Equity

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,


•	the 2010 Equity Incentive Plan (“2010 Plan”), and


•	the 2012 Equity Incentive Plan (“2012 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, 2018:



	Number of Shares		Weighted Average Exercise Price	Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (*) (in thousands)
Outstanding as of September 30, 2017	326,798		$19.54
Granted	—		—
Exercised	(4,831	)	$4.32		$	14
Forfeited	(4,944	)	$4.36
Expired	(242,979	)	$24.66
Outstanding as of June 30, 2018	74,044		$4.74	5.32	$	45
Exercisable as of June 30, 2018	45,129		$4.70	4.08	$	33
Vested and expected to vest as of June 30, 2018	74,044		$4.74	5.32	$	45

(*) 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, 2017, the intrinsic value of options exercised was $0.9 million.

As of June 30, 2018, there was approximately $0.1 million of unrecognized stock-based compensation expense related to non-vested stock options granted under the Equity Plans which is expected to be recognized over an estimated weighted average life of 2.2 years.

Valuation Assumptions

There were no stock option grants for the three and nine months ended June 30, 2018 and 2017.

Time-Based Restricted Stock

Time-based restricted stock units (“RSUs”) and restricted stock awards (“RSAs”) granted to employees under the 2010 Plan and 2012 Plan typically vest over 3 to 4 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. RSAs are considered issued and outstanding on the grant date and are subject to forfeiture if specified vesting conditions are not satisfied.

The following table summarizes the activity related to RSUs and RSAs subject to time-based vesting requirements for the nine months ended June 30, 2018:



Restricted Stock Activity	Restricted Stock Units			Restricted Stock Awards
Restricted Stock Activity	Number of Shares		Weighted Average Grant Date Fair Value	Number of Shares	Weighted Average Grant Date Fair Value
Non-vested as of September 30, 2017	778,084		$5.91	8,154	$8.20
Granted	643,043		$5.81	—	$0.00
Vested	(370,281	)	$5.40	—	$0.00
Forfeited	(22,854	)	$5.23	—	$0.00
Non-vested as of June 30, 2018	1,027,992		$6.05	8,154	$8.20

As of June 30, 2018, there was approximately $5.5 million of remaining unamortized stock-based compensation expense associated with RSUs, which will be expensed over a weighted average remaining service period of approximately 3.1 years. The 1.0 million outstanding non-vested and expected to vest RSUs have an aggregate intrinsic value of approximately $5.2 million and a weighted average remaining contractual term of 1.9 years. For the nine months ended June 30, 2018 and 2017, the intrinsic value of RSUs vested was approximately $2.3 million and $3.3 million, respectively. For the nine months ended June 30, 2017, the weighted average grant date fair value of RSUs granted was $8.44 per share.

As of June 30, 2018, there was approximately $0.1 million of remaining unamortized stock-based compensation expense associated with RSAs, which will be expensed over a weighted average remaining service period of approximately 2.3 years.

On December 28, 2017, the Company granted our CEO, Jeffrey Rittichier, our Senior Vice President of Engineering, Albert Lu, and our Vice President of Sales (now co-VP, Broadband), David Wojciechowski, 40,000, 14,000 and 10,000 RSUs with a grant date fair value of $0.3 million, $0.1 million and $0.1 million, respectively, that will vest in 4 equal annual installments beginning on December 28, 2018.

Performance Stock

Performance based restricted stock units (“PSUs”) and performance based shares of restricted stock (“PRSAs”) granted to employees under the 2012 Plan typically vest over 1 to 3 years and are subject to forfeiture in whole, if employment terminates, or in whole or in part, if specified vesting conditions are not satisfied, in each case prior to vesting. PSUs are not considered issued or outstanding common stock until they vest. PRSAs are considered issued and outstanding on the grant date (at 200% of the target number of shares) and are subject to forfeiture if specified vesting conditions are not satisfied. PSUs and PRSAs that are granted to our executive officers and key employees are provided as long-term incentive compensation that is based on relative total shareholder return, which measures our performance against that of our competitors.

The following table summarizes the activity related to PSUs and PRSAs for the nine months ended June 30, 2018:



Performance Stock Activity	Performance Stock Units			Performance Stock Awards
Performance Stock Activity	Number of Shares (at Target)		Weighted Average Grant Date Fair Value	Number of Shares (at Target)	Weighted Average Grant Date Fair Value
Non-vested as of September 30, 2017	328,708		$8.36	33,333	$12.25
Granted	240,164		$7.62	—	$0.00
Vested	(166,058	)	$6.86	—	$0.00
Forfeited	(5,037	)	$13.36	—	$0.00
Non-vested as of June 30, 2018	397,777		$8.48	33,333	$12.25

As of June 30, 2018, there was approximately $1.8 million of remaining unamortized stock-based compensation expense associated with PSUs, which will be expensed over a weighted average remaining service period of approximately 1.6 years. The 0.4 million outstanding non-vested and expected to vest PSUs have an aggregate intrinsic value of approximately $2.0 million and a weighted average remaining contractual term of 1.6 years. For the nine months ended June 30, 2018, the intrinsic value of PSUs vested was approximately $1.4 million. There were no PSUs vested in the three months ended June 30, 2018. For the three and nine months ended June 31, 2017, there were no PSUs vested. For the nine months ended June 30, 2017, the weighted average grant date fair value of PSUs granted was $8.34.

As of June 30, 2018, there was approximately $0.3 million of remaining unamortized stock-based compensation expense associated with PRSAs, which will be expensed over a weighted average remaining service period of approximately 1.3 years.

On December 28, 2017, the Company granted Messrs. Rittichier, Lu and Wojciechowski, 40,000, 14,000 and 10,000 PSUs with a grant date fair value of $0.3 million, $0.1 million and $0.1 million, respectively. The PSUs issued will vest based on a combination of the relative total shareholder return of EMCORE’s stock compared to the Russell Microcap Index and the executive's continued employment. The total number of shares to be issued to each individual ranges from zero (0) to 200% of the target PSUs granted. Between zero (0) and 200% of the target PSUs will vest, if at all, on December 28, 2020.

On December 28, 2017, in addition to the PSUs granted to Messrs. Rittichier, Lu and Wojciechowski, the Company granted 108,500 target PSUs with a grant date fair value of $0.9 million to certain key non-executive employees. The PSUs issued will vest based on a combination of the relative total shareholder return of EMCORE’s stock compared to the Russell Microcap Index and the employee's continued employment. The total number of shares to be issued to each individual may range from zero (0) to 200% of the target PSUs granted. Between zero (0) and 200% of the target PSUs granted will vest, if at all, on December 28, 2020.

Included in the 240,164 PSUs granted and 166,058 PSUs vested during the nine months ended June 30, 2018 are 67,664 PSUs that vested at more than 100% of the target PSUs upon vesting.

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)	2018		2017		2018		2017
Employee stock options	$	6	$	12	$	26	$	34
Restricted stock units and awards	400		488		1,263		1,211
Performance stock units and awards	330		410		980		1,049
Employee stock purchase plan	64		92		225		210
Outside director equity awards and fees in common stock	65		78		219		168
Total stock-based compensation expense	$	865	$	1,080	$	2,713	$	2,672



Stock-based Compensation Expense - by expense type	For the three months ended June 30,				For the nine months ended June 30,
(in thousands)	2018		2017		2018		2017
Cost of revenue	$	83	$	113	$	337	$	353
Selling, general, and administrative	625		824		1,915		1,957
Research and development	157		143		461		362
Total stock-based compensation expense	$	865	$	1,080	$	2,713	$	2,672

The stock-based compensation expense above relates to continuing operations. Included within discontinued operations is $0 and $11,000 of stock-based compensation expense for the three months ended June 30, 2018 and 2017, respectively. Included within discontinued operations is $0 of stock-based compensation expense for each of the nine months ended June 30, 2018 and 2017.

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. Since June 2015, all employer contributions are made in cash. Our matching contribution in cash for each of the three months ended June 30, 2018 and 2017 was approximately $0.1 million. Our matching contribution in cash for each of the nine months ended June 30, 2018 and 2017 was approximately $0.4 million.

(Loss) Income Per Share

The following table sets forth the computation of basic and diluted net (loss) income 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)	2018			2017			2018			2017
Numerator:
(Loss) income from continuing operations	$	(8,414	)	$	2,436		$	(11,567	)	$	6,057
Loss from discontinued operations	—			(11		)	—			(27		)
Undistributed earnings allocated to common shareholders for basic and diluted net income per share	(8,414		)	2,425			(11,567		)	6,030
Denominator:
Denominator for basic net income per share - weighted average shares outstanding	27,387			26,833			27,204			26,577
Dilutive options outstanding, unvested stock units, unvested stock awards and ESPP	—			983			—			971
Denominator for diluted net income per share - adjusted weighted average shares outstanding	27,387			27,816			27,204			27,548

Net (loss) income per basic share:
Continuing operations	$	(0.31	)	$	0.09		$	(0.43	)	$	0.23
Discontinued operations	—			(0.00		)	—			(0.00		)
Net (loss) income per basic share	$	(0.31	)	$	0.09		$	(0.43	)	$	0.23

Net (loss) income per diluted share:
Continuing operations	$	(0.31	)	$	0.09		$	(0.43	)	$	0.22
Discontinued operations	—			(0.00		)	—			(0.00		)
Net (loss) income per diluted share	$	(0.31	)	$	0.09		$	(0.43	)	$	0.22
Weighted average antidilutive options, unvested restricted stock units and awards, unvested performance stock units and ESPP shares excluded from the computation	825			370			725			400

Average market price of common stock	$	5.06		$	10.00		$	6.20		$	8.66

For diluted (loss) income per share, the denominator includes all outstanding common shares and all potential dilutive common shares to be issued. The anti-dilutive stock options and unvested stock were excluded from the computation of diluted net loss per share for the three and nine months ended June 30, 2018 due to the Company incurring a net loss for the period. For the three and nine months ended June 30, 2017, we excluded 0.4 million of weighted average outstanding stock options, RSUs and PSUs from the calculation of diluted net income per share because their effect would have been anti-dilutive.

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 approximately 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 trading day of the participation period, whichever is lower, and annual contributions are limited to the lower of 10% of an employee's compensation or $25,000.

Future Issuances

As of June 30, 2018, 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	74,044
Unvested restricted stock units	1,027,992
Unvested performance stock units (at 200% maximum payout)	795,554
Purchases under the employee stock purchase plan	818,036
Issuance of stock-based awards under the Equity Plans	1,493,848
Purchases under the officer and director share purchase plan	88,741
Total reserved	4,298,215