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. Repurchased common stock was recorded to treasury stock. The Company incurred costs of $0.7 million in connection with the Tender Offer, which were recorded to treasury stock.

Stock Sales

During August 2012, we filed a shelf registration statement on Form S-3 with the SEC pursuant to which we could, from time to time, sell up to an aggregate of $50 million of our common or preferred stock, warrants or debt securities. On August 23, 2012, the registration statement was declared effective by the SEC, which allowed us to access the capital markets for the three year period following this effective date as long as we continue to meet the eligibility requirements for the use of Form S-3. On October 3, 2012, we sold 1,832,410 shares of common stock for net proceeds of $9.5 million. In addition, on September 18, 2013, we sold 2,875,000 shares of common stock for net proceeds of $11.7 million.

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).

On March 5, 2014, our shareholders approved an amendment to the 2012 Equity Plan to increase the total number of shares of common stock available for grant under the 2012 Equity Plan by 1,000,000 shares, to a total authorized of 2,000,000 shares.

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 fiscal year ended September 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	37,350		$6.23
Exercised	(289,467	)	$4.82		$	305
Forfeited	(9,227	)	$5.28
Expired	(473,387	)	$22.01
Outstanding as of September 30, 2015	696,459		$22.47	2.91	$	436
Exercisable as of September 30, 2015	651,732		$23.60	2.48	$	395
Vested and expected to vest as of September 30, 2015	687,048		$22.70	2.82	$	428

(*) 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 fiscal year ended September 30, 2014 and 2013, the intrinsic value of options exercised was $100,000 and $94,000.

As of September 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 4.1 years.

On December 10, 2014, in connection with the sale of the Photovoltaics Business, which constituted a change in control, the terms of approximately 56,000 stock options for approximately 80 employees were modified to include accelerated vesting effective as of that date. The total incremental benefit resulting from the modifications was approximately $0.2 million and is included in the Company's income from discontinued operations, net of tax, for the year ended September 30, 2015.

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 Fiscal Years Ended September 30,
	2015			2014			2013
Black-Scholes weighted average assumptions:
Expected dividend rate	—		%	—		%	—		%
Expected stock price volatility rate	66.1		%	92.8		%	96.7		%
Risk-free interest rate	1.8		%	1.9		%	1.2		%
Expected term (in years)	6.0			6.0			6.0

Weighted average grant date fair value per share of stock options granted:	$	3.73		$	3.53		$	3.45

Expected Dividend Yield: The Black-Scholes valuation model calls for a single expected dividend rate as an input. We have not issued any dividends.

Expected Stock Price Volatility Rate: The fair values of stock-based payments were valued using the Black-Scholes valuation

method with a volatility factor based on our historical common stock prices.

Risk-Free Interest Rate: The risk-free interest rate used in the Black-Scholes valuation method was based on the implied yield that was currently available on U.S. Treasury zero-coupon notes with an equivalent remaining term. Where the expected terms of stock-based awards do not correspond with the terms for which interest rates are quoted, we performed a straight-line interpolation to determine the rate from the available maturities.

Expected Term: Expected term represents the period that our stock-based awards are expected to be outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of stock-based awards.

Estimated Pre-vesting Forfeitures: We are required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. We use historical data to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those awards that are expected to vest. If we use different assumptions for estimating stock-based compensation expense in future periods or if actual forfeitures differ materially from our estimated forfeitures, the change in our non-cash stock-based compensation expense could adversely affect our results of operations.

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 fiscal year ended September 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	(873,183	)	$4.74
Forfeited	(47,315	)	$4.89
Non-vested as of September 30, 2015	570,231		$5.26

As of September 30, 2015, there was approximately $2.1 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 2.0 years. The 0.6 million outstanding non-vested RSUs have an aggregate intrinsic value of approximately $3.9 million and a weighted average remaining contractual term of 1.2 years. For the fiscal years ended September 30, 2015, 2014 and 2013, the intrinsic value of RSUs vested was $4.6 million, $2.4 million and $1.2 million, respectively. Of the 0.6 million outstanding non-vested RSUs at September 30, 2015, approximately 0.5 million are expected to vest and have an aggregate intrinsic value of approximately $3.7 million and a weighted average remaining contractual term of 1.2 years. For the fiscal years ended September 30, 2014 and 2013, the weighted average grant date fair value of RSUs granted was $4.89 and $4.63, respectively.

On December 10, 2014, in connection with the sale of the Photovoltaics Business, which constituted a change in control, the terms of approximately 147,000 RSUs for approximately 80 employees were modified to include accelerated vesting effective as of that date. The total incremental expense resulting from the modifications was approximately $49,000 and is included in the Company's income from discontinued operations, net of tax, for the year ended September 30, 2015. In total, approximately 0.3 million RSU's vested due to change in control provisions.

Stock-based compensation

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



Stock-based Compensation Expense - by award type	For the Fiscal Years Ended September 30,
(in thousands)	2015		2014		2013
Employee stock options	$	194	$	135	$	293
Restricted stock awards and units	2,658		1,683		1,343
Employee stock purchase plan	143		289		329
401(k) match in common stock	284		513		513
Outside director fees in common stock	341		367		166
Total stock-based compensation expense	$	3,620	$	2,987	$	2,644



Stock-based Compensation Expense - by expense type	For the Fiscal Years Ended September 30,
(in thousands)	2015		2014		2013
Cost of revenue	$	341	$	466	$	562
Selling, general, and administrative	2,847		1,912		1,382
Research and development	432		609		700
Total stock-based compensation expense	$	3,620	$	2,987	$	2,644

For the fiscal years ended September 30, 2015, 2014 and 2013, total stock-based compensation expense did not agree with the amount listed on our statements of shareholders' equity primarily due to the timing difference between the expense accrued and the issuance of common stock for the payment of outside directors fees and our 401(k) company match and due to reclassification of stock-based compensation expense related to discontinued operations.

The stock based compensation expense above relates to continuing operations. Included within discontinued operations is $1.0 million, $1.5 million, and $1.6 million of stock based compensation expense for the fiscal years ended September 30, 2015 and 2014 and 2013, respectively.

Capital Stock

Our authorized capital stock consists of 50 million shares of common stock, no par value, and 5,882,000 shares of preferred stock, $0.0001 par value. As of September 30, 2015, we had 32.6 million and 25.7 million shares of common stock issued and outstanding, respectively. There were no shares of preferred stock issued or outstanding as of September 30, 2015.

Warrants

As of September 30, 2014, warrants representing the right to purchase 400,001 shares, of our common stock were outstanding. Since the warrants expired on April 1, 2015, no warrants were outstanding as of September 30, 2015. See Note 5 - Fair Value Accounting for additional information related to the valuation of our warrants.

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. All employer contributions were made in common stock through June 2015 and since then have been made in cash. For the fiscal years ended September 30, 2015, 2014 and 2013 we contributed approximately $0.3 million, $0.5 million and $0.5 million, respectively, in common stock to the savings plan. Our matching contribution in cash for the fiscal year ended September 30, 2015 was approximately $0.2 million. All participant accounts will have any of their holdings in company stock liquidated as of December 3, 2015.

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. At the 2012 Annual Meeting, our shareholders approved an amendment to the ESPP that increased the total number of shares of common stock on which options may be granted under the ESPP to 2,250,000 shares. On March 5, 2014, our shareholders approved an amendment to the ESPP that increased the total number of shares of common stock on which options may be granted under the ESPP by 1,000,000 shares to 3,250,000 shares. We issue new shares of common stock to satisfy the issuance of shares under this stock-based compensation plan. Common stock issued under the ESPP during the fiscal years ended September 30, 2015, 2014 and 2013 totaled 121,000, 341,000 and 344,000 shares, respectively. As of September 30, 2015, the total amount of common stock issued under the ESPP totaled 2,278,272 shares.

Officer and Director Share Purchase Plan

On January 21, 2011, the Compensation Committee of the Board approved an Officer and Director Share Purchase Plan, or ODPP, which allows executive officers and directors to purchase shares of our common stock at fair market value in lieu of salary or, in the case of directors, director fees. Eligible individuals may voluntarily participate in the ODPP by authorizing payroll deductions or, in the case of directors, deductions from director fees for the purpose of purchasing common stock. Elections to participate in the ODPP may only be made during open trading windows under our insider trading policy when the participant does not otherwise possess material non-public information concerning the Company. The Board of Directors has authorized 125,000 shares to be made available for purchase by officers and directors under the ODPP. Common stock issued under the ODPP during the fiscal years ended September 30, 2015, 2014 and 2013 totaled 0, 1,600 and 4,500 shares, 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 Fiscal Years Ended September 30,
(in thousands, except per share)	2015			2014			2013

Numerator:
(Loss) income from continuing operations	$	(2,272	)	$	4,082		$	(5,554	)
Income from discontinued operations	65,372			770			10,542
Total	63,100			4,852			4,988
Allocation of undistributed earnings - continuing operations
Continuing operations	(2,272		)	4,082			(5,554		)
Undistributed earnings-allocated to participating securities	—			(6		)	(18		)
Allocation of undistributed earnings - continuing operations	(2,272		)	4,076			(5,572		)
Allocation of undistributed earnings - discontinued operations
Discontinued operations	65,372			770			10,542
Undistributed earnings-allocated to participating securities	—			—			(8		)
Allocation of undistributed earnings - discontinued operations	65,372			770			10,534
Undistributed earnings allocated to common shareholders for basic net income per share	$	63,100		$	4,846		$	4,962
Undistributed earnings allocated to common shareholders for diluted net income per share	$	63,100		$	4,846		$	4,962
Denominator:
Denominator for basic net (loss) income per share - weighted average shares outstanding	30,012			30,453			26,531
Dilutive options outstanding, unvested stock units and ESPP	—			324			—
Denominator for diluted net (loss) income per share - adjusted weighted average shares outstanding	30,012			30,777			26,531

Net (loss) income per basic share:
Continuing operations	$	(0.08	)	$	0.13		$	(0.21	)
Discontinued operations	2.18			0.03			0.40
Net income per basic share	$	2.10		$	0.16		$	0.19

Net (loss) income per diluted share:
Continuing operations	$	(0.08	)	$	0.13		$	(0.21	)
Discontinued operations	2.18			0.03			0.40
Net income per diluted share	$	2.10		$	0.16		$	0.19
Weighted average antidilutive options, unvested restricted stock units and awards, warrants and ESPP shares excluded from the computation	1,391			1,936			2,672

Average market price of common stock	$	5.81		$	4.69		$	4.64

For diluted income (loss) per share, the denominator includes all outstanding common shares and all potential dilutive common shares to be issued. For the fiscal years ended September 30, 2015, 2014 and 2013, we excluded 1.4 million, 1.9 million and 2.7 million, respectively, of weighted average outstanding stock options, restricted stock awards, restricted stock units and warrants from the calculation of diluted net income (loss) per share because their effect would have been anti-dilutive.

Future Issuances

As of September 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	696,459
Unvested restricted stock units	570,231
Purchases under the employee stock purchase plan	971,728
Issuance of stock-based awards under the Equity Plans	625,459
Purchases under the officer and director share purchase plan	88,741
Issuance of stock-based awards under the 2007 Directors' Stock Award Plan, as amended	208,162
Total reserved	3,160,780