Equity

Common Stock Repurchase

In April 2015, EMCORE's Board of Directors authorized the Company to repurchase $45.0 million of shares of its common stock. On May 15, 2015, we announced the commencement of a modified "Dutch auction" tender offer to purchase for cash shares of our common stock (the "Tender Offer"). On June 15, 2015, we completed the Tender Offer and purchased 6.9 million shares of our common stock at a purchase price of $6.55 per share, for an aggregate cost of $45.0 million excluding fees and expenses. The repurchased shares of common stock were recorded to treasury stock. The Company incurred costs of $0.6 million in connection with the Tender Offer, which were recorded to treasury stock.

Equity Plans

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


•	the 2000 Stock Option Plan (2000 Plan),


•	the 2010 Equity Incentive Plan (2010 Equity Plan),


•	the 2012 Equity Incentive Plan (2012 Equity Plan).

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

Stock Options

Most of our stock options vest and become exercisable over a four to five year period and have a contractual life of 10 years. Certain stock options awarded are intended to qualify as incentive stock options pursuant to Section 422A of the Internal Revenue Code.

The following table summarizes stock option activity under the Equity Plans for the nine months ended June 30, 2015:



	Number of Shares		Weighted Average Exercise Price	Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (*) (in thousands)
Outstanding as of September 30, 2014	1,431,190		$19.06
Granted	17,150		$5.68
Exercised	(225,736	)	$4.78		$	194
Forfeited	(9,077	)	$5.28
Expired	(297,499	)	$19.83
Outstanding as of June 30, 2015	916,028		$22.22	2.46	$	347
Exercisable as of June 30, 2015	891,351		$22.68	2.28	$	330
Vested and expected to vest as of June 30, 2015	911,032		$22.31	2.43	$	344

(*) Intrinsic value for stock options represents the “in-the-money” portion or the positive variance between a stock option's exercise price and the underlying stock price. For the nine months ended June 30, 2014, the intrinsic value of options exercised was $4,000.

As of June 30, 2015, there was approximately $0.2 million of unrecognized stock-based compensation expense, net of estimated forfeitures, related to non-vested stock options granted under the Equity Plans which is expected to be recognized over an estimated weighted average life of 3.8 years.

Valuation Assumptions

The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option valuation model, adhering to the straight-line attribution approach using the following weighted-average assumptions, of which the expected term and stock price volatility rate are highly subjective:



	For the three months ended June 30,					For the nine months ended June 30,
	2015		2014			2015			2014
Black-Scholes weighted average assumptions:
Expected dividend rate	—	%	—		%	—		%	—		%
Expected stock price volatility rate	63.5	%	92.0		%	70.5		%	93.2		%
Risk-free interest rate	1.9	%	1.9		%	1.8		%	1.9		%
Expected term (in years)	6.0		6.0			6.0			6.0

Weighted average grant date fair value per share of stock options granted:	$3.59		$	3.21		$	3.57		$	3.61

Restricted Stock

Restricted stock units (RSUs) granted under the 2010 Equity Plan and 2012 Equity Plan typically vest over 3 years and are subject to forfeiture if employment terminates prior to the lapse of the restrictions. RSUs are not considered issued or outstanding common stock until they vest.

The following table summarizes the activity related to RSUs for the nine months ended June 30, 2015:



Restricted Stock Activity	Restricted Stock Units
	Number of Shares		Weighted Average Grant Date Fair Value
Non-vested as of September 30, 2014	966,579		$4.71
Granted	524,150		$5.38
Vested	(841,609	)	$4.69
Forfeited	(41,949	)	$4.86
Non-vested as of June 30, 2015	607,171		$5.23

As of June 30, 2015, there was approximately $2.5 million of remaining unamortized stock-based compensation expense, net of estimated forfeitures, associated with RSUs, which will be expensed over a weighted average remaining service period of approximately 2.3 years. The 0.6 million outstanding non-vested RSUs have an aggregate intrinsic value of approximately $3.7 million and a weighted average remaining contractual term of 1.4 years. For the nine months ended June 30, 2015 and 2014, the intrinsic value of RSUs vested was $4.4 million and $1.7 million, respectively. Of the 0.6 million outstanding non-vested RSUs, approximately 0.6 million are expected to vest and have an aggregate intrinsic value of approximately $3.4 million and a weighted average remaining contractual term of 1.4 years. For the nine months ended June 30, 2014, the weighted average grant date fair value of RSUs granted was $4.89.

On December 10, 2014, in connection with the sale of the Photovoltaics Business and the change in control, 0.3 million RSU's vested.

Stock-based compensation

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



Stock-based Compensation Expense - by award type	For the three months ended June 30,				For the nine months ended June 30,
(in thousands)	2015		2014		2015		2014
Employee stock options	$	—	$	16	$	184	$	94
Restricted stock awards and units	297		371		2,353		1,289
Employee stock purchase plan	36		58		100		221
401(k) match in common stock	60		303		284		506
Outside director fees in common stock	8		91		288		286
Total stock-based compensation expense	$	401	$	839	$	3,209	$	2,396



Stock-based Compensation Expense - by expense type	For the three months ended June 30,				For the nine months ended June 30,
(in thousands)	2015		2014		2015		2014
Cost of revenue	$	88	$	121	$	273	$	347
Selling, general, and administrative	195		574		2,609		1,584
Research and development	118		144		327		465
Total stock-based compensation expense	$	401	$	839	$	3,209	$	2,396

The stock based compensation expense above relates to continuing operations. Included within discontinued operations is $0.0 million and $0.3 million of stock based compensation expense for the three months ended June 30, 2015 and 2014, respectively. Included within discontinued operations is $0.9 million and $1.0 million of stock based compensation expense for the nine months ended June 30, 2015 and 2014. respectively.

Income (Loss) Per Share

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



Basic and Diluted Net (Loss) Income Per Share	For the three months ended June 30,					For the nine months ended June 30,
(in thousands, except per share)	2015		2014			2015			2014

Numerator
Income (loss) from continuing operations	$	464	$	(4,349	)	$	(3,622	)	$	(12,894	)
Income from discontinued operations	1,976		1,199			65,242			2,258
Undistributed earnings allocated to common shareholders for basic and diluted net income (loss) per share	2,440		(3,150		)	61,620			(10,636		)
Denominator:
Denominator for basic net income (loss) per share - weighted average shares outstanding	31,203		30,656			31,494			30,327
Dilutive options outstanding, unvested stock units and ESPP	229		—			—			—
Denominator for diluted net income (loss) per share - adjusted weighted average shares outstanding	31,432		30,656			31,494			30,327

Net income (loss) per basic share:
Continuing operations	$	0.02	$	(0.14	)	$	(0.11	)	$	(0.42	)
Discontinued operations	0.06		0.04			2.07			0.07
Net income (loss) per basic share	$	0.08	$	(0.10	)	$	1.96		$	(0.35	)

Net income (loss) per diluted share:
Continuing operations	$	0.02	$	(0.14	)	$	(0.11	)	$	(0.42	)
Discontinued operations	0.06		0.04			2.07			0.07
Net income (loss) per diluted share	$	0.08	$	(0.10	)	$	1.96		$	(0.35	)
Weighted average antidilutive options, unvested restricted stock units and awards, warrants and ESPP shares excluded from the computation	749		3,091			1,378			2,990

Average market price of common stock	$	5.99	$	4.39		$	5.54		$	4.80

The antidilutive stock options, unvested stock and warrants were excluded from the computation of diluted net income (loss) per share.

Employee Stock Purchase Plan

We maintain an Employee Stock Purchase Plan (ESPP) that 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 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 day of the participation period, whichever is lower, and contributions are limited to the lower of 10% of an employee's compensation or $25,000.

Future Issuances

As of June 30, 2015, we had common stock reserved for the following future issuances:



Future Issuances	Number of Common Stock Shares Available for Future Issuances
Exercise of outstanding stock options	916,028
Unvested restricted stock units	607,171
Purchases under the employee stock purchase plan	1,020,874
Issuance of stock-based awards under the Equity Plans	632,117
Purchases under the officer and director share purchase plan	88,741
Total reserved	3,264,931