand note
facility (the "Facility").  The Facility bore interest at the rate of LIBOR plus
75 basis points,  had a term of one year and was due and payable on demand.  The
Facility was guaranteed by the Chairman of the Company's  Board of Directors who
provided  collateral  for  the  Facility.   In  December  1996,  in  return  for
guaranteeing the facility, the Company granted the Chairman 980,392 common stock
purchase  warrants at $10.20 per share which  expire  September  1, 2001.  These
warrants are  exercisable  after July 1, 1997, and are callable at the Company's
option after December 1, 1997 at $0.85 per warrant.  The Facility was terminated
in conjunction with the Company's initial public offering.

     The Company  assigned a value of $3,600,000  to the warrants  issued to the
guarantor.  This  valuation  was based  upon the  Company's  application  of the
Black-Scholes  Option Pricing Model ("Black Scholes").  This value was accounted
for as debt issuance cost and was  amortized  over the expected  period that the
facility was to be in place (four months).

     The Company  utilized a portion of the  proceeds  from its  initial  public
offering to pay down or discharge  certain of its debts.  The Company repaid the
entire $8.0 million outstanding under its October 1996 Facility and $2.0 million
was used to repay a portion of the Company's outstanding subordinated notes, due
May 1, 2001.  In connection  with the  discharge of the  Company's  subordinated
notes, an extraordinary loss of $286,000 was recognized.

     On May 1, 1996, the Company issued  subordinated  notes (the  "Subordinated
Notes") in the amount of $9,500,000 to its existing shareholders,  $1,000,000 of
which were exchanged for notes  receivable  from officers and certain  employees
with  identical  payment and interest  provisions.  The  Subordinated  Notes are
scheduled  to mature on May 1,  2001,  and have a stated  interest  rate of 6.0%
which  is  payable  semi-annually  on May 1 and  November  1. In  addition,  the
noteholders  were  issued  2,328,432  common  stock  purchase  warrants  with an
exercise  price of $4.08 per share which expire on May 1, 2001. The warrants are
exercisable  after November 1, 1996,  and are callable at the Company's  option,
after May 1, 1997,  at $0.85 per  warrant.  The  Company  has the legal right of
offset  with  respect to the notes  receivable  from  officers  and  certain key
employees,  and it is their full  intention  to offset the  corresponding  notes
receivable and payable upon maturity. As such, the Company reflected $848,000 of
the officers' and employees'  notes receivable as a contra  liability,  reducing
the Company's Subordinated Notes balance. The remaining $152,000 note receivable
has been reflected as a contra equity note receivable balance,  representing the
portion of the employee note  receivable  associated  with common stock purchase
warrants  issued to such  employees.  The  Company  received  cash  proceeds  of
$8,500,000 in connection with this Subordinated Notes issuance.

     On September 1, 1996, the Company issued a subordinated  note in the amount
of $2,500,000 to the Company's then majority shareholder with terms identical to
the  Subordinated  Notes issued on May 1, 1996. In addition,  under the terms of
this issuance,  245,098  common stock purchase  warrants were issued to purchase
common  stock at $10.20 per share and which  expire  September  1,  2001.  These
warrants are exercisable  after March 1, 1997, and are callable at the Company's
option after September 1, 1997, at $0.85 per warrant.

     The Company  assigned a value of $1,440,000  to the May 1, 1996  detachable
warrants  and  $900,000 to the  September  1, 1996  detachable  warrants.  These
valuations  were based upon the Company's  application  of Black Scholes and the
Company's  assessment  of  the  underlying  valuation  factors,  as  well  as an
assessment of the terms of the  Subordinated  Notes.  The carrying  value of the
Subordinated  Notes will be subject to periodic  accretions,  using the interest
method, in order for the carrying amount to equal the Company's  obligation upon
maturity.  As a result, the May 1, 1996 and September 1, 1996 Subordinated Notes
have an effective interest rate of approximately  9.3% and 15.0%,  respectively.
For the years  ended  September  30,  1997 and 1996,  imputed  warrant  interest
related  to  the   subordinated   notes   amounted  to  $388,390  and  $125,791,
respectively.

NOTE 8.  COMMITMENTS AND CONTINGENCIES

     On November 16, 1992, the Company entered into a three-year lease agreement
with a bank  for  34,000  square  feet of  space  in the  building  the  Company
presently occupies. On March 31, 1995, the agreement was renewed for 5 years for
49,000 square feet. In November  1996, the Company signed an agreement to occupy
the remaining 26,000 square feet that it previously had not occupied.

     The Company leases certain equipment under non-cancelable operating leases.

     Facility and equipment  rent expense  amounted to  approximately  $292,000,
$350,000  and $548,000 for the years ended  September  30, 1995,  1996 and 1997,
respectively.

     Future minimum rental payments under the Company's non-cancelable operating
leases with an initial or remaining term of one year or more as of September 30,
1997 are as follows:

Period ending September 30,                 Operating
                                         ---------------

1998                                         $553,607
1999                                          549,281
2000                                          231,454
                                         ---------------

     Total minimum lease payments          $1,334,342
                                         ===============

     The Company is from time to time involved in  litigation  incidental to the
conduct of its business.  Management  and its counsel  believe that such pending
litigation will not have a material  adverse effect on the Company's  results of
operations, cash flows or financial condition.

<PAGE>
NOTE 9.  INCOME TAXES

     Income tax expense consists of the following:


<TABLE>
<CAPTION>
                                                    Years ended September 30,
                                  --------------------------------------------------------------
                                         1995                  1996                 1997
                                  -------------------   -------------------  -------------------
<S>                                        <C>                        <C>             <C>      
Current:
     Federal                                 $70,000                 $   -            $ 113,000
     State                                    55,000                     -               24,000
                                  --------------------------------------------------------------
                                             125,000                     -              137,000
Deferred:
     Federal                                       -                     -                    -
     State                                         -                     -                    -
                                  -----------------------------------------  -------------------
              Total                        $ 125,000                  $  -            $ 137,000
                                  ===================   ===================  ===================
</TABLE>


     The principal  differences  between the U.S. statutory and effective income
tax rates were as follows:

<TABLE>
<CAPTION>

                                                      Years ended September 30,
                                       ---------------------------------------------------------
                                             1995                1996                1997
                                       ------------------  -----------------   -----------------
<S>                                               <C>                <C>                 <C>
US statutory income tax (benefit)
     expense rate                                  34.0%              (34.0)%             (34.0)%
Net operating loss carryforward                   (45.4)                  -                   -
Net operating loss not utilized                        -               27.7                 1.7
Expenses not yet deductible for
     tax purposes                                  11.4                 6.3                32.0
AMT and state taxes                                 7.6                  -                  2.9
                                       ------------------  -----------------   -----------------
          Effective tax rate                        7.6%                0.0%                2.6%
                                       ==================  =================   =================
</TABLE>


        The components of the Company's net deferred taxes were as follows:

<TABLE>
<CAPTION>

                                                                       Years ended September 30,
                                                               -------------------------------------------
                                                                        1996                  1997
                                                               ----------------------- -------------------
<S>                                                                         <C>                <C>        
Deferred tax assets:
     Federal net operating loss carryforwards                        $      3,283,003    $      3,502,348
     Research credit carryforwards (state and federal)                        264,966             718,644
     Inventory reserves                                                       142,593             207,732
     Accounts receivable reserves                                             105,383             243,996
     Interest                                                                  84,022           1,461,389
     Accrued installation reserve                                             109,684             362,379
     Accrued warranty reserve                                                  81,475             158,202
     State net operating loss carryforwards                                   801,555             461,821
     Other                                                                     68,858             144,586
     Valuation reserve - federal                                           (4,048,583)         (5,583,217)
     Valuation reserve - state                                              (801,555)          (1,334,975)
                                                               ----------------------- -------------------
               Total deferred tax assets                                       91,401             342,905

Deferred tax liabilities:
     Fixed assets and intangibles                                            (91,401)            (342,905)
                                                               ----------------------- -------------------
               Total deferred tax liabilities                                (91,401)            (342,905)
                         Net deferred taxes                               $        -           $        -
                                                               ======================= ===================
</TABLE>


     The Company has  established a valuation  reserve as it has not  determined
that it is more likely than not that the net deferred  tax asset is  realizable,
based upon the Company's past earnings history.

     As of September 30, 1997, the Company has net operating loss  carryforwards
for regular tax purposes of approximately $7.6 million which expire in the years
2003 through 2012. The Company  believes that the consummation of certain equity
transactions  and a significant  change in the ownership during fiscal year 1995
has  constituted a change in control  under Section 382 of the Internal  Revenue
Code ("IRC").  Due to the change in control,  the  Company's  ability to use its
federal net operating loss carryovers and federal research credit  carryovers to
offset  future  income and income  taxes,  respectively,  are  subject to annual
limitations under IRC Section 382 and 383.

NOTE 10.  STOCKHOLDERS' EQUITY

Reverse Stock Split

     On February 3, 1997, the Board of Directors  approved a 3.4:1 reverse stock
split of its Common  Stock and  approved  a decrease  in the number of shares of
Common Stock authorized. All references in the accompanying financial statements
to the  number of Common  Stock and  per-share  amounts  have been  restated  to
reflect the reverse split.

Common Stock Offering

     In March  1997,  the  Company  completed  an  initial  public  offering  of
2,500,000 shares of common stock at a price of $9.00 per share (the "Offering"),
and  upon  the  exercise  of the  Underwriter's  overallotment  option,  375,000
additional  shares of common  stock  were  also  sold at $9.00  per  share.  The
proceeds,  net of  commissions  and certain  expenses,  to the Company  from the
offering were approximately $22.8 million.  Prior to the Offering,  there was no
public market for the Company's common stock.

Preferred Stock

     In October 1994, the Company initiated a series of activities to reduce and
convert its  outstanding  Class I, Class III and Class IV  preferred  stock into
common stock.  The Company  offered the holders of 1,399,333 Class III preferred
stock  purchase  warrants the right to convert such warrants into 528,450 shares
(representing  a reduced ratio of 1 to .38) of the  Company's  Class I preferred
stock. All the warrant holders exercised such rights. This transaction increased
the outstanding number of Class I preferred stock to 1,222,350 shares.

     In November  1994,  in an effort to simplify  its  capital  structure,  the
Company's Board of Directors and shareholders  approved a capital  restructuring
plan (the  "Plan").  Pursuant  to this Plan,  a newly  formed  and  wholly-owned
subsidiary of the Company was formed and merged with and into the Company. Under
the Plan,  shares of the Company's  Class IV preferred  stock were exchanged for
shares of Class A senior convertible  preferred stock at an exchange rate of 1.5
to 1.0. The shares of all other classes of preferred  stock were  exchanged into
common stock at the following ratios; Class I preferred stock at 100 to 1.18 and
Class III preferred  stock at 100 to 2.94. In addition,  the Company  effected a
reverse  stock split of .29 for one hundred and retired its  preferred  treasury
stock. Prior to this exchange, the Class I preferred stockholders were given the
right to have  their  stock  repurchased  for $.09 per  share.  The  holders  of
approximately  140,000  shares  exercised  this  right,  resulting  in  a  stock
repurchase amounting to $12,645.

     In  August  1995,  the  outstanding  shares  of Class A senior  convertible
preferred  stock were exchanged for shares of common stock on the basis of seven
shares of common stock for each Class A security.  This transaction  reduced the
classes of stock outstanding to common stock.

     As part of the August 1995 restructuring activities, holders of warrants to
purchase  common stock were allowed to exercise its warrants at $3.03 per share,
resulting in the exercise of 30,588 warrants for aggregate cash consideration of
$92,554.

     In January 1995,  the holder of 15,000  warrants to purchase Class A senior
convertible preferred stock exercised their rights by paying $0.67 per share, or
$10,000.  In August 1995,  these 15,000  shares of Class A preferred  stock were
converted into 30,882 shares of common stock.

     The  basis  of all  exchanges  were  approved  by the  Company's  Board  of
Directors  and its  shareholders  and  reflected  the  priorities of the Class A
securities upon liquidation and other factors.

     The following table  summarizes the Company's  preferred  stock  activities
from October 1, 1994 through September 30, 1995:

<TABLE>
<CAPTION>

                                                 (in thousands)
                                       Class I                    Class III            Class IV            Class A
                           ---------------------------------------------------------------------------------------------
                                   Preferred Stock             Preferred Stock      Preferred Stock      Preferred Stock
                           ---------------------------------------------------------------------------------------------
                             Shares     Amount   Discount    Shares        Amount  Shares    Amount   Shares     Amount
                           ------------------------------- ----------------------- -------- -------- ---------  --------
<S>                         <C>       <C>          <C>     <C>         <C>         <C>      <C>       <C>        <C>
Balance at
  September 30, 1994           694    $  1,235    $ (934)     6,617     $ 15,091      882   $  882

Warrants exercised and
  conversions                  528                                                                       15   $     15

November 1994 preferred
  stock conversions
  into common stock 
  and Class A 
  preferred stock           (1,222)     (1,235)      934     (6,617)     (15,091)    (882)    (882)     1,324      882

August 1995 conversion
   of Class A preferred
   stock into common 
   stock                                                                                               (1,339)    (897)
                           ---------- ---------- --------- ---------- ------------ -------- -------- --------- --------
Balance at
   September 30, 1995             -    $      -  $      -         -    $        -        -   $    -         -    $    -
                           ========== ========== ========= ========== ============ ======== ======== =========  ========
</TABLE>



NOTE 11.  STOCK OPTIONS AND WARRANTS

     Stock Option Plan. In November 1994, the Company's  Incentive  Stock Option
Plan,  initiated in 1987, was  eliminated.  On June 5, 1995, the Company adopted
the 1995  Incentive  and  Non-Statutory  Stock Option Plan (the "Option  Plan").
Under the terms of the Option Plan,  options to acquire 323,529 shares of common
stock may be granted to  eligible  employees,  as  defined,  at no less than 100
percent of the fair market value on the date of grant. In March 1996, options to
acquire an additional 323,530 shares of common stock were approved.

     Certain  options under the Option Plan are intended to qualify as incentive
stock options pursuant to Section 422A of the Internal Revenue Code.

     During fiscal 1997,  options with respect to 182,700 shares were granted at
exercise prices ranging from $10.20 to $24.75 per share.

     Stock  options  granted  generally  vest over  three to five  years and are
exercisable  over a ten year period.  As of September  30, 1995,  1996 and 1997,
options with respect to 100,382,  162,764 and 199,368  shares were  exercisable,
respectively.

        The following table summarized the activity under the plan:

<TABLE>
<CAPTION>
                                                                                                         Weighted
                                                                                                          Average
                                                                                         Shares       Exercise Price
                                                                                         ------       --------------
<S>                                                                                <C>                  <C>
Outstanding as of September 30, 1994                                                     32,794             $3.03
        Granted                                                                         281,470              3.03
        Exercised                                                                             -                 -
        Canceled                                                                       (32,794)              3.03
                                                                                ---------------   ---------------
Outstanding as of September 30, 1995                                                    281,470             $3.03
        Granted                                                                          57,942              6.04
        Exercised                                                                             -                 -
        Canceled                                                                              -                 -
                                                                                ---------------      ------------
Outstanding as of September 30, 1996                                                    339,412             $3.54
        Granted                                                                         182,700             11.06
        Exercised                                                                      (42,165)              3.17
        Canceled                                                                        (4,475)              3.08
                                                                                ---------------      ------------
Outstanding as of September 30, 1997                                                    475,472             $6.47
                                                                                ===============      ============
</TABLE>


At September 30, 1997, stock options outstanding were as follows:

<TABLE>
<CAPTION>


                Exercise                        Options      Weighted Average Remaining           Exercisable
                 Prices                       Outstanding     Contractual Life (Years)              Options
                 ------                       -----------     ------------------------              -------
               <S>                             <C>                    <C>                          <C>    
                $3.03                           243,775                7.96                         175,598
                 4.08                            29,703                8.51                          16,002
                10.20                           177,994                9.17                           7,768
                16.25                            22,500                9.65                               -
                24.75                             1,500                9.84                               -
</TABLE>

     In October 1995, the Financial  Accounting  Standards Board issued SFAS No.
123,   "Accounting  for  Stock  Based  Compensation"   ("SFAS  123").  SFAS  123
establishes  financial  and  reporting  standards  for stock based  compensation
plans.  The Company has adopted the disclosure  only provisions of this standard
and has elected to  continue to apply the  provision  of  Accounting  Principles
Board  Opinion  No. 25,  "Accounting  for Stock  Issued to  Employees".  Had the
Company elected to recognize compensation expense for stock options based on the
fair value at the grant  dates of awards,  net loss and net loss per share would
have been as follows:


<PAGE>

<TABLE>
<CAPTION>


                                                               Years ended September 30,
                                                   ----------------------------------------------
                                                             1996                    1997
                                                   -----------------------   --------------------

Loss before extraordinary item
<S>                                                       <C>                    <C>       
     As reported                                          $3,176,314             $5,333,772
     Pro forma                                            $3,169,741             $5,226,270

Loss before extraordinary item per share
     As reported                                               $0.72                 $ 1.06
     Pro forma                                                 $0.71                  $1.04

Net loss
     As reported                                          $3,176,314             $5,619,367
     Pro forma                                            $3,169,741             $5,511,865

Net loss per share
     As reported
                                                               $0.72                 $ 1.12
     Pro forma                                                 $0.71                  $1.09
</TABLE>


     The  weighted  average  fair  value  of the  Company's  stock  options  was
calculated using Black-Scholes with the following  weighted-average  assumptions
used for grants in fiscal 1997:  No dividend  yield;  expected  volatility of 0%
prior to the Company's  initial public offering and 60% thereafter;  a risk-free
interest rate of 6.04%,  expected  lives of 5 years.  The weighted  average fair
value of options  granted during the years ended  September 30, 1996 and 1997 is
$1.02 and $3.82 per share,  respectively.  Stock options  granted by the Company
prior to its initial public  offering were valued using the minimum value method
under FASB No. 123.

Warrants

        Set forth below is a summary of the  Company's  outstanding  warrants at
September 30, 1997:

                        Exercise                              Expiration
  Security               Price          Warrants                 Date
  --------               -----          --------                 ----

Common Stock             $4.08          2,236,661            May 1, 2001
Common Stock            $10.20          1,225,490          September 1, 2001
                                               

NOTE 12.  RELATED PARTIES

     In May 1995, 52% of the Company's  outstanding  shares of Common Stock were
purchased by Jesup & Lamont Merchant Partners, L.L.C. ("JLMP"). Prior to May 12,
1997, a majority of the Company's  then six  directors  were members of JLMP. On
May  12,  1997,  JLMP  distributed  all of its  shares  of  the  Company  to the
individual members of JLMP. As of September 30, 1997, the former members of JLMP
had an ownership  interest in the Company of  approximately  28% based on common
stock  outstanding  (not on a fully  diluted  basis).  In May 1995,  the Company
entered  into a  consulting  agreement  (the  "Agreement")  with  Jesup & Lamont
Capital Markets, Inc. ("Jesup & Lamont") pursuant to which Jesup & Lamont agreed
to provide  financial  advisory  and  employee  services for the Company for one
year. Total fees paid to Jesup & Lamont amounted to  approximately  $241,697 and
$288,385 for the fiscal years ended  September 30, 1995 and 1996,  respectively.
No fees were paid to Jesup & Lamont  during the fiscal year ended  September 30,
1997.

     In December  1996,  the  Company's  chairman  and chief  executive  officer
retired.  The Company entered into a consulting agreement with him for a term of
two years and will provide compensation of $250,000 per annum. In addition,  the
Company has also forgiven  $115,300 of his  indebtedness  to the Company and had
agreed to extend the period for the exercise of his vested stock options through
March 1997 and accordingly he exercised all 26,471 vested shares.

     In fiscal 1997, the Company entered into a non-exclusive and non-refundable
technology licensing and royalty agreement with Uniroyal Technology  Corporation
("UTC") for the process  technology to develop and  manufacture  high brightness
light emitting diodes ("LEDs").  During Fiscal 1997, revenue associated with the
UTC licensing  agreement  amounted to $2.5 million.  UTC's Chairman and CEO is a
member of EMCORE's  Board of Directors and EMCORE's  Chairman is on the Board of
Directors of UTC.  Over the next 12 to 36 months,  the Company may realize up to
$5.5 million in addtional  license fees and related royalties in connection with
these agreements. Additionally, the Company and a wholly-owned subsidiary of UTC
have  agreed in  principle  to form a venture in which the  Company  will have a
minority interest,  for the production and marketing of products related to this
licensed technology. Subsequent to September 30, 1997, the Company's outstanding
related party  accounts  receivable  was paid in full and the payments under the
terms of the licensing agreement are not refundable.

     The Chairman and CEO of Hakuto & Co. Ltd.  ("Hakuto"),  the Company's Asian
distributor,  is a member of the  Company's  Board of Directors  and Hakuto is a
minority  shareholder of the Company.  During the year ended September 30, 1997,
sales made through Hakuto approximated $9.1 million.

<PAGE>
NOTE 13.  EXPORT SALES

     The information  below  summarizes the Company's export sales by geographic
area. The Company's export sales to the Far East and Europe are as follows:

<TABLE>
<CAPTION>

                                            Far East              Europe               Total
                                            --------              ------               -----
<S>                                      <C>                  <C>                  <C>       
Year ended September 30, 1995              $3,978,118           $2,546,301           $6,524,419
Year ended September 30, 1996               8,209,309            3,588,066           11,797,375
Year ended September 30, 1997              14,583,981            5,478,186           20,062,167
</TABLE>


NOTE 14.  QUARTERLY FINANCIAL DATA (UNAUDITED)


<TABLE>
<CAPTION>
                                                          Operating                           Net (Loss)
                                                           (Loss)           Net (Loss)        Income Per
                                        Revenues           Income             Income            Share
                                        --------           ------             ------            -----
Fiscal Year 1996:
<S>                                  <C>                <C>              <C>               <C>       
     December 31, 1995                $  4,255           $  (831)         $    (885)        $   (0.20)
     March 31, 1996                      6,014              (768)              (823)            (0.19)
     June 30, 1996                       7,727            (1,376)            (1,480)            (0.33)
     September 30, 1996                  9,783               221                 12              0.00

Fiscal Year 1997:
     December 31, 1996                $  8,591           $(2,585)          $ (3,798)        $   (0.86)
     March 31, 1997                     12,929               147             (3,150)            (0.82)
     June 30, 1997                      14,106               907                830              0.10
     September 30, 1997                 12,126               841                498              0.06
</TABLE>


NOTE 15.  SUBSEQUENT EVENTS

Warrant Exercise:

     On December  3, 1997,  the holders of 1.8  million  common  stock  purchase
warrants  (with an exercise  price of $4.08)  exercised  such  warrants with the
Company taking full recourse notes  amounting to  approximately  $7.5 million in
exchange for the issued Common Stock.  In addition,  the holders are required to
provide collateral at a 2:1 coverage ratio. This collateral is presently held by
the Company.

Acquisition:

     On December 5, 1997, the Company  acquired all of the  outstanding  capital
stock of MicroOptical Devices, Inc. ("MODE") in exchange for 1,461,866 shares of
EMCORE common stock,  200,966 common stock  purchase  options  (exercise  prices
ranging  from  $0.43 to  $0.59),  and  47,118  common  stock  purchase  warrants
(exercise  prices  ranging  from  $4.32  to  $5.92).   The  purchase  price  was
approximately  $32,829,000  including direct  acquisition costs of approximately
$500,000.  The acquisition of MODE will be recorded using the purchase method of
accounting.  Accordingly, the results of operations of the acquired business and
the fair  values of the  acquired  tangible  and  intangible  assets and assumed
liabilities  will be  included  in the Company  financial  statements  as of the
effective date. The  preliminary  allocation of the fair value of the net assets
acquired is as follows:

Net tangible assets                                                   $707,000
Goodwill                                                             2,828,000
Purchased in process research and development                       29,294,000
                                                              -----------------
Total purchase price                                               $32,829,000
                                                              =================

     The amount allocated to purchased  in-process  research and development was
determined  through an  independent  valuation.  Amounts  allocated to purchased
in-process  research and  development  will be  immediately  written-off  in the
period the acquisition is recorded.  Goodwill will be amortized over a period of
three years.

     The following unaudited pro forma basis financial  information reflects the
combined  results of  operations  of the Company  and MODE,  as if MODE had been
acquired  as of October  1, 1996.  The  summary  includes  the impact of certain
adjustments, such as goodwill amortization and the number of shares outstanding.

                                                  (Unaudited)
                                         Year ended September 30, 1997
                       ---------------------------------------------------------

Revenue                                          $48,313,000
Net loss before extraordinary item                 8,769,000
Net loss                                           9,055,000
Net loss, per share                                    $1.35

     The  unaudited  pro  forma  results  of  operations  are  not   necessarily
indicative of what actually would have occurred if the  acquisition had occurred
on October 1, 1996. In addition,  unaudited pro forma results of operations  are
not intended to be a projection  of future  results that might be achieved  from
the combined  entity.  The foregoing  pro forma  results of operations  does not
reflect  the  non-recurring  write-off  of  purchased  in-process  research  and
development.

<PAGE>
 
                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of EMCORE Corporation:

     We have audited the accompanying  balance sheet of EMCORE  Corporation (the
"Company")  as of  September  30,  1997 and  1996,  the  related  statements  of
operations,  shareholders' (deficit) equity and cash flows for each of the three
years in the period ended September 30, 1997. We have also audited the financial
statement  Schedule  listed in Item 14(a).  These  financial  statements and the
financial statement schedule are the responsibility of the Company's management.
Our  responsibility  is to express an opinion on these financial  statements and
the financial statement schedule based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material  respects,  the financial  position of EMCORE  Corporation as of
September  30,  1997 and 1996,  and the results of its  operations  and its cash
flows for each of the three years in the period ended  September  30,  1997,  in
conformity with generally accepted accounting  principles.  In addition,  in our
opinion,  the financial statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.

                                                       Coopers  & Lybrand L.L.P.

Parsippany, New Jersey
November 3, 1997,

  except for note 15, as to
  which the date is
  December 5, 1997

<PAGE>
         STATEMENT OF MANAGEMENT RESPONSIBILITY FOR FINANCIAL STATEMENTS

To the Shareholders of
  EMCORE Corporation:

     Management has prepared and is responsible for the  consolidated  financial
statements  and  related   information  in  the  Annual  Report.  The  financial
statements,  which  include  amounts  based on judgment,  have been  prepared in
conformity with generally accepted accounting principles consistently applied.

     Management has developed,  and in 1997 continued to strengthen, a system of
internal  accounting  and other  controls for the Company.  Management  believes
these controls  provide  reasonable  assurance that assets are safeguarded  from
loss or unauthorized use and that the company's financial records are a reliable
basis  for  preparing  the  financial  statements.  Underlying  the  concept  of
reasonable  assurance is the premise that the cost of control  should not exceed
the benefit derived.

     The Board of Directors,  through its audit  committee,  is responsible  for
reviewing and  monitoring  the  Company's  financial  reporting  and  accounting
practices.  The audit  committee meets regularly with management and independent
accountants - both  separately and together.  The independent  accountants  have
free access to the audit  committee to review the results of their  audits,  the
adequacy of internal accounting controls and the quality of financial reporting.

<PAGE>

ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

     Not applicable.



PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information  required by this item is incorporated  herein by reference
to the Company's 1998 Proxy  Statement  which will be filed on or before January
28, 1998.


ITEM 11.  EXECUTIVE COMPENSATION

     The information  required by this item is incorporated  herein by reference
to the Company's 1998 Proxy  Statement  which will be filed on or before January
28, 1998.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information  required by this item is incorporated  herein by reference
to the Company's 1998 Proxy  Statement  which will be filed on or before January
28, 1998.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information  required by this term is incorporated  herein by reference
to the Company's 1998 Proxy  Statement  which will be filed on or before January
28, 1998.


PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

14(a)(1)       FINANCIAL STATEMENTS:


<TABLE>
<CAPTION>
                                                                                                          Page
                                                                                                        Reference
<S>                                                                                                   <C>
        Included in Part II, Item 8 of this report:

        Balance sheets as of September 30, 1996 and 1997

        Statements of income for the years ended September 30, 1995, 1996 and 1997

        Statements of shareholders' equity for the years ended September 30, 1995, 1996 and 1997

        Statements of cash flows for the years ended September 30, 1995, 1996 and 1997


        Notes to financial statements

 
       Report of independent accountants

14(a)(2)       Financial Statement Schedule:

        Included in Part IV of this report:

        Schedule II - Valuation and qualifying accounts and reserves

        Other  schedules have been omitted since they are either not required or not applicable.
</TABLE>

14(a)(3)       EXHIBITS

EXHIBIT NO.    DESCRIPTION

3.1  Restated   Certificate   of   Incorporation,   amended   February  3,  1997
     (incorporated  by  reference  to  Exhibit  3.1 to  Amendment  No.  1 to the
     Registration  Statement  on Form S-1 (File No.  333-18565)  filed  with the
     Commission on February 6, 1997).

3.2  Amended By-Laws,  as amended January 11, 1989 (incorporated by reference to
     Exhibit 3.2 to Amendment  No. 1 to the  Registration  Statement on Form S-1
     (File No. 333-18565) filed with the Commission on February 6, 1997).

4.1  Specimen  certificate for shares of Common Stock (incorporated by reference
     to Exhibit 4.1 to Amendment No. 3 to the Registration Statement on Form S-1
     (File No. 333-18565) filed with the Commission on February 24, 1997).

10.1 1995  Incentive  and  Non-Statutory  Stock  Option  Plan  (incorporated  by
     reference to Exhibit 10.1 to Amendment No. 1 to the Registration  Statement
     on Form S-1 (File No.  333-18565)  filed with the Commission on February 6,
     1997).

10.2 1996 Amendment to Option Plan (incorporated by reference to Exhibit 10.2 to
     Amendment  No.  1 to the  Registration  Statement  on Form  S-1  (File  No.
     333-18565) filed with the Commission on February 6, 1997).

10.3 Specimen  Incentive Stock Option  Agreement  (incorporated  by reference to
     Exhibit 10.3 to Amendment No. 1 to the  Registration  Statement on Form S-1
     (File No. 333-18565) filed with the Commission on February 6, 1997).

10.4 Hakuto Distributorship Agreement (incorporated by reference to Exhibit 10.4
     to  Amendment  No. 1 to the  Registration  Statement  on Form S-1 (File No.
     333-18565) filed with the Commission on February 6, 1997).

10.5 Amendment  to Lease for premises at 394  Elizabeth  Avenue,  Somerset,  New
     Jersey 08873  (incorporated by reference to Exhibit 10.5 to Amendment No. 1
     to the Registration  Statement on Form S-1 (File No.  333-18565) filed with
     the Commission on February 6, 1997).

10.6 Registration  Rights Agreement  relating to September 1996 warrant issuance
     (incorporated  by  reference  to  Exhibit  10.6 to  Amendment  No. 1 to the
     Registration  Statement  on Form S-1 (File No.  333-18565)  filed  with the
     Commission on February 6, 1997).

10.7 Registration  Rights  Agreement  relating to December 1996 warrant issuance
     (incorporated  by  reference  to  Exhibit  10.7 to  Amendment  No. 1 to the
     Registration  Statement  on Form S-1 (File No.  333-18565)  filed  with the
     Commission on February 6, 1997).

10.8 Form of 6% Subordinated Note Due May 1, 2001  (incorporated by reference to
     Exhibit 10.8 to Amendment No. 1 to the  Registration  Statement on Form S-1
     (File No. 333-18565) filed with the Commission on February 6, 1997).

10.9 Form of 6%  Subordinated  Note  Due  September  1,  2001  (incorporated  by
     reference to Exhibit 10.9 to Amendment No. 1 to the Registration  Statement
     on Form S-1 (File No.  333-18565)  filed with the Commission on February 6,
     1997).

10.10 Form of $4.08 Warrant  (incorporated  by reference to Exhibit 10.10 to
      Amendment  No. 1 to the  Registration  Statement on Form S-1 (File No.
      333-18565) filed with the Commission on February 6, 1997).

10.11 Form of $10.20 Warrant  (incorporated  by  reference  to Exhibit  10.12 to
      Amendment  No. 1 to the  Registration  Statement  on Form  S-1  (File  No.
      333-18565)filed with the Commission on February 6, 1997).

10.12 Consulting Agreement dated December 6, 1996 between the Company and Norman
      E. Schumaker (incorporated by reference to Exhibit 10.14 to Amendment No.1
      to the Registration Statement on Form S-1 (File No.  333-18565) filed with
      the Commission on February 6, 1997).

10.13  Purchase  Order issued to the Company by General  Motors  Corporation  on
       November  17,  1996  (incorporated  by  reference  to  Exhibit  10.15  to
       Amendment  No.  1 to the  Registration  Statement  on Form  S-1(File  No.
       333-18565)  filed with the Commission on February 6, 1997).  Confidential
       treatment  has been  requested by the Company with respect to portions of
       this document. Such portions are indicated by "[*] ".
      
10.14  Acquisition Agreement,  dated as of December 5, 1997, between the Company
       and MicroOptical Devices, Inc. (incorporated by reference to Exhibit 2 to
       the Company's filing on Form 8-K, dated December 22, 1997).

11.1   Statement of Computation of Per Share Amounts.

23.1   Consent of Coopers & Lybrand L.L.P.

14(b)  Reports on Form 8-K: Form 8-K dated December 22, 1997.

<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act, the Registrant has duly
caused  this  Registration   Statement  to  be  signed  on  its  behalf  by  the
undersigned,  thereunto duly authorized,  in the Township of Somerset,  State of
New Jersey, on December 24, 1997.

                              EMCORE CORPORATION


                              BY    /S/   REUBEN F. RICHARDS, JR.

                                    Name: Reuben F. Richards, Jr.
                                    TITLE: President and Chief Executive Officer


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report on Form 10-K has been signed below by the following  persons on behalf of
EMCORE Corporation in the capacities indicated, on December 24, 1997.

<TABLE>
<CAPTION>


            SIGNATURE                     TITLE
            ---------                     -----

<S>                                      <C>
/s/    THOMAS J. RUSSELL                  Chairman of the Board and Director
       Thomas J. Russell



/s/    REUBEN F. RICHARDS, JR.            President, Chief Executive Officer and Director
       Reuben F. Richards, Jr.              (Principal Executive Officer)



/s/    THOMAS G. WERTHAN                  Vice President, Chief Financial Officer, Secretary
       Thomas G. Werthan                    and Director (Principal Accounting and
                                            Financial Officer)



/s/    RICHARD A. STALL                   Director
       Richard A. Stall


/s/    HOWARD R. CURD                     Director
       Howard R. Curd



/s/    HOWARD F. CURD                     Director
       Howard F. Curd



/s/    ROBERT LOUIS-DREYFUS              Director
       Robert Louis-Dreyfus



/s/    HUGH H. FENWICK                   Director
       Hugh H. Fenwick



/s/    THOMAS E. CONSTANCE               Director
       Thomas E. Constance



/s/    SHIEGO TAKAYAMA                   Director
       Shiego Takayama
</TABLE>


<PAGE>
                                                                   Schedule II

                               EMCORE CORPORATION
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
             FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997


<TABLE>
<CAPTION>
                                                                           Additions
                                                         Balance at        Charged to                          Balance
                                                        Beginning of       Costs and         Recoveries        at End of
                                                           Period           Expenses        (Deductions)        Period
                                                        --------------    -------------    ---------------    -----------
ALLOWANCE FOR DOUBTFUL ACCOUNTS
- ---------------------------------------------------
<S>                                                        <C>              <C>             <C>              <C>     
Year Ended September 30, 1995                                 $68,101         $128,630         $(33,200)<F1>   $163,531
Year Ended September 30, 1997                                 309,949          515,000         (128,314)<F1>    696,635
Year Ended September 30, 1996                                 163,531          183,000          (36,582)<F1>    309,949

RESERVES FOR INVENTORY OBSOLESCENCE
- ---------------------------------------------------
Year Ended September 30, 1995                                 $99,621          $15,379                  -       $115,000
Year Ended September 30, 1997                                 220,000          120,000                  -        340,000
Year Ended September 30, 1996                                 115,000          105,000                  -        220,000
<FN>
<F1>  Uncollectible accounts written off.
</FN>
</TABLE>





                                                                    Exhibit 11.1


<TABLE>
                               EMCORE CORPORATION
                  STATEMENT OF COMPUTATION OF PER SHARE AMOUNTS
              FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
                                   (Unaudited)
                    (in thousands, except per share amounts)
<CAPTION>
                                                                                        TWELVE MONTHS
                                                                                       ENDED SEPTEMBER 30,
                                                                  ---------------------------------------------------
                                                                           1995              1996             1997
                                                                  ---------------- ----------------- ----------------
<S>                                                                <C>               <C>              <C>  
Income (loss) before extraordinary item.......................            $1,516           $(3,176)         $(5,333)
Extraordinary loss............................................                                                 (286)
                                                                  ---------------- ----------------- ----------------
Net income (loss).............................................            $1,516           $(3,176)         $(5,619)
                                                                  ================ ================= ================
Primary earnings per share calculation:
Weighted average shares outstanding:
     Common stock.............................................             1,619             2,994            4,669
     Common stock equivalent(1)...............................             1,526             1,444              361
                                                                  ---------------- ----------------- ----------------

Primary weighted average common shares and equivalents........             3,145             4,438            5,030
                                                                  ================ ================= ================
Income (loss) before extraordinary item.......................             $0.48            $(0.72)          $(1.06)
Extraordinary loss............................................                                                (0.06)
                                                                  ---------------- ----------------- ----------------
Net income (loss) per share...................................             $0.48            $(0.72)          $(1.12)
                                                                  ================ ================= ================

Fully diluted earnings per share calculation: (2)
Weighted average shares outstanding:
     Common stock.............................................             1,619             2,994            4,669
     Common stock equivalent(1)...............................             1,526             1,444              361

Fully diluted weighted average common shares and equivalents..             3,145             4,438            5,030
                                                                  ================ ================= ================

Income (loss) before extraordinary item.......................             $0.48            $(0.72)          $(1.06)
Extraordinary loss............................................                                                (0.06)
                                                                  ---------------- ----------------- ----------------
Net income (loss) per share...................................             $0.48            $(0.72)          $(1.12)
                                                                  ================ ================= ================
<FN>
<F1> Under the provisions of Securities and Exchange  Commission  Staff Bulletin
     No. 64 ("SAB" No. 64), common stock and common stock equivalents  issued by
     the company within one year
 or in contemplation  of the Company's  offering
     are treated as if they were outstanding for all periods  presented prior to
     the Company's IPO. After the IPO is effective,  the determination of common
     stock and  equivalents  has been  determined on basis  consistent  with APB
     Opinion No. 15, which states  "outstanding  options and warrants  should be
     included in the EPS computation only if they have a dilutive effect."

<F2> This calculation is submitted in accordance with Securities Exchange Act of
     1934  Release No. 9083  although not required by footnote 2 of paragraph 14
     of APB Opinion No. 15 because it results in dilution of less than 3%.
</FN>
</TABLE>



                                                                    Exhibit 23.1




                       CONSENT OF INDEPENDENT ACCOUNTANTS


        We  consent  to the  incorporation  by  reference  in  the  Registration
Statements of EMCORE  Corporation on Form S-8 (File Nos.  333-27507,  333-36445,
and 333-39547) of our report dated  November 3, 1997,  except for Note 15, as to
which the date is December 5, 1997,  on our audits of the  financial  statements
and financial statement schedule of EMCORE Corporation as of September 30, 1997,
and for the three years ended  September  30, 1997,  which report is included in
this Annual Report on Form 10-K.


                                                      COOPERS & LYBRAND L. L. P.

Parsippany, New Jersey
December 29, 1997