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

FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___

Commission File Number 001-36632
https://cdn.kscope.io/bde81511049cd135c07efc45385eea11-emkr-20220630_g1.jpg
EMCORE Corporation
(Exact name of registrant as specified in its charter)
New Jersey22-2746503
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)

2015 W. Chestnut Street, Alhambra, California, 91803
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (626) 293-3400

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common stock, no par valueEMKRThe Nasdaq Stock Market LLC (Nasdaq Global Market)

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 No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the E change Act.

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

As of August 5, 2022, the number of shares outstanding of our no par value common stock totaled 37,549,905.



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EMCORE Corporation
FORM 10-Q
For the Quarterly Period Ended June 30, 2022

TABLE OF CONTENTS

Page

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CAUTIONARY NOTE
REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations and projections about future events and financial trends affecting the financial condition of our business. Such forward-looking statements include, in particular, projections about our future results included in our Exchange Act reports and statements about plans, strategies, business prospects, changes, and trends in our business and the markets in which we operate. These forward-looking statements may be identified by the use of terms and phrases such as “anticipates,” “believes,” “can,” “could,” “estimates,” “expects,” “forecasts,” “intends,” “may,” “plans,” “projects,” “should,” “targets,” “will,” “would,” and similar expressions or variations of these terms and similar phrases. Additionally, statements concerning future matters such as our expected liquidity, development of new products, enhancements or technologies, sales levels, expense levels, expectations regarding the outcome of legal proceedings, and other statements regarding matters that are not historical are forward-looking statements. Management cautions that these forward-looking statements relate to future events or our future financial performance and are subject to business, economic, and other risks and uncertainties, both known and unknown, that may cause actual results, levels of activity, performance, or achievements of our business or the industries in which we operate to be materially different from those expressed or implied by any forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include without limitation the following:

uncertainties regarding the effects of the COVID-19 pandemic and the impact of measures intended to reduce its spread on our business and operations, which is evolving and beyond our control;
the effect of component shortages and any alternatives thereto;
the rapidly evolving markets for our products and uncertainty regarding the development of these markets;
our historical dependence on sales to a limited number of customers and fluctuations in the mix of products and customers in any period;
delays and other difficulties in commercializing new products;
the failure of new products: (a) to perform as expected without material defects, (b) to be manufactured at acceptable volumes, yields, and cost, (c) to be qualified and accepted by our customers, and (d) to successfully compete with products offered by our competitors;
uncertainties concerning the availability and cost of commodity materials and specialized product components that we do not make internally;
actions by competitors;
risks and uncertainties related to applicable laws and regulations, including the impact of changes to applicable tax laws and tariff regulations;
acquisition-related risks, including that (a) revenue and net operating results obtained from the Systron Donner Inertial, Inc. (“SDI”) business, the L3Harris Space and Navigation (“S&N”) business, or the Inertial Navigation business line acquired from KVH Industries, Inc. (the "KVH IN Business") may not meet our expectations, (b) the costs and cash expenditures for integration of the S&N business operations or the KVH IN Business may be higher than expected, (c) there could be losses and liabilities arising from the acquisition of SDI, S&N, or the KVH IN Business that we will not be able to recover from any source, (d) we may not recognize the anticipated synergies from the acquisition of SDI, S&N, or the KVH IN Business, and (e) we may not realize sufficient scale in our Navigation and Inertial Sensing product line from the SDI acquisition, the S&N acquisition, and the KVH IN Business acquisition and will need to take additional steps, including making additional acquisitions, to achieve our growth objectives for this product line;
risks related to our ability to obtain capital;
risks related to the transition of certain of our manufacturing operations from our Beijing facility to a contract manufacturer’s facility;
risks and uncertainties related to manufacturing and production capacity and expansion plans related thereto; and
other risks and uncertainties discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021, as such risk factors may be amended, supplemented, or superseded from time to time by our subsequent periodic reports we file with the Securities and Exchange Commission (“SEC”).

These cautionary statements apply to all forward-looking statements wherever they appear in this Quarterly Report. Forward-looking statements are based on certain assumptions and analysis made in light of experience and perception of historical trends, current conditions, and expected future developments as well as other factors that we believe are appropriate under the
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circumstances. While these statements represent judgment on what the future may hold, and we believe these judgments are reasonable, these statements are not guarantees of any events or financial results. All forward-looking statements in this Quarterly Report are made as of the date hereof, based on information available to us as of the date hereof, and subsequent facts or circumstances may contradict, obviate, undermine, or otherwise fail to support or substantiate such statements. We caution you not to rely on these statements without also considering the risks and uncertainties associated with these statements and our business that are addressed in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended September 30, 2021. Certain information included in this Quarterly Report may supersede or supplement forward-looking statements in our other reports filed with the SEC. We do not intend to update any forward-looking statement to conform such statements to actual results or to changes in our expectations, except as required by applicable law or regulation.
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PART I. Financial Information

ITEM 1. Financial Statements
EMCORE CORPORATION
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income
For the three and nine months ended June 30, 2022 and 2021
(in thousands, except per share data)
(unaudited)

For the Three Months Ended June 30,For the Nine Months Ended June 30,
2022202120222021
Revenue$23,675 $42,658 $98,561 $114,490 
Cost of revenue19,777 25,433 69,849 70,059 
Gross profit3,898 17,225 28,712 44,431 
Operating expense:
Selling, general, and administrative7,800 6,081 22,550 17,941 
Research and development4,513 4,500 13,675 12,567 
Severance  1,318  
(Gain) loss on sale of assets(1,318)250 (1,919)439 
Total operating expense10,995 10,831 35,624 30,947 
Operating (loss) income(7,097)6,394 (6,912)13,484 
Other (expense) income:
Gain on extinguishment of debt 6,561  6,561 
Interest income (expense), net9 579 (14)481 
Foreign exchange (loss) gain(185)87 (160)256 
Pension expense(349) (349) 
Total other (expense) income(525)7,227 (523)7,298 
(Loss) income before income tax expense(7,622)13,621 (7,435)20,782 
Income tax expense(27)(6)(25)(214)
Net (loss) income$(7,649)$13,615 $(7,460)$20,568 
Foreign exchange translation adjustment69 (5)91 (26)
Comprehensive (loss) income$(7,580)$13,610 $(7,369)$20,542 
Per share data
Net (loss) income per basic share$(0.20)$0.37 $(0.20)$0.62 
Weighted-average number of basic shares outstanding37,425 36,768 37,197 33,069 
Net (loss) income per diluted share$(0.20)$0.35 $(0.20)$0.59 
Weighted-average number of diluted shares outstanding37,425 38,893 37,197 34,777 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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EMCORE CORPORATION
Condensed Consolidated Balance Sheets
As of June 30, 2022 and September 30, 2021
(in thousands)
(unaudited)

As of
June 30, 2022September 30, 2021
ASSETS
Current assets:
Cash and cash equivalents$74,609 $71,621 
Restricted cash520 61 
Accounts receivable, net of credit loss of $267 and $260, respectively
24,287 31,849 
Contract assets7,439 361 
Inventory29,206 32,309 
Prepaid expenses and other current assets6,471 6,877 
Assets held for sale480 1,241 
Total current assets143,012 144,319 
Property, plant, and equipment, net26,079 22,544 
Goodwill354 69 
Operating lease right-of-use assets20,938 13,489 
Other intangible assets, net1,548 167 
Other non-current assets1,592 225 
Total assets$193,523 $180,813 
LIABILITIES and SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$13,335 $16,686 
Accrued expenses and other current liabilities11,651 9,568 
Contract liabilities9,042 368 
Operating lease liabilities - current2,156 1,198 
Total current liabilities36,184 27,820 
Operating lease liabilities - non-current19,240 12,684 
Asset retirement obligations4,516 2,049 
Other long-term liabilities9 794 
Total liabilities59,949 43,347 
Commitments and contingencies (Note 11)
Shareholders’ equity:
Common stock, no par value, 50,000 shares authorized; 44,449 shares issued and 37,543 shares outstanding as of June 30, 2022; 43,890 shares issued and 36,984 shares outstanding as of September 30, 2021
785,743 782,266 
Treasury stock at cost; 6,906 shares as of June 30, 2022 and September 30, 2021
(47,721)(47,721)
Accumulated other comprehensive income778 687 
Accumulated deficit(605,226)(597,766)
Total shareholders’ equity133,574 137,466 
Total liabilities and shareholders’ equity$193,523 $180,813 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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EMCORE CORPORATION
Condensed Consolidated Statements of Shareholders’ Equity
For the three and nine months ended June 30, 2022 and 2021
(in thousands)
(unaudited)

For the Three Months Ended June 30,For the Nine Months Ended June 30,
2022202120222021
Shares of common stock
Balance, beginning of period37,395 36,775 36,984 29,551 
Stock-based compensation148 101 553 534 
Stock option exercises 5 6 15 
Issuance of common stock - ESPP   126 
Sale of common stock   6,655 
Balance, end of period37,543 36,881 37,543 36,881 
Value of common stock
Balance, beginning of period$784,371 $779,681 $782,266 $744,361 
Stock-based compensation1,523 1,176 3,755 3,010 
Stock option exercises 31 29 77 
Tax withholding paid on behalf of employees for stock-based awards(151)(112)(307)(195)
Issuance of common stock - ESPP   382 
Sale of common stock, net of offering costs   33,141 
Balance, end of period785,743 780,776 785,743 780,776 
Treasury stock, beginning and ending of period(47,721)(47,721)(47,721)(47,721)
Accumulated other comprehensive income
Balance, beginning of period709 897 687 918 
Translation adjustment69 (5)91 (26)
Balance, end of period778 892 778 892 
Accumulated deficit
Balance, beginning of period(597,577)(616,456)(597,766)(623,409)
Net (loss) income(7,649)13,615 (7,460)20,568 
Balance, end of period(605,226)(602,841)(605,226)(602,841)
Total shareholders’ equity$133,574 $131,106 $133,574 $131,106 

The accompanying notes are an integral part of these condensed consolidated financial statements.

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EMCORE CORPORATION
Condensed Consolidated Statements of Cash Flows
For the nine months ended June 30, 2022 and 2021
(in thousands)
(unaudited)

For the Nine Months Ended June 30,
20222021
Cash flows from operating activities:
Net (loss) income$(7,460)$20,568 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense3,292 3,053 
Stock-based compensation expense3,755 3,010 
Provision adjustments related to credit loss187 (35)
Provision adjustments related to product warranty174 313 
(Gain) loss on disposal of property, plant, and equipment(1,919)439 
Other299 (396)
Changes in operating assets and liabilities:
Accounts receivable and contract assets7,306 (4,827)
Inventory3,380 (7,395)
Other assets(5,263)(345)
Accounts payable(4,706)1,423 
Accrued expenses and other current liabilities6,941 (9,116)
Contract liabilities2,650 (124)
Operating lease liabilities - current(487)161 
Net cash provided by operating activities8,149 6,729 
Cash flows from investing activities:
Purchase of equipment(4,743)(3,004)
Proceeds from disposal of property, plant, and equipment2,820 582 
Acquisition of business(2,439) 
Net cash used in investing activities(4,362)(2,422)
Cash flows from financing activities:
Proceeds from employee stock purchase plan and equity awards29 451 
Proceeds from sale of common stock 35,937 
Issuance cost associated with sale of common stock (2,796)
Taxes paid related to net share settlement of equity awards(307)(195)
Net cash (used in) provided by financing activities(278)33,397 
Effect of exchange rate changes provided by foreign currency(62)55 
Net increase in cash, cash equivalents, and restricted cash3,447 37,759 
Cash, cash equivalents, and restricted cash at beginning of period71,682 30,538 
Cash, cash equivalents, and restricted cash at end of period$75,129 $68,297 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest$40 $46 
Cash paid during the period for income taxes$547 $547 
NON-CASH INVESTING AND FINANCING ACTIVITIES
Changes in accounts payable related to purchases of equipment$(76)$1,026 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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EMCORE Corporation
Notes to Condensed Consolidated Financial Statements

NOTE 1. Description of Business

EMCORE Corporation (referred to herein, together with its subsidiaries, as the “Company,” “we,” “our,” or “EMCORE”) is a leading provider of sensors for navigation in the aerospace and defense market as well as a manufacturer of lasers and optical subsystems for use in the broadband industry. We pioneered the linear fiber optic transmission technology that enabled the world’s first delivery of Cable TV (“CATV”) directly on fiber, and today are a leading provider of advanced products that enable communications systems and service providers to meet growing demand for increased bandwidth and connectivity. The technology at the heart of our broadband communications products is shared with our fiber optic gyroscope (“FOG”) and inertial sensors to provide the aerospace and defense markets with state-of-the-art navigation systems technology. With the acquisitions of (a) Systron Donner Inertial, Inc. (“SDI”), a navigation systems provider with a scalable, chip-based platform for higher volume gyro applications utilizing quartz micro-electromechanical system (“QMEMS”) technology, in June 2019, and (b) the L3Harris Space and Navigation (“S&N”) business in April 2022, we further expanded our portfolio of gyros and inertial sensors with SDI’s QMEMS gyro and accelerometer technology and S&N's FOG and ring laser gyro (“RLG”) technology. We have fully vertically-integrated manufacturing capability through our indium phosphide (“InP”) compound semiconductor wafer fabrication facility at our headquarters in Alhambra, CA and through our QMEMS processing and sensor manufacturing facility in Concord, CA and our FOG and RLG manufacturing facility in Budd Lake, NJ. These facilities support our vertically-integrated manufacturing strategy for QMEMS, FOG, and RLG products for navigation systems, and, with respect to our Alhambra, CA facility, for our chip, laser, transmitter, and receiver products for broadband applications. With both analog and digital circuits on multiple chips, or even a single chip, the value of Mixed-Signal device solutions is often substantially greater than traditional digital applications and requires a specialized expertise held by us which is unique in the optics industry.

NOTE 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim information, and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the SEC. Accordingly, they do not include all information and notes required by U.S. GAAP for annual financial statements. In our opinion, the interim financial statements reflect all adjustments, which are all normal recurring adjustments, that are necessary to provide a fair presentation of the financial results for the interim periods presented. Operating results for interim periods are not necessarily indicative of results that may be expected for an entire fiscal year. The condensed consolidated balance sheet as of September 30, 2021 has been derived from the audited consolidated financial statements as of such date. For a more complete understanding of our business, financial position, operating results, cash flows, risk factors and other matters, please refer to our Annual Report on Form 10-K for the fiscal year ended September 30, 2021.

Significant Accounting Policies and Estimates

Pension Plan

With the acquisition of S&N, we acquired the assets and assumed the liabilities associated with a pension plan, now named the Emcore Space & Navigation Corporation Pension Plan (the “Pension Plan”), which is a defined benefit pension plan providing postretirement benefits to certain employees. Subsequent to quarter end, as of July 1, 2022, the Pension Plan was amended to freeze benefit plan accruals for participants.

The investments in the Pension Plan are measured at fair value using quoted market prices or the net asset value per share as a practical expedient. The projected benefit obligations associated with the Pension Plan are determined based on actuarial models utilizing mortality tables and discount rates applied to the expected benefit term.

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, as of the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. If these estimates differ significantly from actual results, the impact to the condensed consolidated financial statements may be material.

Recent Accounting Pronouncements

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We recently adopted the following accounting standards, which had the following impacts on our condensed consolidated financial statements:

In December 2019, the FASB issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing various exceptions, such as the exception to the incremental approach for intra-period tax allocation when there is a loss from continuing operations and income or a gain from other items. The amendments in this update also simplify the accounting for income taxes related to income-based franchise taxes and require that an entity reflect enacted tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The new standard was effective for our fiscal year beginning October 1, 2021. The adoption of this new standard did not have a material impact on the condensed consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which provides an exception to fair value measurement for contract assets and contract liabilities related to revenue contracts acquired in a business combination. The ASU required an entity (acquirer) to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contract. The ASU is effective for the Company for our annual and interim periods beginning October 1, 2023. We early adopted this standard effective with our fiscal year beginning October 1, 2021. The early adoption of this new standard did not have a material impact on the condensed consolidated financial statements.

Other accounting standards that have been issued or proposed by FASB and do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows, or disclosures.

NOTE 3. Acquisition

On April 29, 2022, we completed the acquisition of the L3Harris Technologies, Inc. (“L3H”) Space and Navigation business (“S&N”) for a total purchase price of approximately $5.0 million in cash, exclusive of transaction costs and expenses and subject to certain post-closing working capital adjustments, resulting in a cash payment at closing of the acquisition of approximately $2.4 million. Following the closing, we began integrating S&N into our Aerospace and Defense reportable segment and have included the financial results of S&N in our condensed consolidated financial statements beginning on the acquisition date. Revenue and net loss of S&N from the acquisition date of $4.3 million and $0.7 million, respectively, is included in our condensed consolidated statements of operations and comprehensive (loss) income for the three and nine months ended June 30, 2022.

Preliminary Purchase Price Allocation

The total purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. Due to the fact that the acquisition occurred in the current interim period, the Company's fair value estimates for the purchase price allocation are preliminary. The final determination of fair value for the assets acquired and liabilities assumed is subject to further change and will be completed as soon as possible, but no later than one year from the acquisition date. The preliminary estimates that are not yet finalized relate to identifiable intangible assets and asset retirement obligations. Any changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in a material adjustment to goodwill.

The table below represents the preliminary purchase price allocation to the assets acquired and liabilities assumed of S&N based on their estimated fair values as of the acquisition date based on management’s best estimates and assumptions:

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(in thousands)Amount
Tangible assets acquired:
Accounts receivable$803 
Inventory370 
Contract assets6,206 
Operating lease right-of-use assets1,529 
Property, plant, and equipment1,996 
Net pension benefit assets1,727 
Intangible assets acquired1,460 
Goodwill285 
Liabilities assumed:
Accounts payable and accrued expenses(1,848)
Contract liabilities(6,024)
Operating lease liabilities(1,565)
Asset retirement obligations(2,500)
Total purchase consideration$2,439 

For the three and nine months ended June 30, 2022, the Company incurred transaction costs of approximately $0.3 million and $0.8 million, respectively, in connection with the S&N acquisition, which were expensed as incurred and included in selling, general and administrative expenses within the accompanying condensed consolidated statements of operations and comprehensive (loss) income.

NOTE 4. Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the unaudited condensed consolidated balance sheets that sum to the total of the same amounts shown in the unaudited condensed consolidated statements of cash flows:
As of
(in thousands)June 30, 2022September 30, 2021
Cash$19,482 $16,547 
Cash equivalents55,127 55,074 
Restricted cash520 61 
Total cash, cash equivalents, and restricted cash$75,129 $71,682 

The balance of restricted cash as of June 30, 2022 increased from September 30, 2021 due to an additional reserve related to our workers' compensation insurance policy. A reserve was taken as of June 30, 2022 in lieu of a corresponding letter of credit that was previously in place under our Credit and Security Agreement with Wells Fargo Bank, N.A., which terminated in May 2022 pursuant to its terms.

NOTE 5. Accounts Receivable, net

The components of accounts receivable consisted of the following:
As of
(in thousands)June 30, 2022September 30, 2021
Accounts receivable, gross$24,554 $32,109 
Allowance for credit loss(267)(260)
Accounts receivable, net$24,287 $31,849 

NOTE 6. Inventory
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The components of inventory consisted of the following:
As of
(in thousands)June 30, 2022September 30, 2021
Raw materials$15,217 $16,146 
Work in-process10,716 11,410 
Finished goods3,273 4,753 
Inventory$29,206 $32,309 

NOTE 7. Property, Plant, and Equipment, net

The components of property, plant, and equipment, net consisted of the following:
As of
(in thousands)June 30, 2022September 30, 2021
Equipment$42,932 $37,985 
Furniture and fixtures1,380 1,125 
Computer hardware and software3,589 3,575 
Leasehold improvements7,186 6,663 
Construction in progress8,956 9,247 
Property, plant, and equipment, gross$64,043 $58,595 
Accumulated depreciation(37,964)(36,051)
Property, plant, and equipment, net$26,079 $22,544 

During the fiscal year ended September 30, 2020, the Company entered into agreements to sell equipment and these assets were reclassified to assets held for sale. The balance as of June 30, 2022 and September 30, 2021 was $0.5 million and $1.2 million, respectively. The balance of assets held for sale will be sold in the quarter ending September 30, 2022. During the three months ended June 30, 2022 and 2021, the Company sold certain equipment and recognized a (gain) loss on sale of assets of $(1.3) million and $0.3 million, respectively. During the nine months ended June 30, 2022 and 2021, the Company sold certain equipment and recognized a (gain) loss on sale of assets of $(1.9) million and $0.4 million, respectively.

Geographical Concentrations

Long-lived assets consist of land, building, property, plant, and equipment. As of June 30, 2022 and September 30, 2021, 93% and 96%, respectively, of our long-lived assets were located in the United States. The remaining long-lived assets are primarily located in Thailand. The increase in long-lived assets in Thailand was a result of consigning additional equipment in CIP for production purposes for use predominantly in the CATV Lasers and Transmitters product line.

NOTE 8. Benefit Plans

We assumed a defined benefit pension plan (the “Pension Plan”) on April 29, 2022 as a result of the acquisition of S&N. The Pension Plan was frozen to new hires as of March 31, 2007 and employees hired on or after April 1, 2007 are not eligible to participate in the Pension Plan. Subsequent to quarter end, as of July 1, 2022, the Pension Plan was amended to freeze benefit plan accruals for participants. Benefits are based on years of credited service at retirement. Annual contributions to the Pension Plan are not less than the minimum funding standards outlined in the Employee Retirement Income Security Act of 1974, as amended. We make contributions to the Pension Plan with the goal of ensuring that it is adequately funded to meet its future obligations. We did not make any contributions to the Pension Plan during the period from April 29, 2022 to June 30, 2022 and do not anticipate making any contributions for the remainder of 2022.

The weighted average discount rate used to determine the projected benefit obligation of the Pension Plan as of the date of the S&N acquisition on April 29, 2022 was 4.40%. The weighted average discount rate used to determine interest cost related to the Pension Plan for the period from April 29, 2022 to June 30, 2022 was 4.40%.

The components of the pension expense are as follows:

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(in thousands)For the Three and Nine Months Ended June 30, 2022
Interest cost$60 
Loss on Pension Plan assets349 
Total pension expense$409 
Total pension expense is included as a component of other (expense) income on the condensed consolidated statements of operations and comprehensive (loss) income for the three and nine months ended June 30, 2022.

The net pension asset assumed with the S&N acquisition is as follows:

As of
(in thousands)June 30, 2022
Benefit obligation$8,203 
Fair value of Pension Plan assets9,581 
Net pension asset$1,378 

Net pension asset is included as a component of other non-current assets on the condensed consolidated balance sheets as of June 30, 2022. As of June 30, 2022 the Pension Plan assets consist of cash and cash equivalents.

401(k) Plan

We have a savings plan that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under this savings plan, participating employees may defer a portion of their pretax earnings, up to the Internal Revenue Service annual contribution limit. During each of the three months ended June 30, 2022 and 2021, our matching contribution was $0.2 million in cash, respectively. During each of the nine months ended June 30, 2022 and 2021, our matching contribution was $0.8 million in cash, respectively.

NOTE 9. Accrued Expenses and Other Current Liabilities

The components of accrued expenses and other current liabilities consisted of the following:
As of
(in thousands)June 30, 2022September 30, 2021
Compensation$6,783 $7,192 
Warranty1,381 1,125 
Legal expenses and other professional fees202 152 
Income and other taxes 104 
Severance and restructuring accruals525  
Litigation settlement575 70 
Other2,185 925 
Accrued expenses and other current liabilities$11,651 $9,568 

NOTE 10. Income and Other Taxes

During the three months ended June 30, 2022 and 2021, the Company recorded an income tax expense of $27,000 and $6,000, respectively. Income tax expense during the three months ended June 30, 2022 is composed primarily of Texas gross margin taxes. Income tax expense during the three months ended June 30, 2021 is composed primarily of state tax expense which is driven by the State of California's temporary suspension of net operating loss ("NOL") utilization.

During the nine months ended June 30, 2022 and 2021, the Company recorded an income tax expense of $25,000 and $214,000, respectively. Income tax expense for the nine months ended June 30, 2022 is composed primarily of Texas gross margin taxes. Income tax expense for the nine months ended June 30, 2021 is composed primarily of state tax expense which is driven by the State of California's temporary suspension of NOL utilization.

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For the three months ended June 30, 2022 and 2021 the effective tax rate on continuing operations was 0.4% and 0.0%, respectively. For the nine months ended June 30, 2022 and 2021 the effective tax rate on continuing operations was 0.3% and 1.0%, respectively. The tax rate for the three and nine months ended June 30, 2022 is primarily driven by Texas gross margin taxes.

The Company uses estimates to forecast the results from continuing operations for the current fiscal year as well as permanent differences between book and tax accounting.

We have not provided for income taxes on non-U.S. subsidiaries’ undistributed earnings as of June 30, 2022 because we plan to indefinitely reinvest the unremitted earnings of our non-U.S. subsidiaries and all of our non-U.S. subsidiaries historically have negative earnings and profits.

All deferred tax assets have a full valuation allowance as of June 30, 2022, except for the tax amortization of indefinitely lived goodwill, which cannot be utilized to reduce deferred tax assets. On a quarterly basis, the Company evaluates the positive and negative evidence to assess whether the more likely than not criteria has been satisfied in determining whether there will be further adjustments to the valuation allowance.

As of June 30, 2022 and September 30, 2021, we did not accrue any significant uncertain tax benefit, interest, or penalties as tax liabilities on our condensed consolidated balance sheets. During the three and nine months ended June 30, 2022, there were no material increases or decreases in unrecognized tax benefits.

NOTE 11. Commitments and Contingencies

Indemnifications

We have agreed to indemnify certain customers against claims of infringement of intellectual property rights of others in our sales contracts with these customers. Historically, we have not paid any claims under these customer indemnification obligations. We enter into indemnification agreements with each of our directors and executive officers pursuant to which we agree to indemnify them for certain potential expenses and liabilities arising from their status as a director or executive officer of the Company. We maintain directors and officers insurance, which covers certain liabilities relating to our obligation to indemnify our directors and executive officers in certain circumstances. It is not possible to determine the aggregate maximum potential loss under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular claim.

Legal Proceedings

We are subject to various legal proceedings, claims, and litigation, either asserted or unasserted, that arise in the ordinary course of business. The outcome of these matters is currently not determinable and we are unable to estimate a range of loss, should a loss occur, from these proceedings. The ultimate outcome of legal proceedings involves judgments, estimates, and inherent uncertainties and the results of these matters cannot be predicted with certainty. Professional legal fees are expensed when incurred. We accrue for contingent losses when such losses are probable and reasonably estimable. In the event that estimates or assumptions prove to differ from actual results, adjustments are made in subsequent periods to reflect more current information. Should we fail to prevail in any legal matter, or should several legal matters be resolved against the Company in the same reporting period, then the financial results of that particular reporting period could be materially affected.

Intellectual Property Lawsuits

We protect our proprietary technology by applying for patents where appropriate and, in other cases, by preserving the technology, related know-how, and information as trade secrets. The success and competitive position of our product lines are impacted by our ability to obtain intellectual property protection for our research and development efforts. We have, from time to time, exchanged correspondence with third parties regarding the assertion of patent or other intellectual property rights in connection with certain of our products and processes.

Resilience Litigation

In February 2021, Resilience Capital (“Resilience”) filed a complaint against us with the Delaware Chancery Court containing claims arising from the February 2020 sale of SDI’s real property (the “Concord Property Sale”) located in Concord, California (the “Concord Real Property”) to Eagle Rock Holdings, LP (“Buyer”) and that certain Single-Tenant Triple Net Lease, dated as of February 10, 2020, entered into by and between SDI and the Buyer, pursuant to which SDI leased from the Buyer the
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Concord Real Property for a 15 year term. The Resilience complaint seeks, among other items, (a) a declaration that the Concord Property Sale included a non-cash component, (b) a decree requiring us and Resilience to follow the appraisal requirements set forth in that certain Purchase and Sale Agreement (the "SDI Purchase Agreement"), dated as of June 7, 2019, by and among the Company, The Resilience Fund IV, L.P., The Resilience Fund IV-A, L.P., Aerospace Newco Holdings, Inc. and Ember Acquisition Sub, Inc., (c) recovery of Resilience’s costs and expenses, and (d) pre- and post-judgment interest.
In April 2021, we filed with the Delaware Chancery Court our answer to the Resilience complaint and counterclaims against Resilience, in which we are seeking, among other items, (a) dismissal of the Resilience complaint and/or granting of judgment in favor of EMCORE with respect to the Resilience complaint, (b) entering final judgment against Resilience awarding damages to us for Resilience’s fraud and breaches of the SDI Purchase Agreement in an amount to be proven at trial and not less than $1,565,000, (c) a judicial determination of the respective rights and duties of us and Resilience under the SDI Purchase Agreement, (d) an award to us of costs and expenses, and (e) pre- and post-judgment interest. We believe that the claims made by Resilience in its complaint are without merit and we intend to vigorously defend ourselves against them.

NOTE 12. Equity

Equity Plans

We provide long-term incentives to eligible officers, directors, and employees in the form of equity-based awards. We maintain three equity incentive compensation plans, collectively described as our “Equity Plans”: (a) the 2010 Equity Incentive Plan, (b) the 2012 Equity Incentive Plan, and (c) the 2019 Equity Incentive Plan.

We issue new shares of common stock to satisfy awards granted under our Equity Plans. In March 2022, our shareholders approved the Amended and Restated EMCORE Corporation 2019 Equity Incentive Plan, which was adopted by the Company’s Board of Directors in December 2021, and increased the maximum number of shares of the Company’s common stock that may be issued or transferred pursuant to awards under the 2019 Equity Incentive Plan by an additional 1.9 million shares.

Stock-Based Compensation

The following table sets forth stock-based compensation expense by award type:
For the Three Months Ended June 30,For the Nine Months Ended June 30,
(in thousands)2022202120222021
Employee stock options$ $1 $ $3 
RSUs and RSAs692 573 1,795 1,505 
PSUs and PRSAs708 403 1,602 989 
ESPP 85  258 
Outside director equity awards and fees in common stock123 114 358 255 
Total stock-based compensation expense$1,523 $1,176 $3,755 $3,010 

The following table sets forth stock-based compensation expense by expense type:
For the Three Months Ended June 30,For the Nine Months Ended June 30,
(in thousands)2022202120222021
Cost of revenue$275 $220 $604 $564 
Selling, general, and administrative1,001 752 2,537 1,830 
Research and development247 204 614 616 
Total stock-based compensation expense$1,523 $1,176 $3,755 $3,010 

(Loss) Income Per Share

The following table sets forth the computation of basic and diluted net (loss) income per share:
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For the Three Months Ended June 30,For the Nine Months Ended June 30,
(in thousands, except per share data)2022202120222021
Numerator
Net (loss) income$(7,649)$13,615 $(7,460)$20,568 
Denominator
Weighted average number of shares outstanding - basic37,425 36,768 37,197 33,069 
Effect of dilutive securities
Stock options 10  5 
PSUs, RSUs, and restricted stock 2,115  1,703 
Weighted average number of shares outstanding - diluted37,425 38,893 37,197 34,777 
Earnings per share - basic$(0.20)$0.37 $(0.20)$0.62 
Earnings per share - diluted$(0.20)$0.35 $(0.20)$0.59 
Weighted average antidilutive options, unvested restricted RSUs and RSAs, unvested PSUs and ESPP shares excluded from the computation3,163 2,138 1,315 1,947 

Basic earnings per share ("EPS") is computed by dividing net (loss) income for the period by the weighted-average number of common stock outstanding during the period. Diluted EPS is computed by dividing net (loss) income for the period by the weighted average number of common stock outstanding during the period, plus the dilutive effect of outstanding restricted stock units ("RSUs") and restricted stock awards ("RSAs"), performance stock units ("PSUs"), stock options, and shares issuable under the employee stock purchase plan ("ESPP") as applicable pursuant to the treasury stock method. Certain of the Company's outstanding share-based awards, noted in the table above, were excluded because they were anti-dilutive, but they could become dilutive in the future. The anti-dilutive stock options and shares of outstanding and unvested restricted stock were excluded from the computation of earnings per share for the three and nine months ended June 30, 2022 due to the Company incurring a net loss for such periods.

Future Issuances

Common stock reserved for future issuances was as follows:
As of
June 30, 2022
Exercise of outstanding stock options13,884 
Unvested RSUs and RSAs2,587,302 
Unvested PSUs and PRSAs (at 200% maximum payout)
3,618,106 
Issuance of stock-based awards under the Equity Plans341,304 
Purchases under the officer and director share purchase plan88,741 
Total reserved6,649,337 

NOTE 13. Segment and Revenue Information

Reportable Segments

Reported below are the Company’s segments for which separate financial information is available and upon which operating results are evaluated by the chief operating decision maker, the Chief Executive Officer, to assess performance and to allocate resources. We do not allocate sales and marketing, general and administrative expenses, or interest expense and interest income to our segments because management does not include the information in its measurement of the performance of the operating segments. Also, a measure of segment assets and liabilities has not been provided to the Company's chief operating decision maker and therefore is not shown below.

Information on reportable segments utilized by the chief operating decision maker is as follows:
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(in thousands)For the Three Months Ended June 30,For the Nine Months Ended June 30,
2022202120222021
Revenue
Aerospace and Defense$13,416 $12,327 $32,322 $39,097 
Broadband10,259 30,331 66,239 75,393 
Total revenue$23,675 $42,658 $98,561 $114,490 
Segment profit
Aerospace and Defense gross profit$1,551 $3,872 $4,468 $11,747 
Aerospace and Defense research and development expense3,834 3,598 12,037 10,441 
Aerospace and Defense segment profit$(2,283)$274 $(7,569)$1,306 
Broadband gross profit$2,347 $13,353 $24,244 $32,684 
Broadband research and development expense679 902 1,638 2,126 
Broadband segment profit$1,668 $12,451 $22,606 $30,558 
Total segment profit$(615)$12,725 $15,037 $31,864 
Unallocated expense (income)
Selling, general, and administrative$7,800 $6,081 $22,550 $17,941 
Severance  1,318  
(Gain) loss on sale of assets(1,318)250 (1,919)439 
Gain on extinguishment of debt (6,561) (6,561)
Interest (income) expense, net(9)(579)14 (481)
Foreign exchange loss (gain)185 (87)160 (256)
Pension expense349  349  
Total unallocated expense (income)$7,007 $(896)$22,472 $11,082 
(Loss) income before income tax expense$(7,622)$13,621 $(7,435)$20,782 
Product Categories

Revenue is classified by major product category as presented below:
For the Three Months Ended June 30,
(in thousands)2022% of
Revenue
2021% of
Revenue
Aerospace and Defense
Navigation and Inertial Sensing$9,891 42 %$9,280 22 %
Defense Optoelectronics3,525 15 3,047 7 
Broadband
CATV Lasers and Transmitters7,006 29 27,364 64 
Chip Devices1,353 6 819 2 
Other Optical Products1,900 8 2,148 5 
Total revenue$23,675 100 %$42,658 100 %

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Table of Contents

For the Nine Months Ended June 30,
(in thousands)2022% of
Revenue
2021% of
Revenue
Aerospace and Defense
Navigation and Inertial Sensing$25,651 26 %$27,475 24 %
Defense Optoelectronics6,671 7 11,622 10 
Broadband
CATV Lasers and Transmitters56,449 57 65,799 58 
Chip Devices3,534 4 2,403 2 
Other Optical Products6,256 6 7,191 6 
Total revenue$98,561 100 %$114,490 100 %

Geographical Concentration

The following table sets forth revenue by geographic area based on our customers’ billing addresses:
For the Three Months Ended June 30,For the Nine Months Ended June 30,
(in thousands)2022202120222021
United States and Canada$19,043 $37,705 $86,751 $100,157 
Asia1,684 2,305 6,498 9,475 
Europe2,243 1,603 3,999 2,817