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 and six months ended March 31, 2015 and 2014, 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 March 31, 2015.

The following table presents the aggregate carrying amounts of the major classes of assets and liabilities related to the Photovoltaics business as of March 31, 2015 and September 30, 2014.



	As of		As of
(in thousands)	March 31, 2015		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 and six months ended March 31, 2014.



(in thousands)	For the three months ended March 31,						For the six months ended March 31,
	2015			2014			2015			2014
Revenue	$	—		$	18,627		$	12,614		$	39,546
Cost of revenue	—			13,836			8,245			27,016
Gross profit	—			4,791			4,369			12,530
Operating expense	(272		)	1,749			2,431			3,298
Other income	—			—			779			—
Gain on sale of discontinued operations	—			—			87,022			—
Income from discontinued operations before income tax	272			3,042			89,739			9,232
Income tax benefit (expense)	277			(1,154		)	(29,926		)	(3,501		)
Income from discontinued operations, net of tax	$	549		$	1,888		$	59,813		$	5,731

During the first quarter of fiscal 2015, in connection with the liquidation of our 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 the Digital Products Agreement with NeoPhotonics pursuant to which the Company agreed to sell certain assets, and transferred certain liabilities of the Company's Digital Products Business to NeoPhotonics for an aggregate purchase price of $17.5 million, subject to certain purchase price 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.

On January 2, 2015, EMCORE and NeoPhotonics entered into APA Amendment. 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. On April 16, 2015, EMCORE and NeoPhotonics entered into an agreement to adjust the purchase price resulting in an adjusted balance of the Promissory Note of $15.5 million. On April 17, 2015, NeoPhotonics prepaid the outstanding balance of the Promissory Note, including accrued interest, in the amount of $15.7 million.

The financial results of the Digital Products Business are reported as discontinued operations for the three and six months ended March 31, 2015 and 2014. In connection with this transaction, we sold net assets of $13.3 million to NeoPhotonics and incurred transaction costs of $1.6 million. During the three months ended March 31, 2015, we recognized a gain of $2.0 million, on the sale of the Digital Products 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 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 September 30, 2014. No Digital Products assets or liabilities remain on the condensed consolidated balance sheet as of March 31, 2015.

The following table presents the aggregate carrying amounts of the major classes of assets and liabilities related to the Digital Products Business as of March 31, 2015 and September 30, 2014.



	As of		As of
(in thousands)	March 31, 2015		September 30, 2014
Assets held for sale:
Accounts receivable, net of allowance of $0 and $17, respectively	$	—	$	14,268
Inventory	—		3,225
Prepaid expenses and other current assets	—		30
Current assets of discontinued operations	—		17,523

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

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

through the three and six months ended March 31, 2015 and for the three and six months ended March 31, 2014.



(in thousands)	For the three months ended March 31,						For the six months ended March 31,
	2015			2014			2015		2014
Revenue	$	40		$	10,667		$	11,855	$	19,296
Cost of revenue	(1		)	11,490			9,111		20,114
Gross profit	41			(823		)	2,744		(818		)
Operating expense	446			3,362			3,158		6,708
Other income (expense)	—			—			—		—
Gain on sale of discontinued operations	1,994			—			1,994		—
Income (loss) from discontinued operations before income tax	1,589			(4,185		)	1,580		(7,526		)
Income tax benefit (expense)	1,870			1,587			1,873		2,854
Income (loss) from discontinued operations	$	3,459		$	(2,598	)	$	3,453	$	(4,672	)