Discontinued Operations

Sale of Photovoltaics Business

On September 17, 2014, EMCORE entered into 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. 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 nine months ended June 30, 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). During the three months ended June 30, 2015, we made a payment of $0.1 million to SolAero to complete the working capital adjustment under the agreement. During the three and nine months ended June 30, 2015, we recognized gains of $0.2 million and $0.4 million, respectively, associated with the settlement of outstanding obligations on retained Photovoltaic product warranties.

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 assets and liabilities related to the Photovoltaics Business remain on the condensed consolidated balance sheet as of June 30, 2015.

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



	As of		As of
(in thousands)	June 30, 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

for the three and nine months ended June 30, 2015 and 2014.



(in thousands)	For the three months ended June 30,						For the nine months ended June 30,
	2015			2014			2015			2014
Revenue	$	—		$	18,410		$	12,614		$	57,956
Cost of revenue	—			13,164			8,245			40,180
Gross profit	—			5,246			4,369			17,776
Operating (income) expense	(374		)	1,806			2,057			5,104
Other income	—			17			779			17
Gain on sale of discontinued operations	(64		)	—			86,958			—
Income from discontinued operations before income tax	310			3,457			90,049			12,689
Income tax benefit (expense)	1,105			(1,311		)	(28,821		)	(4,812		)
Income from discontinued operations, net of tax	$	1,415		$	2,146		$	61,228		$	7,877

During the first quarter of fiscal 2015, in connection with the liquidation of our Netherlands and Spain subsidiaries,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 transfer 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 provided that it would bear 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 would mature two years from the closing of the transaction. In addition, the Promissory Note was 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 the 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 of $15.5 million, plus accrued interest of $0.2 million.

The financial results of the Digital Products Business are reported as discontinued operations for the three and nine months ended June 30, 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 nine months ended June 30, 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 June 30, 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 June 30, 2015 and September 30, 2014.



	As of		As of
(in thousands)	June 30, 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

for the three and nine months ended June 30, 2015 and 2014.



(in thousands)	For the three months ended June 30,						For the nine months ended June 30,
	2015			2014			2015		2014
Revenue	$	89		$	12,576		$	11,944	$	31,872
Cost of revenue	27			11,088			9,138		31,202
Gross profit	62			1,488			2,806		670
Operating (income) expense	(11		)	3,014			3,147		9,722
Gain on sale of discontinued operations	—			_—			1,994		—
Income (loss) from discontinued operations before income tax	73			(1,526		)	1,653		(9,052		)
Income tax benefit	488			579			2,361		3,433
Income (loss) from discontinued operations	$	561		$	(947	)	$	4,014	$	(5,619	)