Discontinued Operations

Sale of Photovoltaics Business

On September 17, 2014, EMCORE entered into an Asset Purchase Agreement (the “Photovoltaics Agreement”) with SolAero pursuant to which the Company agreed to sell the Photovoltaics Business for $150.0 million in cash, subject to a working capital adjustment pursuant to the Photovoltaics Agreement. On December 10, 2014, EMCORE completed the Photovoltaics Asset Sale.

The financial results of the Photovoltaics Business are reported as discontinued operations for the three months ended December 31, 2014 and 2013, respectively. In connection with this transaction, we sold net assets of $60.3 million to SolAero and incurred transaction costs of $2.7 million. During the three months ended December 31, 2014, we recognized a gain of $56.8 million, net of tax on the sale of the Photovoltaics Business which is recorded within discontinued operations in the condensed consolidated statements of operations and comprehensive income (loss).

We have classified the assets and liabilities that were sold as "assets of discontinued operations" and "liabilities of discontinued operations" within current and non-current assets and liabilities, respectively, on the condensed consolidated balance sheet as of September 30, 2014. As of September 30, 2014, the carrying amount of goodwill related to the Photovoltaics Business was $20.4 million and this balance was reclassified to non-current assets of discontinued operations. No Photovoltaics assets and liabilities remain on the condensed consolidated balance sheet as of December 31, 2014.

The following table presents the aggregate carrying amounts of the major classes of assets and liabilities related to the Photovoltaics business as of December 31, 2014 and September 30, 2014.



	As of		As of
(in thousands)	December 31, 2014		September 30, 2014
Assets of discontinued operations:
Accounts receivable, net of allowance of $0	$	—	$	17,827
Inventory	—		7,203
Prepaid expenses and other current assets	—		1,512
Current assets of discontinued operations	—		26,542

Property, plant and equipment, net	—		26,660
Goodwill	—		20,384
Other non-current assets, net	—		254
Non-current assets of discontinued operations	—		47,298
Total assets of discontinued operations	$	—	$	73,840
Liabilities of discontinued operations:
Accounts payable	$	—	$	4,640
Accrued expenses and other current liabilities	—		5,398
Current liabilities of discontinued operations	—		10,038

Asset retirement obligations	—		720
Non-current liabilities of discontinued operations	—		720
Total liabilities of discontinued operations	$	—	$	10,758

The following table presents the statements of operations for the discontinued operations of the Photovoltaics Business

from October 1, 2014 to December 10, 2014 and for the three months ended December 31, 2013.



(in thousands)	For the three months ended December 31,
	2014			2013
Revenue	$	12,614		$	20,919
Cost of revenue	8,245			13,180
Gross profit	4,369			7,739
Operating expense	2,703			1,549
Other income	779			—
Gain on sale of discontinued operations	87,022			—
Income from discontinued operations before income tax	89,467			6,190
Income tax expense	(30,203		)	(2,347		)
Income from discontinued operations, net of tax	$	59,264		$	3,843

In connection with the liquidation of the Netherlands and Spain subsidiaries in October 2014, we recognized other income within discontinued operations of $0.7 million previously recorded in accumulated other comprehensive income.

Sale of Digital Products Business

On October 22, 2014, EMCORE entered into an Asset Purchase Agreement (the "Digital Products Agreement") with NeoPhotonics Corporation, a Delaware corporation ("NeoPhotonics") pursuant to which the Company agreed to sell certain assets, and transferred certain liabilities of the Company's telecommunications business (collectively, the "Digital Products Business" and, the sale of the Digital Products Business, the "Digital Products Assets Sale") to NeoPhotonics for an aggregate purchase price of $17.5 million, subject to certain adjustments, consisting of $1.5 million in cash at closing and a promissory note in the principal amount of $16.0 million (the "Promissory Note"). The Promissory Note bears interest of 5.0% per annum for the first year and 13.0% per annum for the second year, payable semi-annually in cash, and matures two years from the closing of the transaction. In addition, the promissory note is subject to prepayments under certain circumstances, and is secured by certain of the assets sold to NeoPhotonics in the transaction. The Company is in the process of assessing the fair value of the consideration received from the sale of the Digital Products Business that closed subsequent to December 31, 2014.

On January 2, 2015, EMCORE and NeoPhotonics entered into Amendment No. 1 (the "APA Amendment") to the Digital Products Agreement dated October 22, 2014. Among other things, the APA Amendment revised the nature and timing of the financial deliverable requirements of the Company to NeoPhotonics under the original Digital Products Agreement. The assets sold pursuant to the Digital Products Agreement included certain fixed assets, inventory and intellectual property for the ITLA, micro-ITLA, T-TOSA and T-XFP product lines within the Company’s telecommunications business. On January 2, 2015, EMCORE completed the sale of the Digital Products Business.

The financial results of the Digital Products Business are reported as discontinued operations. We have classified the assets and liabilities that are held for sale within the descriptions "assets of discontinued operations" and "liabilities of discontinued operations" within current and non-current assets and liabilities, respectively, on the condensed consolidated balance sheet as of December 31, 2014 and September 30, 2014.

The following table presents the aggregate carrying amounts of the major classes of assets and liabilities related to the Digital Products Business as of December 31, 2014 and September 30, 2014.



	As of		As of
(in thousands)	December 31, 2014		September 30, 2014
Assets held for sale:
Accounts receivable, net of allowance of $25 and $17, respectively	$	9,992	$	14,268
Inventory	2,905		3,225
Prepaid expenses and other current assets	30		30
Current assets of discontinued operations	12,927		17,523

Property, plant and equipment, net	7,795		7,881
Other intangible assets, net	1,028		1,060
Non-current assets of discontinued operations	8,823		8,941
Total assets of discontinued operations	$	21,750	$	26,464
Liabilities held for sale:
Accounts payable	7,894		10,848
Accrued expenses and other current liabilities	11		38
Current liabilities of discontinued operations	$	7,905	$	10,886

The following table presents the statements of operations for the discontinued operations of the Digital Products Business:



(in thousands)	For the three months ended December 31,
	2014			2013
Revenue	$	11,815		$	8,629
Cost of revenue	9,112			8,624
Gross profit	2,703			5
Operating expense	2,712			3,346
Loss from discontinued operations before income tax	(9		)	(3,341		)
Income tax benefit	3			1,267
Loss from discontinued operations	$	(6	)	$	(2,074	)