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,~~December 31, 2020

☐ 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

EMCORE Corporation

(Exact name of registrant as specified in its charter)



New Jersey		22-2746503
(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 Class	Trading Symbol	Name of Each Exchange on Which Registered
Common stock, no par value	EMKR	The 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. þ 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). þ 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 ~~definition~~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 Exchange Act. ☐

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

As of ~~August~~February 3, ~~2020,~~2021, the number of shares outstanding of our no par value common stock totaled ~~29,408,087.~~29,782,853.

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CAUTIONARY STATEMENT

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 our 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 our plans, strategies, business prospects, changes and trends in our business and the markets in which we operate, including the expected impact of the COVID-19 pandemic on our business and operations. 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 ~~our industry~~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: (a) 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; (b) the rapidly evolving markets for ~~the Company’s~~our products and uncertainty regarding the development of these markets; (c) ~~the Company’s~~our historical dependence on sales to a limited number of customers and fluctuations in the mix of products and customers in any period; (d) delays and other difficulties in commercializing new products; (e) the failure of new products: (i) to perform as expected without material defects, (ii) to be manufactured at acceptable volumes, yields, and cost, (iii) to be qualified and accepted by our customers, and (iv) to successfully compete with products offered by our competitors; (f) uncertainties concerning the availability and cost of commodity materials and specialized product components that we do not make internally; (g) actions by competitors; (h) risks and uncertainties related to applicable laws and regulations, including the impact of changes to applicable tax laws and tariff regulations; (i) acquisition-related risks, including that (1) the revenues and net operating results obtained from the Systron Donner Inertial, Inc. ("SDI") business may not meet our expectations, (2) the costs and cash expenditures for integration of the SDI business operations may be higher than expected, (3) there could be losses and liabilities arising from the acquisition of SDI that we will not be able to recover from any source, and (4) we may not realize sufficient scale in our Navigation and Inertial Sensing product line from the SDI acquisition and will need to take additional steps, including making additional acquisitions, to achieve our growth objectives for this product line; (j) risks related to our ability to obtain capital; (k) risks related to the transition of certain of our manufacturing operations from our Beijing facility to a contract manufacturer’s facility; and (l) other risks and uncertainties discussed in Part II, Item 1A, Risk Factors in this Quarterly Report on Form 10-Q and in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2019,~~2020, 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 our experience and perception of historical trends, current conditions and expected future developments as well as other factors that we believe are appropriate under the circumstances. While these statements represent our 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, ~~2019.~~2020. 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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EMCORE Corporation

FORM 10-Q

For The Quarterly Period Ended ~~June 30,~~December 31, 2020

TABLE OF CONTENTS


			Page
Part I:	Financial Information		4
	Item 1.	Financial Statements (Unaudited)	4
		Condensed Consolidated Statements of Operations and Comprehensive ~~Loss~~Income (Loss) for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2020 and 2019	4
		Condensed Consolidated Balance Sheets as of ~~June 30,~~December 31, 2020 and September 30, ~~2019~~2020	5
		Condensed Consolidated Statements of Shareholders’ Equity for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2020 and 2019	6
		Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~June 30,~~December 31, 2020 and 2019	7
		Notes to our Condensed Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2318
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3626
	Item 4.	Controls and Procedures	3726
Part II:	Other Information		3727
	Item 1.	Legal Proceedings	3727
	Item 1A.	Risk Factors	3727
	Item 6.	Exhibits	4029
		SIGNATURES	4130

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PART I. Financial Information.

ITEM 1.Financial Statements

EMCORE CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive ~~Loss~~Income (Loss)

For the three ~~and nine~~ months ended ~~June 30,~~December 31, 2020 and 2019

(in thousands, except per share data)

(unaudited)


	For the three months ended				For the nine months ended				For the three months ended
	June 30,				June 30,				December 31,
	2020		2019		2020		2019		2020		2019
Revenue	$	27,266	$	17,219	$	76,598	$	62,965	$	33,426	$	25,482
Cost of revenue		18,048		13,515		53,479		47,644		20,854		18,008
Gross profit		9,218		3,704		23,119		15,321		12,572		7,474
Operating expense:
Selling, general, and administrative		5,936		9,288		18,962		23,877		5,798		5,887
Research and development		4,807		4,629		14,033		13,008		4,296		4,642
Gain from change in estimate on ARO obligation		—		—		—		(40)
Gain on sale of assets		(312)		—		(2,229)		—		(29)		(1,602)
Total operating expense		10,431		13,917		30,766		36,845		10,065		8,927
Operating loss		(1,213)		(10,213)		(7,647)		(21,524)
Operating income (loss)										2,507		(1,453)
Other income:
Interest (expense) income, net		(40)		99		(54)		590
Foreign exchange (loss) gain		(20)		(349)		(29)		(31)
Total other (expense) income		(60)		(250)		(83)		559
Loss before income tax (expense) benefit		(1,273)		(10,463)		(7,730)		(20,965)
Income tax (expense) benefit		(14)		(14)		27		(44)
Net loss	$	(1,287)	$	(10,477)	$	(7,703)	$	(21,009)
Interest expense, net										(49)		(15)
Foreign exchange gain										237		147
Total other income										188		132
Income (loss) before income tax expense										2,695		(1,321)
Income tax expense										(126)		(14)
Net income (loss)									$	2,569	$	(1,335)
Foreign exchange translation adjustment		2		9		(5)		36		(10)		(36)
Comprehensive loss	$	(1,285)	$	(10,468)	$	(7,708)	$	(20,973)
Comprehensive income (loss)									$	2,559	$	(1,371)
Per share data:
Net loss per basic and diluted share	$	(0.04)	$	(0.37)	$	(0.27)	$	(0.76)
Weighted-average number of basic and diluted shares outstanding used in computing net loss per share		29,295		28,005		29,052		27,730
Net income (loss) per basic share									$	0.09	$	(0.05)
Weighted-average number of basic shares outstanding										29,503		28,832
Net income (loss) per diluted share									$	0.08	$	(0.05)
Weighted-average number of diluted shares outstanding										30,377		28,832

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,~~December 31, 2020 and September 30, ~~2019~~2020

(in thousands)

(unaudited)


	As of		As of		As of		As of
	June 30,		September 30,		December 31,		September 30,
	2020		2019		2020		2020
ASSETS
Current assets:
Cash and cash equivalents	$	29,497	$	21,574	$	31,120	$	30,390
Restricted cash		185		403		38		148
Accounts receivable, net of allowance of $303 and $148, respectively		19,854		18,497
Accounts receivable, net of credit loss of $234 and $227, respectively						27,276		25,324
Contract assets		2,079		1,055		582		1,566
Inventory		24,410		24,051		27,855		25,525
Prepaid expenses and other current assets		5,440		6,389		4,283		5,589
Assets held for sale		1,580		—		1,661		1,568
Total current assets		83,045		71,969		92,815		90,110
Property, plant, and equipment, net		21,210		37,223		20,558		21,052
Goodwill		69		69		69		69
Operating lease right-of-use assets		14,886		—		14,262		14,566
Other intangible assets, net		211		239		193		202
Other non-current assets		217		62		229		242
Total assets	$	119,638	$	109,562	$	128,126	$	126,241
LIABILITIES and SHAREHOLDERS’ EQUITY
Current liabilities:
Borrowings from credit facility	$	—	$	5,497
PPP liability - current		2,458		—	$	1,093	$	—
Accounts payable		13,075		10,701		17,158		16,484
Accrued expenses and other current liabilities		10,788		14,521		9,650		11,577
Operating lease liabilities - current		1,020		—		979		992
Total current liabilities		27,341		30,719		28,880		29,053
PPP liability - non-current		4,030		—		5,395		6,488
Operating lease liabilities - non-current		13,981		—		13,481		13,735
Asset retirement obligations		2,014		1,890		2,041		2,022
Other long-term liabilities		—		207		794		794
Total liabilities		47,366		32,816		50,591		52,092
Commitments and contingencies (Note 13)
Commitments and contingencies (Note 11)
Shareholders’ equity:
Common stock, 0 par value, 50,000 shares authorized; 36,318 shares issued and 29,408 shares outstanding as of June 30, 2020; 35,803 shares issued and 28,893 shares outstanding as of September 30, 2019		743,160		739,926
Common stock, 0 par value, 50,000 shares authorized; 36,693 shares issued and 29,783 shares outstanding as of December 31, 2020; 36,461 shares issued and 29,551 shares outstanding as of September 30, 2020						745,188		744,361
Treasury stock at cost; 6,910 shares		(47,721)		(47,721)		(47,721)		(47,721)
Accumulated other comprehensive income		945		950		908		918
Accumulated deficit		(624,112)		(616,409)		(620,840)		(623,409)
Total shareholders’ equity		72,272		76,746		77,535		74,149
Total liabilities and shareholders’ equity	$	119,638	$	109,562	$	128,126	$	126,241

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,~~December 31, 2020 and 2019

(in thousands)

(unaudited)


	For the three months ended				For the nine months ended				For the three months ended
	June 30,				June 30,				December 31,
	2020		2019		2020		2019		2020		2019
Shares of Common Stock
Balance, beginning of period		29,291		27,856		28,893		27,577		29,551		28,893
Stock-based compensation		117		93		283		305		230		55
Stock option exercises		—		—		1		1		2		0
Issuance of common stock for acquisition		—		811		—		811
Issuance of restricted stock units		—		—		116		—
Issuance of common stock - ESPP		—		—		115		66
Balance, end of period		29,408		28,760		29,408		28,760		29,783		28,948
Value of Common Stock
Balance, beginning of period	$	742,416	$	735,257	$	739,926	$	734,066	$	744,361	$	739,926
Stock-based compensation		779		677		2,625		1,824		903		801
Stock option exercises		—		—		2		1		7		0
Tax withholding paid on behalf of employees for stock-based awards		(35)		(9)		(82)		(203)		(83)		(47)
Issuance of common stock for acquisition		—		2,916		—		2,916
Issuance of restricted stock units		—		—		410		—
Issuance of common stock - ESPP		—		—		279		237
Balance, end of period		743,160		738,841		743,160		738,841		745,188		740,680
Treasury stock, beginning and ending of period		(47,721)		(47,721)		(47,721)		(47,721)		(47,721)		(47,721)
Accumulated Other Comprehensive Income
Balance, beginning of period		943		912		950		885		918		950
Translation adjustment		2		9		(5)		36		(10)		(36)
Balance, end of period		945		921		945		921		908		914
Accumulated Deficit
Balance, beginning of period		(622,825)		(590,957)		(616,409)		(580,425)		(623,409)		(616,409)
Net loss		(1,287)		(10,477)		(7,703)		(21,009)
Net income (loss)										2,569		(1,335)
Balance, end of period		(624,112)		(601,434)		(624,112)		(601,434)		(620,840)		(617,744)
Total Shareholders’ Equity	$	72,272	$	90,607	$	72,272	$	90,607	$	77,535	$	76,129

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~~three months ended ~~June 30,~~December 31, 2020 and 2019

(in thousands)

(unaudited)


	For the nine months ended June 30,				For the three months ended December 31,
	2020		2019		2020		2019
Cash flows from operating activities:
Net loss	$	(7,703)	$	(21,009)
Net income (loss)					$	2,569	$	(1,335)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense		4,359		5,011		1,005		1,981
Stock-based compensation expense		2,625		1,824		903		801
Provision adjustments related to doubtful accounts		188		62
Provision adjustments related to credit loss						6		111
Provision adjustments related to product warranty		178		139		171		49
Net gain on disposal of property, plant and equipment		(2,229)		—
Issuance of restricted stock units		410		—
Gain on disposal of property, plant and equipment						(29)		(1,602)
Other		(113)		(72)		(290)		(259)
Total non-cash adjustments		5,418		6,964		1,766		1,081
Changes in operating assets and liabilities:
Accounts receivable anc contract assets		(2,566)		5,119
Accounts receivable and contract assets						(970)		(1,450)
Inventory		(293)		(1,211)		(1,998)		(902)
Other assets		(13,706)		(3,899)		1,694		(2,809)
Accounts payable		2,738		(4,508)		836		794
Accrued expenses and other current liabilities		10,707		6,835		(2,371)		(1,358)
Total change in operating assets and liabilities		(3,120)		2,336		(2,809)		(5,725)
Net cash used in operating activities		(5,405)		(11,709)
Net cash provided by (used in) operating activities						1,526		(5,979)
Cash flows from investing activities:
Purchase of equipment		(3,391)		(8,615)		(870)		(1,506)
Acquisition of business, net of cash acquired		—		(22,246)
Proceeds from disposal of property, plant and equipment		15,300		—		0		1,947
Net cash provided by (used in) investing activities		11,909		(30,861)
Net cash (used in) provided by investing activities						(870)		441
Cash flows from financing activities:
Net payments on credit facilities		(5,497)		—		0		(1,038)
Proceeds from PPP loan		6,488		—
Proceeds from exercise of equity awards		281		238		8		0
Taxes paid related to net share settlement of equity awards		(82)		(203)		(83)		(47)
Net cash provided by financing activities		1,190		35
Net cash used in financing activities						(75)		(1,085)
Effect of exchange rate changes provided by foreign currency		11		1		39		32
Net increase (decrease) in cash, cash equivalents and restricted cash		7,705		(42,534)		620		(6,591)
Cash, cash equivalents and restricted cash at beginning of period		21,977		63,195		30,538		21,977
Cash, cash equivalents and restricted cash at end of period	$	29,682	$	20,661	$	31,158	$	15,386

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest	$	98	$	96	$	15	$	47
Cash paid during the period for income taxes	$	60	$	59
NON-CASH INVESTING AND FINANCING ACTIVITIES
Changes in accounts payable related to purchases of equipment	$	(357)	$	(338)	$	(350)	$	(725)

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

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EMCORE Corporation

Notes to our Condensed Consolidated Financial Statements

NOTE 1. Description of Business

Business Overview

EMCORE Corporation (referred to herein, together with its subsidiaries, as the “Company,” “we,” “our,” or “EMCORE”) was established in 1984 as a New Jersey corporation. The Company became publicly traded in 1997 and is listed on the Nasdaq stock exchange under the ticker symbol EMKR. 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 cable TV industry. EMCORE pioneered the linear fiber optic transmission technology that enabled the world’s first delivery of Cable TV (“CATV”) directly on fiber, and today is a leading provider of advanced Mixed-Signal Optics products that enable communications systems and service providers to meet growing demand for increased bandwidth and connectivity. The Mixed-Signal Optics technology at the heart of our broadband communications products is shared with our fiber optic gyros and inertial sensors to provide the aerospace and defense markets with state-of-the-art navigation systems technology. With the acquisition of Systron Donner Inertial, Inc. (“SDI”), a navigation systems provider with a scalable, chip-based platform for higher volume gyro applications utilizing Quartz MEMS technology, in June 2019, EMCORE further expanded its portfolio of gyros and inertial sensors with SDI’s quartz MEMS gyro and accelerometer technology. EMCORE has fully vertically-integrated manufacturing capability through our indium phosphide compound semiconductor wafer fabrication facility at our headquarters in Alhambra, CA, and through our quartz processing and sensor manufacturing facility in Concord, CA. These facilities support EMCORE’s vertically-integrated manufacturing strategy for quartz and fiber optic gyro products, for navigation systems, and 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 EMCORE which is unique in the optics industry.

Interim Financial Statements

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 Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the 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, ~~2019~~2020 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, ~~2019.~~2020.

~~Critical~~Significant Accounting Policies and Estimates

Our significant accounting policies are detailed in “Note 2 - Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended September 30, 2020. There have been no significant changes to our accounting policies during the three months ended December 31, 2020. 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. There have been no material changes in our critical accounting policies and estimates from those disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2019.~~2020. Please refer to Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2019~~2020 for a discussion of our critical accounting policies and estimates.

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Disaggregation of Revenue - Revenue is classified based on the product line of business. For additional information on the disaggregated revenues by geographical region, see Note 13 – Segment Data and Related Information in the notes to the condensed consolidated financial statements.

Revenue is also classified by major product category and is presented below:


	For the three months ended December 31,
			% of				% of
(in thousands)	2020		Revenue		2019		Revenue
Navigation and Inertial Sensing	$	9,202	28	%	$	10,267	40	%
Defense Optoelectronics		4,434	13	%		3,437	13	%
CATV Lasers and Transmitters		17,315	52	%		9,383	37	%
Chip Devices		743	2	%		1,555	6	%
Other		1,732	5	%		840	4	%
Total revenue	$	33,426	100	%	$	25,482	100	%

NOTE 2. Recent Accounting Pronouncements

(a)	New Accounting Updates Recently Adopted

●

In ~~February~~June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~2016-02,~~ ~~Leases (Topic 842)~~~~. ASU 2016-02 introduces a lessee model that requires recognition of~~

~~Table of Contents~~

assets and liabilities arising from qualified leases on the consolidated balance sheets and disclosure of qualitative and quantitative information about lease transactions. The new standard was effective for our fiscal year beginning October 1, 2019. We adopted Topic 842 using the modified retrospective approach. The modified retrospective approach provides a method for recording existing leases at the beginning of the period of adoption. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed us to carry forward the historical lease classification and we elected the hindsight practical expedient to determine the lease term for existing leases. Additionally, the Company elected an accounting policy to not record operating lease right-of-use (“ROU”) assets and lease liabilities for leases with an initial term of twelve months or less on its condensed consolidated balance sheet. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

Adoption of the new standard resulted in the recording of net operating lease ROU assets of $4.8 million and operating lease liabilities of $4.8 million, as of October 1, 2019. The standard did not have an impact on our consolidated results of operations or cash flow.

●

~~The impact of the adoption of Accounting Standards Codification (“ASC”) 842 on the balance sheet as of October 1, 2019 was:~~

As Reported

Balance

September 30, 2019

Increase

October 1, 2019
(in thousands)

Operating lease right-of-use assets

$
-

$
4,800

$
4,800
Total assets

109,562

4,800

114,362
Operating lease liabilities

-

800

800
Total current liabilities

30,719

800

31,519
Operating lease liabilities non-current

-

4,000

4,000
Total liabilities

32,816

4,800

37,616
Total liabilities and equity

109,562

4,800

114,362

~~In connection with the sale/leaseback of non-residential real estate on February 10, 2020, the Company recorded an additional operating ROU assets and operating lease~~ ~~liabilities~~ ~~of $10.8~~ ~~million during the nine months ended June 30, 2020. See also~~ ~~Note 9 – Property, Plant and Equipment, netin the notes to the condensed consolidated financial statements.~~

~~(b)~~

~~Recent Accounting Standards or Updates Not Yet Effective~~

●

~~In June 2016, the FASB issued ASU~~ 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes the way entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net earnings. The new standard is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. The new standard was effective for our fiscal year beginning October 1, 2020. We adopted the new standard on October 1, 2020, and it did not have a material impact on its condensed consolidated financial statements.

(b)	Recent Accounting Standards or Updates Not Yet Effective

●

In December 2019, the FASB issued ASU 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The new standard is effective for annual periods beginning after December 15, 2020, including interim periods within those annual periods. The new standard will be effective for our fiscal year beginning October 1, ~~2020~~2021 and early adoption is permitted. The Company is currently evaluating the new guidance to determine the impact it may have on its condensed consolidated financial statements and related disclosures.

~~NOTE 3. Summary of Significant Accounting Policies~~

Our significant accounting policies are detailed in “Note 2 - Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended September 30, 2019. Significant changes to our accounting policies as a result of adopting Topic 842 are discussed below:

The Company determines if an arrangement is a lease at its inception. ROU assets and operating lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company uses its estimated incremental borrowing rate in determining the present value of lease payments considering

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the term of the lease, which is derived from information available at the lease commencement date. The lease term includes renewal options when it is reasonably certain that the option will be exercised, and excludes termination options. To the extent that the Company’s agreements have variable lease payments, the Company includes variable lease payments that depend on an index or a rate and excludes those that depend on facts or circumstances occurring after the commencement date, other than the passage of time. Lease expense for these leases is recognized on a straight-line basis over the lease term. The Company has elected not to recognize ROU assets and lease liabilities that arise from short-term (12 months or less) leases for any class of underlying asset. Operating leases are included in operating lease ROU assets, current operating lease liabilities, and non-current operating lease liabilities in the Company's condensed consolidated balance sheet.

The Company’s lease arrangements consist primarily of corporate, manufacturing and other facility agreements as well as various office equipment agreements. The leases expire at various dates through 2035, some of which include options to extend the lease term. The options with the longest potential total lease term consist of options for extension of up to five years following expiration of the original lease term.

During the three and nine months ended June 30, 2020, the Company recorded $0.6 million and $1.3 million of operating lease expense, respectively. During the three and nine months ended June 30, 2019, the Company recorded $0.3 million and $1.0 million of rent expense, respectively. The Company's finance leases and short-term leases are immaterial.

~~Supplemental cash information and non-cash activities related to operating leases are as follows (in thousands):~~

Nine Months Ended

June 30, 2020
Operating cash outflows from operating leases

$
1,111
Operating lease assets obtained in exchange for new lease liabilities

$
10,791

~~Maturities of operating lease liabilities as of June 30, 2020 were as follows (in thousands):~~

Amount
2020

$
1,788
2021

1,830
2022

1,849
2023

1,730
2024

1,719
Thereafter

12,802
Total lease payments

21,718
Less imputed interest

(6,717)
Total

$
15,001

~~The following is a schedule of future minimum operating lease payments as of September 30, 2019 (in thousands):~~

Amount
2020

$
988
2021

839
2022

824
2023

853
2024

655
Thereafter

1,350
Total lease payments

$
5,509

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~~Weighted-average remaining lease term and discount rate related to operating leases are as follows:~~



	~~June 30, 2020~~
~~Weighted average remaining lease term (years)~~	~~14.7~~
~~Weighted average discount rate~~	~~6.1~~	%

~~Disaggregation of Revenue -~~ ~~Revenue is classified based on the product line of business. For additional information on the disaggregated revenues by geographical region, see~~ ~~Note 15 - Geographical Information~~ ~~in the notes to the condensed consolidated financial statements.~~

~~Revenue is also classified by major product category and is presented below:~~

For the three months ended June 30,

For the nine months ended June 30,

% of

% of

% of

% of

(in thousands)

2020

Revenue

2019

Revenue

2020

Revenue

2019

Revenue

Navigation and Inertial Sensing

$
9,861

36
%

5,604

32
%
$
28,970

38
%

12,157

19
%
Defense Optoelectronics

4,164

16
%

2,514

15
%

11,772

15
%

6,974

11
%
CATV Lasers and Transmitters

10,905

40
%

6,849

40
%

29,070

38
%

32,383

52
%
Chip Devices

1,443

5
%

1,854

11
%

4,033

5
%

9,570

15
%
Other

893

3
%

398

2
%

2,753

4
%

1,881

3
%
Total revenue

$
27,266

100
%
$
17,219

100
%
$
76,598

100
%
$
62,965

100
%

~~NOTE 4. Acquisition~~

On June 7, 2019, we completed the acquisition of Systron Donner Inertial, Inc. (“SDI”), a private-equity backed navigation systems provider with a scalable, chip-based platform for higher volume gyro applications utilizing Quartz MEMS technology. The total purchase price was approximately $25.0 million, consisting of (i) approximately $22.0 million in cash after working capital adjustments and (ii) the issuance of 811,000 shares of common stock with an aggregate value of approximately $3.0 million as of the closing date.

Following the closing, we incorporated SDI’s products into our Navigation and Inertial Sensing product line and have included the financial results of SDI in our condensed consolidated financial statements beginning on the acquisition date. Net revenue and net income of SDI of $7.7 million and $1.1 million, respectively, is included in our condensed consolidated statements of operations and comprehensive loss for the three months ended June 30, 2020. Net revenue and net loss of SDI of $22.1 million and $0.3 million, respectively, is included in our condensed consolidated statements of operations and comprehensive loss for the nine months ended June 30, 2020. Net revenue and net loss of SDI from the acquisition date of $2.0 million and $5,000, respectively, was included in our condensed consolidated statements of operations and comprehensive loss for the three and nine months ended June 30, 2019.

~~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.~~

~~The Company finalized the allocation of the purchase price in the quarter ended March 31, 2020, which resulted in no change from the preliminary purchase price recorded at September 30, 2019.~~

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The table below represents the purchase price allocation to the assets acquired and liabilities assumed of SDI based on their estimated fair values as of the acquisition date. The fair values assigned to assets acquired and liabilities assumed were based on management’s best estimates and assumptions at the acquisition date.

Weighted

Average Useful
(in thousands)

Amount

Life (years)
Purchase price

$
24,978

Developed technology

250

7
Cash acquired

541


Inventories

8,522


Accounts receivable

4,291


Other assets

355


Land and building

12,890


Equipment

2,913


Net liabilities assumed

(4,853)


Goodwill

$
69

~~Pro Forma Financial Information~~

The following unaudited pro forma financial information presented for the three and nine months ended June 30, 2020 and 2019 does not purport to be indicative of the results of operations that would have been achieved had the acquisition been consummated on October 1, 2018, nor of the results which may occur in the future. The pro forma amounts are based upon available information and certain assumptions that the Company believes are reasonable.

For the three months ended

For the nine months ended

June 30,

June 30,
(in thousands, except per share data)

2020

2019

2020

2019
Revenue

$
27,266

$
21,976

$
76,598

$
84,911
Net loss

$
(1,287)

$
(14,024)

$
(7,703)

$
(27,069)
Net loss per basic and diluted share

$
(0.04)

$
(0.50)

$
(0.27)

$
(0.98)
Weighted-average number of basic and diluted shares outstanding

29,295

28,005

29,052

27,730

NOTE 5.3. Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited consolidated balance sheets that sum to the total of the same amounts shown in the unaudited statements of consolidated cash flows:


	As of		As of		As of		As of		As of
	June 30,		September 30,		June 30,		December 31,		September 30,
(in thousands)	2020		2019		2019		2020		2020
Cash	$	10,435	$	4,338	$	3,368	$	12,055	$	11,325
Cash equivalents		19,062		17,236		17,135		19,065		19,065
Restricted cash		185		403		158		38		148
Total cash, cash equivalents and restricted cash	$	29,682		21,977		20,661	$	31,158	$	30,538

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The Company’s restricted cash includes cash balances which are legally or contractually restricted in use. The Company’s restricted cash is included in current assets as of ~~June 30,~~December 31, 2020 and September 30, ~~2019 and June 30, 2019.~~2020.

NOTE 6.4. Fair Value Accounting

~~ASC~~Accounting Standards Codification Topic 820 (“ASC 820”), Fair Value ~~Measurements,~~Measurement, establishes a valuation hierarchy for disclosure of the inputs to valuation techniques used to measure fair value. This standard describes a fair value hierarchy based on three levels of

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inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:

●

Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

●

Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the assets or liabilities, either directly or indirectly, through market corroboration, for substantially the full term of the financial instrument.

●

Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets or liabilities at fair value.

Classification of an asset or liability within this hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs.

Cash consists primarily of bank deposits or highly liquid short-term investments with a maturity of three months or less at the time of purchase. Restricted cash represents temporarily restricted deposits held as compensating balances against short-term borrowing arrangements. Cash, cash equivalents and restricted cash are based on Level 1 measurements.

The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, contract assets, other current assets, and accounts payable approximate fair value because of the short maturity of these instruments. ~~See~~ ~~Note 4 - Acquisition~~ ~~for discussion of the fair value measurement of assets acquired and liabilities assumed in the SDI acquisition.~~

NOTE 7.5. Accounts Receivable

The components of accounts receivable consisted of the following:


	As of				As of
(in thousands)	June 30, 2020		September 30, 2019		December 31, 2020		September 30, 2020
Accounts receivable, gross	$	20,157	$	18,645	$	27,510	$	25,551
Allowance for doubtful accounts		(303)		(148)
Allowance for credit loss						(234)		(227)
Accounts receivable, net	$	19,854	$	18,497	$	27,276	$	25,324

The allowance for ~~doubtful accounts~~credit loss is based on the age of receivables and a specific identification of receivables considered at risk of collection.

~~NOTE 8. Inventory~~

~~The components of inventory consisted of the following:~~

As of
(in thousands)

June 30, 2020

September 30, 2019
Raw materials

$
12,616

$
11,510
Work in-process

8,390

8,176
Finished goods

3,404

4,365
Inventory balance at end of period

$
24,410

$
24,051

1310

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NOTE 6. Inventory

The components of inventory consisted of the following:


	As of
(in thousands)	December 31, 2020		September 30, 2020
Raw materials	$	14,795	$	13,354
Work in-process		8,780		8,381
Finished goods		4,280		3,790
Inventory balance at end of period	$	27,855	$	25,525

NOTE 9.7. Property, Plant, and Equipment, net

The components of property, plant, and equipment, net consisted of the following:

As of
(in thousands)

June 30, 2020

September 30, 2019
Land

$
—

$
3,484
Building

—

9,405
Equipment

34,577

42,308
Furniture and fixtures

1,125

1,109
Computer hardware and software

3,460

3,554
Leasehold improvements

3,061

2,676
Construction in progress

10,058

9,330
Property, plant, and equipment, gross

$
52,281

$
71,866
Accumulated depreciation

(31,071)

(34,643)
Property, plant, and equipment, net

$
21,210

$
37,223


	As of
(in thousands)	December 31, 2020		September 30, 2020
Equipment	$	36,074	$	35,218
Furniture and fixtures		1,125		1,125
Computer hardware and software		3,476		3,473
Leasehold improvements		3,249		3,169
Construction in progress		9,933		10,301
Property, plant, and equipment, gross	$	53,857	$	53,286
Accumulated depreciation		(33,299)		(32,234)
Property, plant, and equipment, net	$	20,558	$	21,052

During the three ~~and nine~~ months ended ~~June 30,~~December 31, 2020 and 2019, the Company sold certain equipment and recognized a gain on sale of assets of approximately ~~$0.3 million~~$29,000 and ~~$1.9~~$1.6 million, respectively. In addition, in the fiscal year ended September 30, 2020, the Company entered into agreements to sell additional equipment and these assets have been reclassified to assets held for sale.

On February 10, 2020, SDI completed a sale and leaseback transaction with Eagle Rock Holdings LP (“Buyer”) of non-residential real estate (the “Sale and Leaseback Transaction”). Under the terms of the applicable purchase agreement, SDI sold its property located in Concord, California (the “Concord Real Property”) to Buyer for a total purchase price of $13.2 million. The Company received net proceeds of $12.8 million after reducing for transaction commissions and expenses incurred in connection with the sale. The Company recorded a gain on the sale of assets of approximately $0.3 million in the nine months ended June 30, 2020 related to this transaction.

At the consummation of the Sale and Leaseback Transaction, SDI entered into a Single-Tenant Triple Net Lease (the “Lease Agreement”) with Buyer pursuant to which SDI leased back from Buyer the Concord Real Property for a term commencing on the consummation of the Sale and Leaseback Transaction and ending ~~fifteen~~ (15) years after the consummation of the Sale and Leaseback Transaction, unless earlier terminated or extended in accordance with the terms of the Lease Agreement. Under the Lease Agreement, SDI’s financial obligations include base monthly rent of $0.75 per square foot, or approximately $77,500 per month, which rent will increase on an annual basis at 3 percent (3%) over the life of the lease. SDI is also responsible for all monthly expenses related to the Concord Real Property, including insurance premiums, taxes and other expenses, such as utilities. In connection with the execution of the Lease Agreement, EMCORE executed a Lease Guaranty (the “Guaranty”) with Buyer under which EMCORE guaranteed the payment when due of the monthly rent and all other additional rent, interest and charges to be paid by SDI under the Lease Agreement.

~~As a result of the Lease Agreement, the Company recorded net operating lease ROU assets and operating lease~~ ~~liabilities~~ ~~of $10.8 million during the nine months ended June 30, 2020.~~

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NOTE ~~10.~~8. Accrued Expenses and Other Current Liabilities

The components of accrued expenses and other current liabilities consisted of the following:


	As of				As of
(in thousands)	June 30, 2020		September 30, 2019		December 31, 2020		September 30, 2020
Compensation	$	6,136	$	5,185	$	5,140	$	6,916
Warranty		644		654		921		803
Legal expenses and other professional fees		230		4,407		210		211
Contract liabilities		1,011		541		77		502
Income and other taxes		1,176		1,135		1,411		1,265
Severance and restructuring accruals		62		172		—		17
Other		1,529		2,427		1,891		1,863
Accrued expenses and other current liabilities	$	10,788	$	14,521	$	9,650	$	11,577

NOTE ~~11.~~9. Credit Facilities and Debt

Credit Facilities

On November 11, 2010, we entered into a Credit and Security Agreement (as amended to date, the “Credit Facility”) with Wells Fargo Bank, N.A. The Credit Facility is secured by the Company’s assets and is subject to a borrowing base formula based on the Company’s eligible accounts receivable, inventory, and machinery and equipment accounts.

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The Credit Facility matures in November 2021 and currently provides us with a revolving credit line of up to $15.0 million, subject to a borrowing base formula, that can be used for working capital requirements, letters of credit, acquisitions, and other general corporate purposes subject to a requirement, for certain specific uses, that the Company ~~have~~has liquidity of at least $25.0 million after such use. The Credit Facility requires us to maintain (a) liquidity of at least $10.0 million and (b) excess availability of at least $1.0 million.

As of ~~June 30,~~December 31, 2020, there was no amount outstanding under this Credit Facility and the Company was in compliance with all financial covenants. Also, as of ~~June 30,~~December 31, 2020, the Credit Facility had approximately $0.5 million reserved for 1 outstanding stand-by letter of credit and $3.5 million available for borrowing.

Debt

On May 3, 2020, the Company entered into a Paycheck Protection Program Promissory Note and Agreement (the “PPP Loan Agreement”) with Wells Fargo Bank, N.A. under the Paycheck Protection Program (“PPP”) established under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) to receive loan proceeds of approximately $6.5 million (the “PPP Loan”), which the Company received on May 6, 2020.

The PPP Loan matures on May 3, 2022 and bears interest at a fixed rate of 1.00% per annum, payable monthly. Monthly payments in the amount of $273,160 will be due and payable beginning at such time as is in ~~November 2020 (subject to further deferral pursuant to~~accordance with the terms of the Paycheck Protection Flexibility Act of ~~2020)~~2020 and continuing each month thereafter until maturity of the PPP Loan. There is no prepayment penalty. Under the terms of the PPP, all or a portion of the principal may be forgiven if the PPP Loan proceeds are used for qualifying expenses as described in the CARES Act, such as payroll costs, benefits, rent, and utilities. No assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part. With respect to any portion of the PPP Loan that is not forgiven, the PPP Loan will be subject to customary provisions for a loan of this type, including customary events of default relating to, among other things, payment defaults and breaches of the provisions of the PPP Loan Agreement. The Company expects to apply for forgiveness of the PPP Loan during the fiscal year ending September 30, 2021, but it can make no assurance that forgiveness will be granted in part or in whole. As of December 31, 2020, $1.1 million is recorded in current liabilities and $5.4 million is recorded in long-term liabilities on the Company’s condensed consolidated balance sheet.

NOTE ~~12.~~10. Income and Other Taxes

During each of the three months ended ~~June 30,~~December 31, 2020 and 2019, the Company recorded income tax expense of approximately ~~$14,000.~~$126,000 and $14,000, respectively. Income tax expense for the three months ended ~~June 30,~~December 31, 2020 and 2019 is composed primarily of state ~~minimum~~ tax expense.

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~~For the nine months ended June 30, 2020 and 2019, the Company recorded~~ The increase in income tax ~~benefit (expense)~~expense is due to increased revenues and the State of ~~approximately $27,000 and $(44,000), respectively. Income tax benefit for the nine months ended June 30, 2020 is composed primarily~~California’s temporary suspension of the reversal of a deferred tax liability related to the Concord Real Property partially offset by state minimum tax expense. Income tax expense for the nine months ended June 30, 2019 is primarily comprised of state minimum tax expense.NOL utilization.

For the three months ended ~~June 30,~~December 31, 2020 and 2019, the effective tax rate on continuing operations was ~~0.0%~~0.4% and ~~0.1%~~0.0%, respectively. The ~~lower~~increased tax rate for the three months ended ~~June 30,~~December 31, 2020 is primarily due to ~~higher~~increased revenue in the three months ended ~~June 30, 2020. For the nine months ended June 30,~~December 31, 2020 and ~~2019,~~ the effective tax rate on continuing operations was 0.0% and 0.1%, respectively. The lower tax rate for the nine months ended June 30, 2020 is primarily due to the federal income tax benefit associated with the saleState of ~~the Concord Real Property.~~California’s temporary suspension of NOL utilization. The Company uses some estimates to forecast 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,~~December 31, 2020 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 at ~~June 30,~~December 31, 2020. 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.

During the three ~~and nine~~ months ended ~~June 30,~~December 31, 2020 and 2019, there were no material increases or decreases in unrecognized tax benefits. As of ~~June 30,~~December 31, 2020 and September 30, ~~2019,~~2020, we had approximately ~~$0.5~~$0.6 million of interest and penalties accrued as tax liabilities on our balance sheet. We ~~do not believe~~expect that ~~it is reasonably possible that any~~$0.4 million of ~~the~~ uncertain tax ~~positions~~benefit will be ~~paid or~~ settled within the next 12 ~~months.~~months, which will impact the effective tax rate. Interest that is accrued on tax liabilities is recorded within interest expense on the condensed consolidated statements of operations.

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NOTE ~~13.~~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 director and officer insurance, which may cover certain liabilities arising from 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 ~~agreement.~~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.

a)	~~Intellectual Property Lawsuits~~

a) 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

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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.

b)	~~Phoenix Navigation Components, LLC (“Phoenix”) Legal Proceedings~~

~~On June 12, 2018, Phoenix commenced an arbitration~~b) Resilience Threatened Litigation

In November 2020, we received a demand letter and draft complaint from counsel to Resilience Capital (“Resilience”) threatening to initiate a lawsuit against ~~EMCORE with the American Arbitration Association (“AAA”)~~us in New York. On August 31, 2018, Phoenix filed a First Amended Demand for Arbitration, asserting the following claims: breach of contract, breach of the covenant of good faith and fair dealing, misappropriation of trade secrets (under the Defend Trade Secrets Act, 18 U.S.C. § 1836, and New York law), conversion, unjust enrichment, correction of inventorship relating to U.S. Patent No. 8,773,665, and declaratory relief, relating to EMCORE’s termination of certain agreements entered into between EMCORE and Phoenix related to the purported license of certain intellectual property related to fiber optic gyroscope technology and disputed royalty payments related thereto. On September 14, 2018, EMCORE filed an Answering Statement and Counterclaim, denying all of Phoenix’s claims and asserting counterclaims for breach of the implied covenant of good faith and fair dealing and declaratory relief.

On June 21, 2019, an interim award (the “Interim Award”) was issued in connection with all claims in the AAA proceeding other than the claims related to correction of inventorship and declaratory relief relating to U.S. Patent No. 8,773,665 (the “Patent Claims”). While Phoenix ultimately sought $21.2 million in total damages, plus attorneys’ fees and costs, in the Interim Award, the arbitrator found in the Interim Award that (i) Phoenix's claim for breach of the covenant of good faith and fair dealing was denied; (ii) Phoenix's claim for breach of the agreements entered with EMCORE for failure to provide funding for non-recurring engineering was denied; (iii) Phoenix's claim for unjust enrichment was denied; (iv) Phoenix's claim for conversion was granted, but damages for that claim duplicate the damages on the breach of contract and misappropriation of trade secret claims described below and no incremental damages were awarded based on the granting of this claim; (v) EMCORE's request for a declaration that, as between EMCORE and Phoenix, EMCORE owns its proprietary IOC and transceiver was granted.

The arbitrator also found in the Interim Award that (i) EMCORE breached certain license agreements entered into with Phoenix by failing to make royalty payments due and failing to provide required accountings; (ii) Phoenix and its members are no longer subject to prior exclusivity restrictions; (iii) EMCORE's claim for breach of the covenant of good faith and fair dealing was denied; and (iv) the proceedings for the Patent Claims and EMCORE's counterclaim with respect thereto would be established by a future proceeding.

Further, out of the original 97 trade secret subpart claims by Phoenix, the arbitrator found in the Interim Award that EMCORE had misappropriated a total of 5 trade secret subparts (the “Deemed Trade Secrets”) and found that at least 1 Deemed Trade Secret was being used in 7 EMCORE products (the “EMCORE Products”). The arbitrator found that as a result of the foregoing, royalties of 7.5% of the sale price are owed, to the extent not previously paid, on (i) sales through July 16, 2018 on all fiber optic gyroscopes sold by EMCORE, and (ii) sales from July 16, 2018 through May 31, 2019 of the EMCORE Products, whether standalone or incorporated into a larger product, in each case together with interest at the New York statutory rate of 9% simple interest. In addition, the arbitrator found in the Interim Award that Phoenix was the prevailing party, and Phoenix was awarded attorneys' fees and costs in the amount of approximately $3.7 million, which amount was reduced 10% from Phoenix’s attorneys’ fees request.

In the Interim Award, the arbitrator further determined that EMCORE shall pay Phoenix a royalty of 7.5% of the sale price on (i) future customer payments for certain EMCORE product contracts previously entered into and (ii) customer payments for future sales of any product using any Deemed Trade Secret, in each case payable in a single lump sum within one month of completion of the calendar quarter in which payment has been received from the customer, and shall concurrently submit to Phoenix a written report that sets forth the calculation of the amount of the royalty payment in a form similar to previous royalty reports, provided that following the first $1 million of royalty payments on the EMP-1 product only, inclusive of payments made to date, EMCORE will pay to Phoenix a royalty of 2.25% of the sale price (net of any warranty work, returns, rebates, discounts or credits). EMCORE is required to continue to make royalty payments in this manner until such time as it has in good faith determined, and can so document, that it has completely ceased use of the Deemed Trade Secrets, and at such time, EMCORE shall provide Phoenix written notice of same by certified letter, return receipt requested.

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On October 1, 2019, the arbitrator issued a Modified Partial Final Award, which incorporated by reference the terms of the Interim Award and ordered and awarded, among other items, (i) an award to Phoenix of attorneys’ fees and costs in the amount of approximately $3.8 million, (ii) an award to Phoenix of $1.0 million in damages owing for unpaid royalties through June 30, 2019, of which $0.6 million remained to be paid as of the issuance of the Modified Partial Final Award, (iii) an award to Phoenix of $0.1 million in pre-judgment interest, calculated at the New York statutory rate of 9% simple interest, and (iv) an order that EMCORE make the payments in the foregoing items (i), (ii) and (iii) on or before October 14, 2019. On October 10, 2019, EMCORE made the foregoing payments to Phoenix in an aggregate amount equal to approximately $4.5 million. This amount was accrued as of September 30, 2019.

The Patent Claims were not determined in the Interim Award or the Modified Partial Final Award. In December 2019, EMCORE and Phoenix entered into a settlement agreement with respect to the Patent Claims pursuant to which EMCORE (i) granted Phoenix a fully paid, perpetual nonexclusive license to the disputed patent and (ii) agreed to pay Phoenix a total of ~~$0.4 million, of which $0.2 million was paid in January 2020, $0.1 million was paid in April 2020 and $0.1 million was paid in July 2020.~~

~~On June 21, 2018, Phoenix commenced a special proceeding against EMCORE in the New York Supreme~~Delaware Chancery Court ~~Commercial Division (the “Special Proceeding”). As part of the Special Proceeding, Phoenix filed an application for a preliminary injunction in aid of arbitration pursuant to CLPR 7502(c),~~ in connection with the ~~AAA arbitration proceeding~~February 2020 sale of SDI’s real property (the “Concord Property Sale”) located in ~~New York.~~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 Concord Real Property for a 15 year term. In the demand, Resilience, among other things: (i) claimed that we received non-cash consideration in connection with the Concord Property Sale in the form of below-market rent; and (ii) asserted that litigation would be filed seeking, among other things, damages in an amount to be determined at trial, unless we promptly agreed to proceed with the appraisal process set forth in that certain Purchase and Sale Agreement, dated as of June 7, 2019, by and among the Company, The ~~application resulted~~Resilience Fund IV, L.P., The Resilience Fund IV-A, L.P., Aerospace Newco Holdings, Inc. and Ember Acquisition Sub, Inc. To date no litigation has been filed and the parties have agreed to engage in ~~a so-ordered stipulated injunction between EMCORE~~mediation in an effort to resolve these claims. We believe that the claims made by Resilience are without merit and ~~Phoenix, which was entered in August 2018. In January 2020, the court granted a motion~~we intend to ~~confirm the Modified Partial Final Award, vacated the so-ordered stipulated injunction entered in August 2018, and disposed of the Special Proceeding.~~vigorously defend ourselves against them.

NOTE ~~14.~~12. Equity

Equity Plans

We provide long-term incentives to eligible officers, directors, and employees in the form of equity-based awards. We maintain 43 equity incentive compensation plans, collectively described below as our “Equity Plans”:

●

the ~~2000 Stock Option Plan,~~

●

~~the~~ 2010 Equity Incentive Plan, ~~(“2010 Plan”),~~

●

~~the 2012 Equity Incentive Plan (“2012 Plan”), and~~

●

~~the 2019 Equity Incentive Plan (“2019 Plan”).~~

~~We issue new shares of common stock to satisfy awards issued under our Equity Plans.~~

~~Stock-based compensation~~

~~The effect of recording stock-based compensation expense was as follows:~~

For the three months

For the nine months
Stock-based Compensation Expense - by award type

ended June 30,

ended June 30,
(in thousands)

2020

2019

2020

2019
Employee stock options

$
4

$
6

$
13

$
20
Restricted stock units and awards

403

380

1,331

1,162
Performance stock units and awards

255

188

910

357
Employee stock purchase plan

52

50

145

132
Outside director equity awards and fees in common stock

65

53

226

152
Total stock-based compensation expense

$
779

$
677

$
2,625

$
1,823

1813

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For the three months

For the nine months
Stock-based Compensation Expense - by expense type

ended June 30,

ended June 30,
(in thousands)

2020

2019

2020

2019
Cost of revenue

$
166

$
121

$
504

$
341
Selling, general, and administrative

488

367

1,564

999
Research and development

125

189

557

483
Total stock-based compensation expense

$
779

$
677

$
2,625

$
1,823

●

the 2012 Equity Incentive Plan, and

●

the 2019 Equity Incentive Plan.

We issue new shares of common stock to satisfy awards issued under our Equity Plans.

Stock-based compensation

The effect of recording stock-based compensation expense was as follows:


	For the three months
Stock-based Compensation Expense - by award type	ended December 31,
(in thousands)	2020		2019
Employee stock options	$	1	$	5
Restricted stock units and awards		431		376
Performance stock units and awards		317		292
Employee stock purchase plan		89		47
Outside director equity awards and fees in common stock		65		81
Total stock-based compensation expense	$	903	$	801


	For the three months
Stock-based Compensation Expense - by expense type	ended December 31,
(in thousands)	2020		2019
Cost of revenue	$	141	$	136
Selling, general, and administrative		559		485
Research and development		203		180
Total stock-based compensation expense	$	903	$	801

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. Since June 2015, all employer contributions are made in cash. During each of the three months ended ~~June 30,~~December 31, 2020 and 2019, our matching contribution in cash was approximately ~~$0.2 million. Our matching contribution in cash for the nine months ended June 30, 2020~~$0.3 and ~~2019 was approximately $0.7 million and $0.4~~$0.2 million, respectively.

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~~Loss~~Income (Loss) Per Share

The following table sets forth the computation of basic and diluted net ~~loss~~income (loss) per share:


	For the three months				For the nine months				For the three months
Basic and Diluted Net Loss Per Share	ended June 30,				ended June 30,
Basic and Diluted Net Income (Loss) Per Share									ended December 31,
(in thousands, except per share)	2020		2019		2020		2019		2020		2019
Numerator:
Loss from continuing operations	$	(1,287)	$	(10,477)	$	(7,703)	$	(21,009)
Undistributed earnings allocated to common shareholders for basic and diluted net income per share		(1,287)		(10,477)		(7,703)		(21,009)
Income (Loss) from continuing operations									$	2,569	$	(1,335)
Undistributed earnings allocated to common shareholders for basic and diluted net income (loss) per share										2,569		(1,335)
Denominator:
Denominator for basic and fully diluted net loss per share - weighted average shares outstanding		29,295		28,005		29,052		27,730
Denominator for basic net income (loss) per share - weighted average shares outstanding										29,503		28,832
Denominator for fully diluted net (income) loss per share - weighted average shares outstanding										30,377		28,832

Net loss per basic and fully diluted share	$	(0.04)	$	(0.37)	$	(0.27)	$	(0.76)
Net income (loss) per basic share									$	0.09	$	(0.05)
Net income (loss) per fully diluted share									$	0.08	$	(0.05)

Weighted average antidilutive options, unvested restricted stock units and awards, unvested performance stock units and ESPP shares excluded from the computation		1,410		1,317		1,316		881		874		1,168

~~For diluted loss~~Basic earnings per share is computed by dividing net income (loss) for the ~~denominator includes all~~period by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income (loss) for the period by the weighted average number of common ~~shares.~~shares outstanding during the period, plus the dilutive effect of outstanding restricted stock units and awards, performance stock units, stock options, and shares issuable under the employee stock purchase plan as applicable pursuant to the treasury stock method. The anti-dilutive stock options and shares of outstanding and unvested restricted stock were excluded from the computation of ~~diluted~~ net loss per share for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2020 ~~and 2019~~ due to the Company incurring a net loss for the ~~periods.~~period.

Employee Stock Purchase Plan

We maintain an Employee Stock Purchase Plan (“ESPP”) which provides employees an opportunity to purchase common stock through payroll deductions. The ESPP is a 6-month duration plan with new participation periods beginning on approximately February 25 and August 26 of each year. The purchase price is set at 85% of the average high and low market price of our common stock on either the first or last trading day of the participation period, whichever is lower, and annual contributions are limited to the lower of 10% of an employee’s compensation or $25,000.

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Future Issuances

As of ~~June 30,~~December 31, 2020, we had common stock reserved for the following future issuances:


		Number of Common
		Stock Shares Available for
Future Issuances		Future Issuances
Exercise of outstanding stock options		~~44,976~~38,407
Unvested restricted stock units and awards		~~1,630,273~~1,734,697
Unvested performance stock units and awards (at 200% maximum payout)		~~1,752,000~~1,472,000
Purchases under the employee stock purchase plan		~~428,349~~312,474
Issuance of stock-based awards under the Equity Plans		~~850,861~~637,303
Purchases under the officer and director share purchase plan		88,741
Total reserved		~~4,795,200~~4,283,622

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NOTE ~~15.~~13. Segment Data and Related Information

The 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 to assess performance and to allocate resources. ~~As a result of organizational changes effective in the beginning of fiscal year 2020, the~~The Company has ~~reassessed its reportable segments and~~ determined that it has 2 reportable segments, (i) Aerospace and Defense and (ii) Broadband. ~~All prior-period amounts have been adjusted retrospectively to reflect our reportable segment changes.~~

The Company’s Chief Executive Officer is the chief operating decision maker and he assesses the performance of the operating segments and allocates resources based on segment profits. We do not allocate sales and marketing, or general and administrative expenses to our segments, because management does not include the information in its measurement of the performance of the operating segments. Also, total assets, interest expense and interest income are not presented by segment because management does not include this information in its measurement of the performance of the operating segments.

The Aerospace and Defense segment is comprised of two product lines: (a) Navigation and Inertial Sensing; and (b) Defense Optoelectronics. The Broadband segment is comprised of three product lines: (a) CATV Lasers and Transmitters; (b) Chip Devices; and (c) Other. Information on reportable segments utilized by our chief operating decision maker is as follows:


		For the three months
(in thousands)		ended December 31,
		2020		2019
Revenue:
Aerospace and Defense	$	13,636	$	13,704
Broadband		19,790		11,778
Total revenue	$	33,426	$	25,482

Segment Profit:
Aerospace and Defense gross profit	$	4,100	$	4,488
Aerospace & Defense R&D expense		3,686		3,951
Aerospace and Defense segment profit	$	414	$	537

Broadband gross profit	$	8,472	$	2,987
Broadband R&D expense		610		692
Broadband segment profit	$	7,862	$	2,295

Total consolidated segment profit	$	8,276	$	2,832
Unallocated expense:
Selling, general and administrative		5,798		5,887
Gain on sale of assets		(29)		(1,602)
Interest expense, net		49		15
Foreign exchange gain		(237)		(147)
Total unallocated expense		5,581		4,153
Income (loss) before income tax expense	$	2,695	$	(1,321)

2016

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The Aerospace and Defense segment is comprised of two product lines: (i) Navigation and Inertial Sensing; and (ii) Defense Optoelectronics. The Broadband segment is comprised of three product lines: (i) CATV Lasers and Transmitters; (ii) Chip Devices; and (iii) Other. Information on reportable segments utilized by our chief operating decision maker is as follows:

For the three months

For the nine months
(in thousands)

ended June 30,

ended June 30,

2020

2019

2020

2019
Revenue:

Aerospace and Defense

$
14,025

$
8,118

$
40,742

$
19,131
Broadband

13,241

9,101

35,856

43,834
Total revenue

$
27,266

$
17,219

$
76,598

$
62,965

Segment Profit:

Aerospace and Defense gross profit

$
4,877

$
2,587

$
12,209

$
6,489
Aerospace & Defense R&D expense

3,925

2,559

11,867

5,792
Aerospace and Defense segment profit

$
952

$
28

$
342

$
697

Broadband gross profit

$
4,341

$
1,117

$
10,910

$
8,832
Broadband R&D expense

882

2,070

2,166

7,216
Broadband segment profit (loss)

$
3,459

$
(953)

$
8,744

$
1,616

Total consolidated segment profit (loss)

$
4,411

$
(925)

$
9,086

$
2,313
Unallocated (income) expense:

Selling, general and administrative

5,936

9,288

18,962

23,877
Gain on sale of assets

(312)

-

(2,229)

-
Gain from change in estimate on ARO obligation

-

-

-

(40)
Interest expense (income), net

40

(99)

54

(590)
Foreign exchange loss

20

349

29

31
Total unallocated expense

5,684

9,538

16,816

23,278
Loss before income tax expense

$
(1,273)

$
(10,463)

$
(7,730)

$
(20,965)

Revenue: The following table sets forth revenue by geographic region with revenue assigned to geographic regions based on our customers’ billing address.


	For the three months				For the nine months				For the three months
Revenue by Geographic Region	ended June 30,				ended June 30,				ended December 31,
(in thousands)	2020		2019		2020		2019		2020		2019
United States and Canada	$	23,209	$	14,208	$	63,291	$	48,432	$	29,346	$	20,195
Asia		2,041		1,684		5,999		9,936		3,025		2,266
Europe		1,075		1,315		4,480		4,362		656		1,889
Other		941		12		2,828		235		399		1,132
Total revenue	$	27,266	$	17,219	$	76,598	$	62,965	$	33,426	$	25,482

Significant Customers: Significant customers are defined as customers representing greater than 10% of our consolidated revenue. ~~During each of the three months ended June 30, 2020 and 2019, revenue~~Revenue from 3 of our significant customers represented an aggregate of ~~58%~~70% and ~~52%~~50% of our consolidated revenue ~~respectively. During each of~~for the ~~nine~~three months ended ~~June 30,~~December 31, 2020 and 2019, ~~revenue from three and four of our significant customers represented an aggregate of 55% and 57% of our consolidated revenue,~~ respectively.

Significant portions of the Company’s sales are concentrated among a limited number of customers. The duration, severity and future impact of the COVID-19 pandemic are highly uncertain and could result in significant disruptions to the business operations of the Company’s customers. If one or more of these significant customers significantly ~~decrease~~decreases their orders for the Company’s products, the Company’s business could be materially and adversely affected.

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Long-lived Assets: Long-lived assets consist of land, building and property, plant, and equipment. As of ~~June 30,~~December 31, 2020 and September 30, ~~2019,~~2020, approximately ~~97%~~98% and ~~85%~~97%, respectively, of our long-lived assets were located in the United States. The remaining long-lived assets are primarily located in China.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included in Financial Statements under Item 1 within this Quarterly Report. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. See Cautionary Statement Regarding Forward-Looking Statements preceding Item 1 of this Quarterly Report.

Business Overview

EMCORE pioneered the linear fiber optic transmission technology that enabled the world’s first delivery of CATV directly on fiber, and today is a leading provider of advanced Mixed-Signal Optics products serving the broadband communications and Aerospace and Defense markets. The Mixed-Signal Optics technology at the heart of our broadband communications products is shared with our fiber optic gyros and inertial sensors to provide the aerospace and defense markets with state-of-the-art navigations systems technology. With the acquisition of Systron Donner Inertial, Inc. (“SDI”), a navigation systems provider with a scalable, chip-based platform for higher volume gyro applications utilizing Quartz MEMS technology, in June 2019, EMCORE further expanded its portfolio of gyros and inertial sensors with SDI’s quartz MEMS gyro and accelerometer technology.

EMCORE has fully vertically-integrated manufacturing capability through our indium phosphide compound semiconductor wafer fabrication facility at our headquarters in Alhambra, CA, and through our quartz processing and sensor manufacturing facility in Concord, CA. These facilities support EMCORE’s vertically-integrated manufacturing strategy for quartz and fiber optic gyro products, for navigation systems, and for our chip, laser, transmitter, and receiver products for broadband applications.

We have two reporting segments, (a) Aerospace and Defense and (b) Broadband. Aerospace and Defense is comprised of two product lines: (i) Navigation and Inertial ~~Sensing,~~Sensing; and (ii) Defense Optoelectronics. The Broadband segment is comprised of three product lines: (i) CATV Lasers and ~~Transmitters,~~Transmitters; (ii) Chip ~~Devices,~~Devices; and (iii) Other. ~~Due to a shift in customer base, the previously existing Satellite/Microwave Communications product line has been renamed “Defense Optoelectronics.”~~

Recent Developments

COVID-19

The ~~global outbreak of the coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization and a national emergency by the U.S. Government in March 2020. The~~ongoing COVID-19 pandemic is has negatively affected the U.S. and global economy, disrupted global supply chains, significantly restricted travel and transportation, resulted in mandated closures and orders to “shelter-in-place,” and created significant disruption of the financial markets. The full extent of the COVID-19 impact on our operational and financial performance will depend on future developments, including the duration and spread of the pandemic, the emergence of new strains of the virus, the impact of vaccination efforts, and related actions taken by the U.S. government, state and local government officials, and international governments to prevent disease spread, all of which are uncertain, out of our control, and cannot be predicted.

~~Table of Contents~~

Each region we and our supply chain partners operate in has been affected by COVID-19 at varying times and magnitudes, often creating unforeseen challenges associated with logistics, raw material supply and labor shortages. In accordance with applicable U.S. state and county ordinances generally exempting essential businesses and/or critical infrastructure workforces from mandated closures and orders to “shelter-in-place,” our U.S. production facilities have continued to operate in support of essential products and services, subject to limitations and requirements pursuant to applicable state and county orders with regard to ongoing operations that have reduced the efficiency of our engineering and operational teams. While operations at our facility in China were delayed in ~~early~~ February 2020, we were at planned

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capacity by the end of February 2020 and throughout the ~~quarter~~quarters ended June 30, 2020, September 30, 2020, and December 31, 2020.

We rely on third party suppliers and contract manufacturers to provide materials, major components and products, and services. Many of our suppliers have at times temporarily ceased or limited operations as a result of COVID-19 and failed to deliver parts or components to us. For example, in the quarter ended ~~June 30,~~December 31, 2020, ~~unexpected~~ delays caused by air freight and ~~cancellations of key component deliveries~~customs caused disruption to our business, and ~~these actions may continue~~the ongoing shortages in ~~the future. In addition,~~air freight capacity due to the decline in commercial airline traffic has at times ~~created shortages in air freight capacity, making~~made it more difficult and costly for us to timely procure parts and components. These or similar actions may continue in the future.

We remain diligent in continuing to identify and manage risks to our business given the changing uncertainties related to COVID-19 and have plans in place intended to address or mitigate shortages of labor, material supplies and logistics services. While we believe that our supply chain, logistics and operations teams are currently in a position to meet expected customer demand levels in the coming quarters, we recognize that unpredictable events could create new challenges in the months ahead. We may not be able to address these challenges in a timely manner, which could negatively impact our financial results.

In addition, restrictions related to the COVID-19 pandemic have negatively affected the timing of the sale and transfer of certain CATV module and transmitter manufacturing equipment to the Buyers (defined below), as described in more detail below under “Hytera Transactions”. Travel into Thailand by our manufacturing engineers to support the transfer remains ~~difficult, and customer product qualification processes for products being manufactured in Thailand are being delayed due to our customers’ inability to access their facilities to perform testing.~~difficult. While we are taking actions within our supply chain and manufacturing operations to mitigate the effects of these delays, the timing and completion of these transfers may be further disrupted as a result of COVID-19, which could delay our recognition of the anticipated benefits of transferring this equipment and could disrupt our manufacturing activities for these products.

Our customer orders to date have generally ~~remain~~remained stable with our pre-COVID-19 outlook, except with respect to customer orders related to the CATV Lasers and Transmitters product line, which have increased compared to our pre-COVID-19 outlook. However, qualification testing for certain of our products has ~~been~~continued to be delayed due to customer engineering shortages and limitations on their ability to access their facilities, and development timelines for certain programs ~~are being~~continue to be extended. We continue to analyze on an ongoing basis how COVID-19 related actions could affect our product development efforts, future customer demand, timing of orders, recognized revenues, and cash flows.

~~SDI Acquisition~~

On June 7, 2019, we completed the acquisition of SDI, a private-equity backed navigation systems provider with a scalable, chip-based platform for higher volume gyro applications utilizing Quartz MEMS technology. ~~SeeNote 4 - Acquisition~~ in the notes to our condensed consolidated financial statements for additional information regarding this acquisition. Following the closing, we began integrating SDI into our current Navigation and Inertial Sensing product line and have included the financial results of SDI in our consolidated financial statements beginning on the acquisition date.

~~Table of Contents~~

Hytera Transactions

As part of the effort to streamline operations and move to a variable cost model in our CATV Lasers and Transmitters product line, on October 25, 2019, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Hytera Communications (Hong Kong) Company Limited, a limited liability company incorporated in Hong Kong (“Hytera HK”), and Shenzhen Hytera Communications Co., Ltd., a corporation formed under the laws of the P.R.C. (“Shenzhen Hytera”, and together with Hytera HK, the “Buyers”), pursuant to which the Buyers agreed to purchase from EMCORE certain CATV module and transmitter manufacturing equipment (the “Equipment”) owned by EMCORE and currently located at the manufacturing facility of EMCORE’s wholly-owned subsidiary, EMCORE Optoelectronics (Beijing) Co, Ltd., a corporation formed under the laws of the P.R.C., for an aggregate purchase price of approximately $5.54 million.

~~As described under “COVID-19” above,~~The Equipment is in the process of being transferred to the Buyers in multiple closings, some of which have been delayed due to travel restrictions and delays in customer product qualification ~~processes~~process related to the COVID-19 pandemic, have negatively affected the timing of the sale and transfer of some of the Equipment to the Buyers. The Equipment has been or will be transferred to the Buyers in three separate closings, (a) one of which occurred in the quarter ended December 31, 2019, with payment in an amount equal to approximately $1.9 million received in such quarter, (b) one of which is now expected to occur during the quarter ending September 30, 2020, for which 80% of the applicable sale price (approximately $1.4 million) was received in April 2020 and the ~~remaining 20% (approximately $0.4 million) is expected to be received in the quarter ending September 30, 2020, and (c) one~~last of which is now expected to occur during the quarter ending December 31, ~~2020, with payment to be made following such transfer in an amount equal to (i) 80%~~2021. Concurrently

Table of ~~the sale price (approximately $1.1 million) within three months following the third closing and (ii) 20% of the sale price (approximately $0.3 million) within six months following the third closing.~~Contents

~~Concurrently~~ with entry into the Asset Purchase Agreement, we entered into a Contract Manufacturing Agreement (the “Manufacturing Agreement”), dated as of October 25, 2019, with the Buyers pursuant to which the Buyers agreed to manufacture certain CATV module and transmitter products for ~~EMCORE~~us from a manufacturing facility located in Thailand for an initial five year term at product prices agreed to between the parties. InThe manufacture, purchase and sale of certain CATV module and transmitter products from the Thailand manufacturing facility pursuant to the Manufacturing Agreement ~~we agreed to pay certain shortfall penalties in the event that orders for manufactured products are below certain thresholds.~~

~~Other Actions Related to CATV Business~~

~~In the quarter ended September 30, 2019, we also reduced the size of our CATV-related employee headcount~~has commenced and reduced the capacity of our wafer fab to one shift, and in January 2020, we further reduced the size of our employee headcount. These actions incurred costs of $0.4 million in the quarter ended September 30, 2019 and $0.4 million in the quarter ended March 31, 2020 and, together with previously-disclosed headcount reduction at our Beijing, China facility and the continuing shift to a variable cost model in our CATV Lasers and Transmitters product line as described under “Hytera Transactions” above, have collectively resulted in annual cash savings of approximately $3.4 million beginning in the quarter ended March 31, 2020 and continuing through the quarter ended June 30, 2020. These operational changes in CATV also fulfill a strategic objective of better positioning the CATV Lasers and Transmitters product line to generate positive cash flow to help fund the other growth areas of EMCORE including Aerospace and Defense.

~~Sale/Leaseback Transaction~~

SDI entered into a Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate (Non-Residential) (the “Concord Purchase Agreement”) dated as of December 31, 2019 with Parkview Management Group, Inc. pursuant to which the parties agreed to consummate a sale and leaseback transaction (the “Sale and Leaseback Transaction”). Under the terms of the Concord Purchase Agreement, SDI sold the property located in Concord, California (the “Concord Real Property”) to Eagle Rock Holdings, LP (“Buyer”), an affiliate of Parkview Management Group, Inc. on February 10, 2020 for a total purchase price of $13.2 million. SDI received net proceeds of $12.8 million after transaction commissions and expenses incurred in connection with the sale.

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At the consummation of the Sale and Leaseback Transaction, SDI entered into a Single-Tenant Triple Net Lease (the “Lease Agreement”) with Buyer pursuant to which SDI leased back from Buyer the Concord Real Property for a term commencing on the consummation of the Sale and Leaseback Transaction and ending fifteen (15) years after the consummation of the Sale and Leaseback Transaction, unless earlier terminated or extended in accordance with the terms of the Lease Agreement. Under the Lease Agreement, SDI’s financial obligations will include base monthly rent of $0.75 per square foot, or approximately $77,500 per month, which rent will increase on an annual basis at three percent (3%) over the life of the lease. SDI is also responsible for all monthly expenses related to the Concord Real Property, including insurance premiums, taxes and other expenses, such as utilities. In connection with the execution of the Lease Agreement, EMCORE executed a Lease Guaranty (the “Guaranty”) with Buyer under which EMCORE guaranteed the payment when due of the monthly rent, and all other additional rent, interest and charges to be paid by SDI under the Lease Agreement. ongoing.

Results of Operations

The following table sets forth our consolidated statements of operations data expressed as a percentage of revenue:


	For the three months				For the nine months				For the three months
	ended June 30,				ended June 30,				ended December 31,
	2020		2019		2020		2019		2020		2019
Revenue	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenue	66.2		78.5		69.8		75.7		62.4		70.7
Gross profit	33.8		21.5		30.2		24.3		37.6		29.3
Operating expense:
Selling, general, and administrative	21.8		53.9		24.8		37.9		17.3		23.1
Research and development	17.6		26.9		18.3		20.7		12.9		18.2
Gain from change in estimate on ARO	—		—		—		(0.1)
Gain on sale of assets	(1.1)		—		(2.9)		—		(0.1)		(6.3)
Total operating expense	38.3		80.8		40.2		58.5		30.1		35.0
Operating loss	(4.5)		(59.3)		(10.0)		(34.2)
Operating income (loss)									7.5		(5.7)
Other income:
Interest (expense) income, net	(0.1)		0.6		(0.1)		0.9
Interest expense, net									(0.1)		(0.1)
Foreign exchange gain	(0.1)		(2.0)		—		—		0.7		0.6
Total other (expense) income	(0.2)		(1.4)		(0.1)		0.9
Loss before income tax expense	(4.7)		(60.7)		(10.1)		(33.3)
Income tax (expense) benefit	—		(0.1)		—		(0.1)
Net loss	(4.7)	%	(60.8)	%	(10.1)	%	(33.4)	%
Total other income									0.6		0.5
Income (loss) before income tax expense									8.1		(5.2)
Income tax expense									(0.4)		—
Net income (loss)									7.7	%	(5.2)	%

Comparison of Financial Results for the Three Months Ended December 31, 2020 and 2019


	For the three months ended December 31,
(in thousands, except percentages)	2020		2019		$ Change		% Change
Revenue	$	33,426	$	25,482	$	7,944	31.2%
Cost of revenue		20,854		18,008		2,846	15.8%
Gross profit		12,572		7,474		5,098	68.2%
Operating expense:
Selling, general, and administrative		5,798		5,887		(89)	(1.5)%
Research and development		4,296		4,642		(346)	(7.5)%
Gain on sale of assets		(29)		(1,602)		1,573	98.2%
Total operating expense		10,065		8,927		1,138	12.7%
Operating income (loss)		2,507		(1,453)		3,960	272.5%
Other income:
Interest expense, net		(49)		(15)		(34)	(226.7)%
Foreign exchange gain		237		147		90	61.2%
Total other income		188		132		56	42.4%
Income (loss) before income tax expense		2,695		(1,321)		4,016	304.0%
Income tax expense		(126)		(14)		(112)	(800.0)%
Net income (loss)	$	2,569	$	(1,335)	$	3,904	292.4%

2620

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~~Comparison of Financial Results for the Three Months Ended June 30, 2020 and 2019~~

For the three months ended June 30,

(in thousands, except percentages)

2020

2019

$ Change

% Change

Revenue

$
27,266

$
17,219

$
10,047

58.3%

Cost of revenue

18,048

13,515

4,533

33.5%

Gross profit

9,218

3,704

5,514

148.9%

Operating expense:









Selling, general, and administrative

5,936

9,288

(3,352)

-36.1%

Research and development

4,807

4,629

178

3.8%

Gain on sale of assets

(312)

—

(312)

N/A

Total operating expense

10,431

13,917

(3,486)

-25.0%

Operating loss

(1,213)

(10,213)

9,000

88.1%

Other income (expense):









Interest (expense) income, net

(40)

99

(139)

-140.4%

Foreign exchange loss

(20)

(349)

329

94.3%

Total other expense

(60)

(250)

190

76.0%

Loss before income tax expense

(1,273)

(10,463)

9,190

87.8%

Income tax expense

(14)

(14)

—

0.0%

Net loss

$
(1,287)

$
(10,477)

$
9,190

87.7%

Revenue

For the three months ended June 30,
(in thousands, except percentages)

2020

2019

$ Change

% Change
Aerospace and Defense revenue

$
14,025

$
8,118

$
5,907

72.8%
Broadband revenue

13,241

9,101

4,140

45.5%
Total revenue

$
27,266

$
17,219

$
10,047

58.3%


	For the three months ended December 31,
(in thousands, except percentages)	2020		2019		$ Change		% Change
Aerospace and Defense revenue	$	13,636	$	13,704	$	(68)	(0.5)%
Broadband revenue		19,790		11,778		8,012	68.0%
Total revenue	$	33,426	$	25,482	$	7,944	31.2%

Aerospace and Defense Revenue:

For the three months ended ~~June 30,~~December 31, 2020, our Aerospace and Defense revenue ~~increased $5.9 million,~~decreased $68,000 or ~~73%~~0.5%, compared to the same period in the prior year. ~~Included in Aerospace and Defense revenue is $7.7 million and $2.0 million of revenue from SDI for the three months ended June 30, 2020 and 2019, respectively.~~ For the three months ended ~~June 30,~~December 31, 2020, our Navigation and Inertial Sensing product line revenue ~~increased $4.3~~decreased $1.1 million compared to the same period in the prior year, primarily due to the ~~increase of SDI revenue of $5.7 million.~~decrease in products sold arising from decreased customer demand. Defense Optoelectronics product line revenue increased ~~$1.6~~$1.0 million compared to the same period in the prior year primarily driven by an increase in products sold arising from increased demand.

Broadband Revenue:

For the three months ended December 31, 2020, our Broadband revenue increased $8.0 million, or 68.0%, compared to the same period in the prior year primarily due to an ~~increase in products sold arising from increased customer demand.~~

~~Broadband Revenue~~:

~~For the three months ended June 30, 2020, our Broadband revenue increased $4.1~~$8.0 million ~~or 46%, compared to the same period in the prior year primarily due to an~~ increase in products sold in the CATV Lasers and Transmitters product line due to increased customer demand, arising in part from an increase in investment by cable TV multiple-system operators (“MSOs”) in their networks to ~~break~~address the bottlenecks created by bandwidth demands from both work-from-home initiatives and “stay at home” entertainment.

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Gross Profit


	For the three months ended June 30,							For the three months ended December 31,
(in thousands, except percentages)	2020		2019		$ Change		% Change	2020		2019		$ Change		% Change
Aerospace and Defense gross profit	$	4,877	$	2,587	$	2,290	88.5%	$	4,100	$	4,488	$	(388)	(8.6)%
Broadband gross profit		4,341		1,117		3,224	288.6%		8,472		2,987		5,485	183.6%
Total gross profit	$	9,218	$	3,704	$	5,514	148.9%	$	12,572	$	7,475	$	5,097	68.2%

Our cost of revenue consists of raw materials, compensation expense including non-cash stock-based compensation expense, depreciation expense and other manufacturing overhead costs, expenses associated with excess and obsolete inventories, and product warranty costs. Historically, our cost of revenue as a percentage of revenue, which we refer to as our gross margin, has fluctuated significantly due to product mix, manufacturing yields, ~~and~~ sales volumes, ~~and~~ inventory and specific product warranty ~~charges.~~charges, as well as the amount of our revenue relative to fixed manufacturing costs.

Consolidated gross margins were ~~33.8%~~37.6% and ~~21.5%~~29.3% for the three months ended ~~June 30,~~December 31, 2020 and 2019, respectively.

Stock-based compensation expense within cost of revenue totaled approximately ~~$0.2~~$0.1 million and $0.1 million for the three months ended ~~June 30,~~December 31, 2020 and 2019, respectively.

Aerospace and Defense Gross Profit:

For the three months ended ~~June 30,~~December 31, 2020, Aerospace and Defense gross profit ~~increased $2.3~~decreased $0.4 million, or ~~89%~~8.6%, compared to the same period in the prior year, primarily due to higher revenue, of which $2.5 million results from the inclusion of $3.1 million of SDI gross profit in the three months ended June 30, 2020 compared to $0.6 million in the three months ended June 30, 2019.lower revenue. For the three months ended ~~June 30,~~December 31, 2020 and 2019, Aerospace and Defense gross margin was ~~34.8%~~30.1% and ~~31.9%~~32.7%, respectively. The ~~higher~~lower gross margin in the three months ended ~~June 30,~~December 31, 2020 is primarily due to ~~higher~~lower revenue relative to fixed manufacturing costs and product mix.

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Broadband Gross ~~Profit:~~Profit:

For the three months ended ~~June 30,~~December 31, 2020, Broadband gross profit increased ~~$3.2~~$5.5 million or ~~289%~~183.6% compared to the same period in the prior year, primarily as a result of higher revenue ~~and lower costs~~ in the three months ended ~~June 30, 2020 due to actions taken through June 30, 2020 in connection with our ongoing transition to a variable cost model in our CATV Lasers and Transmitters product line.~~December 31, 2020. For the three months ended ~~June 30,~~December 31, 2020 and 2019, Broadband gross margin was ~~32.8%~~42.8% and ~~12.3%~~25.4%, respectively. The higher gross margin in the three months ended ~~June 30,~~December 31, 2020 is primarily due to higher revenue relative to fixed manufacturing costs and product mix.

Selling, General and Administrative (“SG&A”)

SG&A consists primarily of compensation expense including non-cash stock-based compensation expense related to executive, finance, and human resources personnel, as well as sales and marketing expenses, professional fees, legal and patent-related costs, and other corporate-related expenses.

Stock-based compensation expense within SG&A totaled approximately ~~$0.5~~$0.6 million and ~~$0.4~~$0.5 million for the three months ended ~~June 30,~~December 31, 2020 and 2019, respectively.

SG&A expense for the three months ended ~~June 30,~~December 31, 2020 was $0.1 million lower than the amount reported in the same period in the prior year primarily due to ~~lower fees~~a $0.2 million decrease in severance expense, a $0.4 million decrease in professional services, a $0.2 million decrease in travel, and ~~costs arising from litigation proceedings partially~~a $0.2 million decrease in allocated expenses, primarily offset by ~~higher compensation (including due to~~ a ~~higher U.S. headcount than the prior period due to the SDI acquisition)~~$0.7 million increase in bonus expense and ~~insurance expenses.~~a $0.2 million increase in sales and use tax.

As a percentage of revenue, SG&A expenses were ~~21.8%~~17.3% and ~~53.9%~~23.1% for the three months ended ~~June 30,~~December 31, 2020 and 2019, respectively.

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Research and Development (“R&D”)

R&D consists primarily of compensation expense including non-cash stock-based compensation expense, as well as engineering and prototype costs, depreciation expense, and other overhead expenses, as they relate to the design, development, and testing of our products. Our R&D costs are expensed as incurred. We believe that in order to remain competitive, we must invest significant financial resources in developing new product features and enhancements and in maintaining customer satisfaction worldwide.

Stock-based compensation expense within R&D totaled approximately ~~$0.1 million and~~ $0.2 million during the three months ended ~~June 30,~~December 31, 2020 and ~~2019, respectively.~~2019.

For the three months ended ~~June 30,~~December 31, 2020 and 2019, Aerospace and Defense R&D expense was ~~$3.9~~$3.7 million and ~~$2.5~~$3.9 million, respectively. For the three months ended ~~June 30,~~December 31, 2020 and 2019, Broadband R&D expense was ~~$0.9~~$0.6 million and ~~$2.1~~$0.7 million, respectively.

R&D expense for the three months ended ~~June 30,~~December 31, 2020 was ~~higher~~lower than the amounts reported in the same period in the prior year by $0.3 million primarily due to ~~an increase~~a $0.4 million decrease in compensation ~~costs (including due to a higher R&D headcount than the prior period due to the SDI acquisition),~~expense partially offset by ~~lower project spending, primarily~~smaller increases in ~~Aerospace~~other research and ~~Defense, and an overall reduction in Broadband R&D expense.~~development costs.

As a percentage of revenue, R&D expenses were ~~17.6%~~12.9% and ~~26.9%~~18.2% for the three months ended ~~June 30,~~December 31, 2020 and 2019, respectively.

Operating ~~Loss~~Income (Loss)

Operating ~~loss~~income (loss) represents revenue less the cost of revenue and operating expenses incurred. Operating income (loss) is a measure that executive management uses to assess performance and make decisions. As a percentage of revenue, our operating ~~loss~~income (loss) was ~~(4.5)%~~7.5% and ~~(59.3)~~(5.7)% for the three months ended ~~June 30,~~December 31, 2020 and 2019, respectively. The ~~decrease~~improvement of $4.0 million in operating ~~loss as a percentage of revenue~~income (loss) in the three months ended ~~June 30,~~December 31, 2020 compared to the same period in the prior year is primarily due to the increase in gross profit ~~the~~of $5.1 million, a decrease

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in research and development expense of $0.4 million, and decrease in selling, general and administrative expense of $0.1 million, offset by a decrease in gain on sale of equipment of ~~$0.3 million and the decrease in SG&A expense partially offset by an increase in R&D expense in the three months ended June 30, 2020.~~$1.6 million.

Other Income

Interest ~~Income,~~Expense, net

During the three months ended ~~June 30,~~December 31, 2020 and 2019, we recorded ~~$30,000 and~~ $0.1 million ~~respectively,~~ of interest ~~income earned on cash and cash equivalents balances, which was partially offset by~~expense primarily as a result of interest expense and letter of credit fees related to our Credit Facility (as defined below)., partially offset by interest income earned on cash and cash equivalent balances. Interest income for the three months ended ~~June 30,~~December 31, 2020 was lower than the amount reported in the prior year due to lower interest rates due to the impact of COVID-19 on U.S. financial ~~markets and lower cash and cash equivalents balances.~~markets.

Foreign Exchange Gain

Gains or losses from foreign currency transactions denominated in currencies other than the U.S. dollar, both realized and unrealized, are recorded as foreign exchange gain (loss) on our condensed consolidated statements of operations and comprehensive ~~income.~~loss. The gain (losses) recorded relate to the change in value of the Chinese Yuan Renminbi relative to the U.S. dollar.

Income Tax Expense

During ~~each of~~ the three months ended ~~June 30,~~December 31, 2020 and 2019, the Company recorded income tax expense of approximately ~~$14,000.~~$126,000 and $14,000, respectively. Income tax expense for the three months ended ~~June 30,~~December 31, 2020 and 2019 is composed primarily of state ~~minimum~~ tax expense.

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~~Comparison of Financial Results for the Nine Months Ended June 30, 2020 and 2019~~

For the nine months ended June 30,
(in thousands, except percentages)

2020

2019

$ Change

% Change
Revenue

$
76,598

$
62,965

$
13,633

21.7%
Cost of revenue

53,479

47,644

5,835

12.2%
Gross profit

23,119

15,321

7,798

50.9%
Operating expense:








Selling, general, and administrative

18,962

23,877

(4,915)

-20.6%
Research and development

14,033

13,008

1,025

7.9%
Gain from change in estimate on ARO

—

(40)

40

100.0%
Gain on sale of assets

(2,229)

—

(2,229)

N/A
Total operating expense

30,766

36,845

(6,079)

-16.5%
Operating loss

(7,647)

(21,524)

13,877

64.5%
Other income (expense):







Interest (expense) income, net

(54)

590

(644)

-109.2%
Foreign exchange loss

(29)

(31)

2

6.5%
Total other (expense) income

(83)

559

(642)

-114.8%
Loss before income tax expense

(7,730)

(20,965)

13,235

63.1%
Income tax benefit (expense)

27

(44)

71

161.4%
Net loss

$
(7,703)

$
(21,009)

$
13,306

63.3%

~~Revenue~~

For the nine months ended June 30,
(in thousands, except percentages)

2020

2019

$ Change

% Change
Aerospace and Defense revenue

$
40,742

$
19,131

$
21,611

113.0%
Broadband revenue

35,856

43,834

(7,978)

-18.2%
Total revenue

$
76,598

$
62,965

$
13,633

21.7%

~~Aerospace and Defense Revenue~~:

~~For the nine months ended June 30, 2020, our Aerospace and Defense revenue increased $21.6 million, or 113%, compared to the same period~~ The increase in ~~the prior year. Included in Aerospace and Defense revenue~~income tax expense is $22.1 million and $2.0 million of revenue from SDI for the nine months ended June 30, 2020 and 2019, respectively. For the nine months ended June 30, 2020, our Navigation and Inertial Sensing product line revenue increased $16.8 million compared to the same period in the prior year, primarily due to the increase of SDI revenue of $20.1 million, partially offset by a decrease of $3.3 million in our other Aerospace and Defense revenue. For the nine months ended June 30, 2020, our Defense Optoelectronics product line revenue increased ~~$4.8 million compared to the same period in the prior year, primarily due to an increase in products sold arising from increased customer demand.~~revenues.

~~Broadband Revenue~~:

For the nine months ended June 30, 2020, our Broadband revenue decreased $8.0 million, or 18%, compared to the same period in the prior year primarily due to lower customer demand in the CATV Lasers and Transmitters and Chips product lines.

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~~Gross Profit~~

For the nine months ended June 30,
(in thousands, except percentages)

2020

2019

$ Change

% Change
Aerospace and Defense gross profit

$
12,209

$
6,489

$
5,720

88.1%
Broadband gross profit

10,910

8,832

2,078

23.5%
Total gross profit

$
23,119

$
15,321

$
7,798

50.9%

Our cost of revenue consists of raw materials, compensation expense including non-cash stock-based compensation expense, depreciation expense and other manufacturing overhead costs, expenses associated with excess and obsolete inventories, and product warranty costs. Historically, our cost of revenue as a percentage of revenue, which we refer to as our gross margin, has fluctuated significantly due to product mix, manufacturing yields and sales volumes, and inventory and specific product warranty charges.

~~Consolidated gross margins were 30.2% and 24.3% for the nine months ended June 30, 2020 and 2019, respectively.~~

~~Stock-based compensation expense within cost of revenue totaled approximately $0.5 million and $0.3 million for the nine months ended June 30, 2020 and 2019, respectively.~~

~~Aerospace and Defense Gross Profit~~:

For the nine months ended June 30, 2020, Aerospace and Defense gross profit increased $5.7 million, or 88%, compared to the same period in the prior year, primarily due to higher revenue, of which $6.6 million results from the inclusion of SDI gross profit in the nine months ended June 30, 2020, compared to a $0.6 million inclusion of SDI gross profit in the nine months ended June 30, 2019. For the nine months ended June 30, 2020 and 2019, Aerospace and Defense gross margin was 30.0% and 33.9%, respectively. The lower gross margin in the nine months ended June 30, 2020 is primarily due to product mix.

~~Broadband Gross Profit:~~

For the nine months ended June 30, 2020, Broadband gross profit increased $2.1 million, or 24%, compared to the same period in the prior year, primarily as a result of product mix in the nine months ended June 30, 2020. For the nine months ended June 30, 2020 and 2019, Broadband gross margin was 30.4% and 20.1%, respectively. The higher gross margin in the nine months ended June 30, 2020 was primarily the result of product mix.

~~Selling, General and Administrative (“SG&A”)~~

~~Stock-based compensation expense within SG&A totaled approximately $1.6 million and $1.0 million for the nine months ended June 30, 2020 and 2019, respectively.~~

SG&A expense for the nine months ended June 30, 2020 was lower than the amount reported in the same period in the prior year, primarily due to lower attorneys’ fees and costs arising from litigation proceedings, partially offset by an increase in compensation (including due to a higher U.S. headcount than the prior period due to the SDI acquisition), insurance and bad debt expenses.

~~As a percentage of revenue, SG&A expenses were 24.8% and 37.9% for the nine months ended June 30, 2020 and 2019, respectively.~~

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~~Research and Development (“R&D”)~~

~~Stock-based compensation expense within R&D totaled approximately $0.6 million and $0.5 million for the nine months ended June 30, 2020 and 2019, respectively.~~

For the nine months ended June 30, 2020 and 2019, Aerospace and Defense R&D expense was $11.9 million and $5.8 million, respectively. For the nine months ended June 30, 2020 and 2019, Broadband R&D expense was $2.1 million and $7.2 million, respectively.

R&D expense for the nine months ended June 30, 2020 was higher than the amounts reported in the same period in the prior year primarily due to an increase in compensation costs (including due to a higher R&D headcount than the prior period due to the SDI acquisition), partially offset by lower project spending, primarily in Aerospace and Defense and an overall reduction in Broadband R&D expense.

~~R&D expenses were 18.3% and 20.7% as a percentage of revenue for the nine months ended June 30, 2020 and 2019, respectively.~~

~~Operating Loss~~

Operating loss represents revenue less the cost of revenue and direct operating expenses incurred. As a percentage of revenue, our operating loss was (10.0)% and (34.2)% for the nine months ended June 30, 2020 and 2019, respectively. The decrease in operating loss as a percentage of revenue in the nine months ended June 30, 2020 compared to the same period in the prior year is primarily due to the increase in gross profit, the gain on sale of equipment of $1.9 million and the Concord Real Property of $0.3 million and the decrease in SG&A expense, partially offset by the increase in R&D expense in the nine months ended June 30, 2020.

~~Other Income~~

~~Interest Income, net~~

During the nine months ended June 30, 2020 and 2019, we recorded $0.2 million and $0.6 million, respectively, of interest income earned on cash and cash equivalents balances, which was partially offset by interest expense and letter of credit fees related to our Credit Facility (as defined below). Interest income for the nine months ended June 30, 2020 was lower than the amount reported in the prior year due to the impact of COVID-19 on U.S. financial markets and lower cash and cash equivalents balances.

~~Foreign Exchange~~

Gains or losses from foreign currency transactions denominated in currencies other than the U.S. dollar, both realized and unrealized, are recorded as foreign exchange gain (loss) on our consolidated statements of operations and comprehensive income. The gain (losses) recorded relate to the change in value of the Chinese Yuan Renminbi relative to the U.S. dollar.

~~Income Tax Expense~~

For the nine months ended June 30, 2019, the Company recorded income tax benefit (expense) of approximately $27,000 and $(44,000), respectively. Income tax benefit for the nine months ended June 30, 2020 is composed primarily of the reversal of a deferred tax liability related to the Concord Real Property, partially offset by state minimum tax expense. Income tax expense for the nine months ended June 30, 2019 is primarily comprised of state minimum tax expense.

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Order Backlog

EMCORE’s product sales are made pursuant to purchase orders, often with short lead times. These orders are subject to revision or cancellation and often are made without deposits. In addition, Broadband products typically ship within the same quarter in which a purchase order is received. Therefore, our order backlog at any particular date is not necessarily indicative of actual revenue or the level of orders for any succeeding period and may not be comparable to prior periods. We ~~have~~ experienced an increase in our backlog in our CATV Lasers and Transmitters product line through the quarter ~~ending~~ended December 31, 2020 due to increased customer demand, arising in part from an increase in investment by MSOs in their networks to break the bottlenecks created by bandwidth demands from both work-from-home initiatives and “stay at home” entertainment as a result of the COVID-19 pandemic. However, we can provide no assurance that such an increase in our backlog will continue beyond December 31, 2020.

Liquidity and Capital Resources

We have historically consumed cash from operations and, in most periods, we have incurred operating losses from continuing operations. We have managed our liquidity position through the sale of assets and cost reduction initiatives, as well as, from time to time in prior periods, borrowings from our Credit Facility (defined below) and capital markets transactions.

As of ~~June 30,~~December 31, 2020, cash and cash equivalents totaled ~~$29.5~~$31.2 million and net working capital totaled approximately ~~$55.7~~$63.9 million. Net working capital, calculated as current assets (including inventory) minus current liabilities, is a financial metric we use which represents available operating liquidity.

On November 11, 2010, we entered into a Credit and Security Agreement (as amended to date, the “Credit Facility”) with Wells Fargo Bank, N.A. (“Wells Fargo”). The Credit Facility currently provides us with a revolving credit line of up to $15.0 million that can be used for working capital requirements, letters of credit, acquisitions, and other general corporate purposes subject to requirements that (a) ~~the Company~~we have (i) liquidity of at least $10.0 million, and (ii) for certain specific uses, liquidity of at least $25.0 million after such use and (b) ~~the Company~~we maintain excess availability of at least $1.0

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million. The Credit Facility has a maturity date expiring in November 2021, is secured by ~~the Company’s~~our assets and is subject to a borrowing base formula based on the Company’s eligible accounts receivable, inventory, and machinery and equipment accounts. See Note 119 - Credit Facilities and Debt in the notes to the condensed consolidated financial statements for additional disclosures. As of ~~August 3, 2020,~~January 31, 2021, there was no outstanding balance under this Credit Facility, $0.5 million reserved for one outstanding stand-by letter of credit and ~~$8.2~~$13.4 million available for borrowing.

On May 3, 2020, ~~the Company~~we entered into a Paycheck Protection Program Promissory Note and Agreement (the “PPP Loan Agreement”) with Wells Fargo Bank, N.A. under the Paycheck Protection Program (“PPP”) established under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) to receive loan proceeds of approximately $6.5 million (the “PPP Loan”), which ~~the Company~~we received on May 6, 2020.

The PPP Loan matures on May 3, 2022 and bears interest at a fixed rate of 1.00% per annum, payable monthly. Monthly payments in the amount of $273,160 will be due and payable beginning at such time as is in ~~November 2020 (subject to further deferral pursuant to~~accordance with the terms of the Paycheck Protection Flexibility Act of ~~2020)~~2020 and continuing each month thereafter until maturity of the PPP Loan. There is no prepayment penalty. Under the terms of the PPP, all or a portion of the principal may be forgiven if the PPP Loan proceeds are used for qualifying expenses as described in the CARES Act, such as payroll costs, benefits, rent, and utilities. NoWe expect to apply for forgiveness of the PPP Loan during the fiscal year ending September 30, 2021. We can provide no assurance ~~is provided~~ that ~~the Company~~we will obtain forgiveness of the PPP Loan in whole or in part. With respect to any portion of the PPP Loan that is not forgiven, the PPP Loan will be subject to customary provisions for a loan of this type, including customary events of default relating to, among other things, payment defaults and breaches of the provisions of the PPP Loan Agreement.

~~The Company has~~We have a history of operating losses and negative cash flows from operations. We believe that our existing balances of cash and cash equivalents, cash flows from operations and amounts expected to be available under our Credit Facility and any amounts that may be available to us under governmental lending programs will provide us with sufficient financial resources to meet our cash requirements for operations, working capital, and capital expenditures for at least the next twelve months from the date of the issuance of these financial statements. We have taken a number of

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actions to continue to support our operations and meet our obligations, including completing the sale of the Concord Real Property, headcount reductions and other cost ~~reductions.~~reductions and obtaining the PPP Loan. In addition, should we require more capital than what is generated by our operations, we could engage in additional sales or other monetization of certain fixed assets, additional cost reductions, or elect to raise capital in the U.S. through debt or equity issuances. These alternatives may not be available to us on reasonable terms or at all, and could result in higher effective tax rates, increased interest expense, and/or dilution of our earnings.

As described above, the continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which, depending on future developments, could impact our capital resources in the future. If we need to raise additional capital to support operations in the future, we may be unable to access capital markets and additional capital may only be available to us on terms that could be significantly detrimental to our existing stockholders and to our business.

Cash Flow

Net Cash Provided By (Used In) ~~Provided By~~ Operating Activities


Operating Activities	For the nine months ended June 30,								For the three months ended December 31,
(in thousands, except percentages)	2020		��	2019		$ Change		% Change	2020		2019		$ Change		% Change
Net cash used in operating activities	$	(5,405)		$	(11,709)	$	6,304	53.8%
Net cash provided by (used in) operating activities									$	1,526	$	(5,979)	$	7,505	125.5%

~~Fiscal~~For the three months ended December 31, 2020:

For the ~~nine~~three months ended ~~June 30,~~December 31, 2020, our operating activities ~~used~~provided cash of ~~$5.4~~$1.5 million, primarily due to our net ~~loss~~income of ~~$7.7~~$2.6 million, and positive adjustments for non-cash charges, including depreciation and amortization expense of $1.0 million, stock based compensation of $0.9 million, and provision adjustment related to product warranty of $0.2 million offset by negative adjustments for non-cash charges, and changes in our operating assets and liabilities (or working capital ~~components, which includes non-current inventory)~~components) of $3.1 million and gain on disposal of assets of $2.2 million, partially offset by adjustments for non-cash charges, including depreciation and amortization expense of $4.4 million, stock-based compensation expense of $2.6 million, issuance of restricted stock units of $0.4 million, product warranty provision of $0.2 million and bad debt provision of $0.2$2.8 million. The change in our operating assets and liabilities was primarily the result of an increase in accounts receivable and contract

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assets of ~~$2.6~~$1.0 million, inventory of ~~$0.3~~$2.0 million, and a decrease in accrued expenses and other liabilities of $2.4 million offset by a decrease in other assets of ~~$13.7~~$1.7 million ~~partially offset by~~and an increase in accounts payable of ~~$2.7 million and accrued expenses and other liabilities of $10.7~~$0.8 million.

~~Fiscal~~For the three months ended December 31, 2019:

For the ~~nine~~three months ended ~~June~~ ~~30,~~December 31, 2019, our operating activities used cash of ~~$11.7~~$6.0 million, primarily due to our net loss of ~~$21.0~~$1.3 million, ~~and partially offset by~~ changes in our operating assets and liabilities (or working capital ~~components, which includes non-current inventory)~~components) of ~~$2.3~~$5.7 million and ~~adjustments for non-cash charges, including~~gain on disposal of assets of $1.6 million, partially offset by depreciation and amortization expense of ~~$5.0~~$2.0 million, stock-based compensation expense of ~~$1.8 million, warranty provision of $0.1~~$0.8 million and bad debt provision of $0.1 million. The change in our operating assets and liabilities was primarily the result of ~~a decrease~~an increase in accounts receivable of ~~$5.1~~$1.5 million, inventory of $0.9 million and ~~an increase~~other assets of $2.8 million and a decrease in accrued expenses and other liabilities of ~~$6.8~~$1.4 million, partially offset by ~~a decrease in inventory of $1.2 million and other assets of $3.9 million and a decrease~~an increase in accounts payable of ~~$4.5~~$0.8 million.

Working Capital Components:

Accounts Receivable: We generally expect the level of accounts receivable at any given quarter end to reflect the level of sales in that quarter. Our accounts receivable balances have historically fluctuated due to the timing of account collections, timing of product shipments, and/or change in customer credit terms.

Inventory: We generally expect the level of inventory at any given quarter end to reflect the change in our expectations of forecasted sales during the quarter. Our inventory balances have historically fluctuated due to the timing of customer orders and product shipments, changes in our internal forecasts related to customer demand, as well as adjustments related to excess and obsolete inventory and the purchase of non-current inventory.

Accounts Payable: The fluctuation of our accounts payable balances is primarily driven by changes in inventory purchases as well as changes related to the timing of actual payments to vendors.

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Accrued Expenses: Our largest accrued expense typically relates to compensation. Historically, fluctuations of our accrued expense accounts have primarily related to changes in the timing of actual compensation payments, receipt or application of advanced payments, adjustments to our warranty accrual, and accruals related to professional fees.

Net Cash (Used In) Provided By ~~(Used In)~~ Investing Activities


Investing Activities	For the nine months ended June 30,							For the three months ended December 31,
(in thousands, except percentages)	2020		2019		$ Change		% Change	2020		2019		$ Change		% Change
Net cash provided by (used in) investing activities	$	11,909	$	(30,861)	$	42,770	138.6%
Net cash (used in) provided by investing activities								$	(870)	$	441	$	(1,311)	(297.3)%

~~Fiscal~~For the three months ended December 31, 2020:

For the ~~nine~~three months ended ~~June 30,~~December 31, 2020, our investing activities used cash of $0.9 million due to capital-related expenditures.

For the three months ended December 31, 2019:

For the three months ended December 31, 2019, our investing activities provided cash of ~~$11.9~~$0.4 million primarily from cash proceeds from the disposal of ~~property, plant and~~ equipment of ~~$15.3~~$1.9 million partially offset by capital-related expenditures of ~~$3.4~~$1.5 million.

~~Fiscal 2019:~~

For the nine months ended June 30, 2019, our investing activities used $30.9 million of cash for the acquisition of SDI, net of cash acquired, of $22.2 million and capital-related expenditures of $8.6 million primarily related to investment in our wafer fabrication facility.

Net Cash ~~Provided By~~Used In Financing Activities


Financing Activities	For the nine months ended June 30,							For the three months ended December 31,
(in thousands, except percentages)	2020		2019		$ Change		% Change	2020		2019		$ Change		% Change
Net cash provided by financing activities	$	1,190	$	35	$	1,155	3300.0%
Net cash used in financing activities								$	(75)	$	(1,085)	$	1,010	93.1%

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~~Fiscal~~For the three months ended December 31, 2020:

For the ~~nine~~three months ended ~~June 30,~~December 31, 2020, our financing activities ~~provided~~used cash of ~~$1.2 million primarily~~$75,000 due to $6.5 million of borrowings from the PPP Loan and proceeds from stock plan transactions of $0.3 million, partially offset by net payments related to borrowings from our bank Credit Facility of $5.5 million and tax withholding paid on behalf of employees for stock-based awards of ~~$0.1 million.~~

~~Fiscal 2019:~~

~~For the nine months ended June 30, 2019, our financing activities provided cash of $35,000 primarily from~~$83,000 offset by proceeds from stock plan transactions of ~~$0.2~~$8,000.

For the three months ended December 31, 2019:

For the three months ended December 31, 2019, our financing activities used cash of $1.1 million ~~partially offset by tax withholding paid on behalf of employees for stock-based awards of $0.2 million.~~primarily due to net payments related to borrowings from our bank Credit Facility.

Contractual Obligations and Commitments

As of the date of this report, ~~other than changes related to adoption of the new lease accounting standard as discussed in~~ ~~Note 2 – Recent Accounting Pronouncements~~ ~~to the condensed consolidated financial statements and the PPP Loan Agreement as discussed in~~ ~~Note 11 – Credit Facilities and Debt~~, there were no material changes to our contractual obligations and commitments outside the ordinary course of business since September 30, ~~2019~~2020 as reported in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2019.~~2020.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements other than our operating leases described above, that have or are reasonably likely to have a current or future material effect on our condensed consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.

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Critical Accounting Policies and Estimates

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. There have been no material changes in our critical accounting policies and estimates from those disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2019.~~2020. Please refer to Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2019~~2020 for a discussion of our critical accounting policies and estimates.

ITEM 3. Quantitative and Qualitative Disclosures about Market ~~Risks~~Risk

~~We are exposed~~There were no material changes to ~~financial~~our quantitative and qualitative disclosures about market risk during the first quarter of fiscal 2021. Please refer to Part II, Item 7A Quantitative and Qualitative Disclosures about Market Risk included in our Annual Report on the Form 10-K for our fiscal year ended September 30, 2020 for a more complete discussion of the market risks ~~including changes in currency exchange rates and interest rates. We do not use derivative financial instruments for speculative purposes.~~

~~Foreign Currency Exchange Risks~~

~~The United States dollar is the reporting currency for our condensed consolidated financial statements. The functional currency for our China subsidiaries is the Yuan Renminbi.~~

We recognize translation adjustments due to the effect of changes in the value of the Yuan Renminbi relative to the U.S. dollar associated with our operations in China. The assets and liabilities of our foreign operations are translated from their respective functional currencies into U.S. dollars at the rates in effect at the consolidated balance sheet dates, and the revenue and expense amounts are translated at the average rate during the applicable periods reflected on the consolidated statements of operations and comprehensive income. Foreign currency translation adjustments are recorded as accumulated other comprehensive income.

Gains and losses from foreign currency transactions denominated in currencies other than the U.S. dollar, both realized and unrealized, are recorded as foreign exchange gain (loss) on our consolidated statements of operations and comprehensive income.

~~During the normal course of business,~~ we are exposed to market risks associated with fluctuations in foreign currency exchange rates due to the Yuan Renminbi. To reduce the impact of these risks on our earnings and to increase the predictability of cash flows, we use natural offsets in receipts and disbursements within the applicable currency as the primary means of reducing the risk.

Some of our foreign suppliers may adjust their prices (in U.S. dollars) from time to time to reflect currency exchange fluctuations, and such price changes could impact our future financial condition or results of operations. We do not currently hedge our foreign currency exposure.

~~Interest Rate Risks~~

We monitor our interest rate risk on cash balances primarily through cash flow forecasting. Cash that is surplus to immediate requirements is invested in short-term deposits with banks accessible with short notice and invested in money market accounts. Based on the LIBOR rate loans outstanding under our credit facility during the three and nine months ended June 30, 2020, a hypothetical 50 basis points increase in interest rates would have resulted in an insignificant amount of additional interest expense.

~~Inflation Risks~~

Inflationary factors, such as increases in material costs and operating expenses, may adversely affect our results of operations and cash flows. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, an increase in the rate of inflation in the future may have an adverse effect on the levels

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~~of gross profit and operating expenses as a percentage of revenue if the sales prices for our products do not proportionately increase with these increases in expenses.~~

~~Credit Market Conditions~~

The U.S. and global capital markets periodically experience turbulent conditions, particularly in the credit markets, which can result in tightening of lending standards, reduced availability of credit, and reductions in certain asset values. The continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which, depending on future developments, could impact our capital resources in the future. If we need to raise additional capital to support operations in the future, we may be unable to access capital markets and additional capital may only be available to us on terms that could be significantly detrimental to our existing stockholders and to our business. This could also impact our ability to obtain additional funding through asset sales.encounter.

ITEM 4.4. Controls and Procedures

a. Evaluation of Disclosure Controls and Procedures

Our management, with the participation of its Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer and Accounting Officer), evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of ~~June 30,~~December 31, 2020. Based upon this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

b. Changes in Internal Control over Financial Reporting

There have been no ~~other~~ changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act) during the quarter ended ~~June 30,~~ December 31,

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2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. Other ~~Information~~Information.

ITEM 1. Legal Proceedings

See the disclosures under the caption “Legal Proceedings” in Note 1311 - Commitments and Contingencies in the notes to our condensed consolidated financial statements for disclosures related to our legal proceedings, which disclosures are incorporated herein by reference.

ITEM 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10‑K for the fiscal year ended September 30, ~~2019,~~2020, which could materially affect our business, financial condition or future results. Except for the risk ~~factors~~factor discussed below, we do not believe that there have been any material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2019.~~2020. The risks described in our Annual Report on Form 10‑K and described below are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem immaterial also may materially adversely affect our business, financial condition, operating results and/or cash flows.

The full effects of COVID-19 and other potential future public health crises, epidemics, pandemics or similar events are uncertain and could have a material and adverse effect on our business, financial condition, operating results and cash flows.

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The ~~global outbreak of the coronavirus disease 2019 (“COVID-19”) was declared a pandemic by the World Health Organization and a national emergency by the U.S. Government in March 2020. The~~ongoing COVID-19 pandemic has negatively affected the U.S. and global economy, disrupted global supply chains, significantly restricted travel and transportation, resulted in mandated closures and orders to “shelter-in-place,” and created significant disruption of the financial markets. The full extent of the COVID-19 impact on our operational and financial performance will depend on future developments, including the duration and spread of the pandemic, the emergence of new strains of the virus, the impact of vaccination efforts and related actions taken by the U.S. government, state and local government officials, and international governments to prevent disease spread, all of which are uncertain, out of our control and cannot be predicted.

In accordance with applicable U.S. state and county ordinances generally exempting essential businesses and/or critical infrastructure workforces from mandated closures and orders to “shelter-in-place,” our U.S. production facilities have continued to operate in support of essential products and services, subject to limitations and requirements pursuant to applicable state and county orders with regard to ongoing operations that have reduced the efficiency of our engineering and operational teams. However, facility closures or further work slowdowns or temporary stoppages could occur, and in some cases, our facilities and supplier facilities are not operating under full staffing as a result of COVID-19, which could have a longer-term impact and could delay our development efforts and our deliveries to customers. In addition, other countries have different practices and policies that can affect our international operations and the operations of our suppliers and customers. For example, operations at our Beijing facility ceased for one additional week beyond the Chinese New Year holiday in ~~early~~ February 2020 as a result of the COVID-19 situation, and additional closures could occur.

In addition, the COVID-19 pandemic has negatively affected, and could have further negative effects on, the timing of the sale and transfer of certain CATV module and transmitter manufacturing equipment that we have agreed, as part of our efforts to streamline operations and move to a variable cost model in our CATV Lasers and Transmitters product line, to sell to Hytera Communications (Hong Kong) Company Limited (“Hytera HK”), and Shenzhen Hytera Communications Co., Ltd. (“Shenzhen Hytera”, and together with Hytera HK, the “Buyers”), for use by the Buyers in connection with the manufacturing of certain CATV module and transmitter products for us from a manufacturing facility located in Thailand. The sale and transfer of the equipment will occur in three separate closings, one of which occurred in the quarter ended December 31, 2019 and the other two of which are now expected to occur during the ~~quarters~~quarter ending ~~September 30, 2020 and~~ December 31, ~~2020, respectively.~~2021. The timing and completion of these transfers may be further disrupted as a result of

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COVID-19, which could delay our recognition of the anticipated benefits of transferring this equipment and could disrupt our manufacturing activities for these products.

If significant portions of our workforce are unable to work effectively, including because of illness, quarantines, absenteeism, government actions, facility closures, travel restrictions or other restrictions in connection with the COVID-19 pandemic, our operations will be negatively impacted. We may be unable to perform fully on our contracts and our costs may increase as a result of the COVID-19 outbreak. The impact of COVID-19 could worsen if there is an extended duration of any COVID-19 outbreak or a resurgence of COVID-19 infection in affected regions after they have begun to experience improvement.

~~As described in Item 1A, Risk Factors of our Annual Report on Form 10-K for the fiscal year ended September 30, 2019, we~~We rely on other companies to provide materials, major components and products, and to perform a portion of the services that are provided to our customers under the terms of most of our contracts where we rely on these third parties. Many of our suppliers have at times temporarily ceased or limited operations as a result of COVID-19 and failed to deliver parts or components to us. For example, in the quarter ended ~~June 30,~~December 31, 2020, ~~unexpected push-outs~~delays caused by air freight and ~~cancellations of key component deliveries~~customs caused disruption to our business, and ~~these~~the ongoing shortages in air freight capacity due to the decline in commercial airline traffic has at times made it more difficult and costly for us to timely procure parts and components. These or similar actions may continue in the ~~future. An~~future, and an extended period of global supply chain disruption caused by the response to COVID-19 could impact our ability to perform on our contracts and, if we are not able to implement alternatives or other mitigations, product deliveries could be adversely impacted. ~~In addition, the rapid decline in commercial airline traffic created shortages in air freight capacity, making it more difficult and costly to timely procure parts and components.~~

As a result of COVID-19, we could see reduced customer orders in certain of our product lines, which could adversely affect our revenues, financial performance and cash flows, and could result in inventory write-downs and impairment losses. Significant delays in inspection, acceptance and payment by our customers, many of whom are teleworking, could also affect our revenues and cash flows, and current limitations on travel to customers could impact orders. For

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example, qualification testing for certain of our products ~~has been~~continues to be delayed due to customer engineering shortages and limitations on their ability to access their facilities. In addition, limitations on government operations can also impact regulatory approvals such as export licenses that are needed for international sales and deliveries for certain of our products. Government funding priorities may change as a result of the costs of COVID-19, which could adversely affect our revenues arising from government contracts or subcontracts, and with respect to such contracts, we could experience delays in new program starts or awards of future work or in timelines for current programs, as well as the uncertain impact of contract modifications to respond to the national emergency.

The continued spread of COVID-19 has also led to disruption and volatility in the global capital markets, which, depending on future developments, could impact our capital resources and liquidity in the future. If we need to raise additional capital to support operations in the future, we may be unable to access capital markets and additional capital may only be available to us on terms that could be significantly detrimental to our existing stockholders and to our business as a result of COVID-19. We are also monitoring the impacts of COVID-19 on the fair value of our assets. While we do not currently anticipate any material impairments on our assets as a result of COVID-19, future changes in expectations for sales, earnings and cash flows related to intangible assets and ~~goodwill~~ below our current projections could cause these assets to be impaired.

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ITEM 6. Exhibits


2.1		~~Standard Offer,~~Asset Purchase Agreement, ~~and Escrow Instructions for Purchase of Real Estate (Non-Residential)~~ dated as of ~~December 31,~~October 25, 2019 by and ~~between Parkview Management Group, Inc.~~among EMCORE Corporation, Hytera Communications (Hong Kong) Company Limited and ~~Systron Donner Inertial, Inc~~Shenzhen Hytera Communications Co., Ltd. (incorporated by reference to Exhibit ~~10.1~~2.1 to the Company’s Current Report on Form ~~8 K~~8-K filed on ~~January 6, 2020)~~October 30, 2019).
2.2		Purchase and Sale Agreement, dated as of June 7, 2019 by and among EMCORE Corporation, The Resilience Fund IV, L.P., The Resilience Fund IV-A, L.P., Aerospace Newco Holdings, Inc. and Ember Acquisition Sub, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on June 10, 2019).
2.3		~~Asset~~Standard Offer, Agreement and Escrow Instructions for Purchase ~~Agreement,~~of Real Estate (Non-Residential) dated as of ~~October 25,~~December 31, 2019 by and ~~among EMCORE Corporation, Hytera Communications (Hong Kong) Company Limited~~between Parkview Management Group, Inc. and ~~Shenzhen Hytera Communications Co., Ltd. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on October 30, 2019).~~
~~10.1~~		~~Paycheck Protection Program Promissory Note and Agreement, dated May 3, 2020, entered into by and between EMCORE Corporation and Wells Fargo Bank, National Association~~Systron Donner Inertial, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on ~~May~~January 6, 2020).
2.4		First Amendment to Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate (Non-Residential) dated as of January 13, 2020 by and between Parkview Management Group, Inc. and Systron Donner Inertial, Inc. (incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q filed on February 10, 2020).
3.1		By-Laws of EMCORE Corporation, as amended through January 11, 2021 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on January 13, 2021).
10.1		EMCORE Corporation Fiscal 2021 Bonus Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 16, 2020).
10.2†**		Form of ~~Indemnification Agreement entered into with directors and executive officers.~~Single-Tenant Triple Net Lease (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8 K filed on January 6, 2020).
10.3		Form of Lease Guaranty (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8 K filed on January 6, 2020).
31.1**		Certificate of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002.
31.2**		Certificate of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002.
32.1***		Certificate of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002~~2002.
32.2***		Certificate of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002~~2002.
101.INS**		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH**		~~Inline~~ XBRL Taxonomy Extension Schema Document.
101.CAL**		~~Inline~~ XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB**		~~Inline~~ XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**		~~Inline~~ XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF**		~~Inline~~ XBRL Taxonomy Extension Definition Linkbase Document.
104**		Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).

† ~~Management contract or compensatory plan~~

** Filed herewith

*** The material contained in Exhibits 32.1 and 32.2 is not deemed “filed” with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing, except to the extent that the registrant specifically incorporates it by referenceFurnished herewith

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


EMCORE CORPORATION

Date:
~~August 6, 2020~~February 5, 2021

By:
/s/ Jeffrey Rittichier

Jeffrey Rittichier

Chief Executive Officer
(Principal Executive Officer)

Date:
~~August 6, 2020~~February 5, 2021

By:
/s/ Tom Minichiello

Tom Minichiello

Chief Financial Officer
(Principal Financial and Accounting Officer)

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		As Reported				Balance
		September 30, 2019		Increase		October 1, 2019
(in thousands)
Operating lease right-of-use assets	$	-	$	4,800	$	4,800
Total assets		109,562		4,800		114,362
Operating lease liabilities		-		800		800
Total current liabilities		30,719		800		31,519
Operating lease liabilities non-current		-		4,000		4,000
Total liabilities		32,816		4,800		37,616
Total liabilities and equity		109,562		4,800		114,362


	Nine Months Ended
	June 30, 2020
Operating cash outflows from operating leases	$	1,111
Operating lease assets obtained in exchange for new lease liabilities	$	10,791


	Amount
2020	$	1,788
2021		1,830
2022		1,849
2023		1,730
2024		1,719
Thereafter		12,802
Total lease payments		21,718
Less imputed interest		(6,717)
Total	$	15,001


			Weighted
			Average Useful
(in thousands)	Amount		Life (years)
Purchase price	$	24,978
Developed technology		250	7
Cash acquired		541
Inventories		8,522
Accounts receivable		4,291
Other assets		355
Land and building		12,890
Equipment		2,913
Net liabilities assumed		(4,853)
Goodwill	$	69


		EMCORE CORPORATION

Date:	~~August 6, 2020~~February 5, 2021	By:	/s/ Jeffrey Rittichier
			Jeffrey Rittichier
			Chief Executive Officer (Principal Executive Officer)


Date:	~~August 6, 2020~~February 5, 2021	By:	/s/ Tom Minichiello
			Tom Minichiello
			Chief Financial Officer (Principal Financial and Accounting Officer)