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 fiscal year ended September 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	(6,392	)	$4.37		$	15
Forfeited	(6,407	)	$4.60
Expired	(244,019	)	$24.57
Outstanding as of September 30, 2018	69,980		$4.74	5.11	$	31
Exercisable as of September 30, 2018	46,886		$4.76	4.11	$	23
Vested and expected to vest as of September 30, 2018	69,980		$4.74	5.11	$	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 fiscal years ended September 30, 2017 and 2016, the intrinsic value of options exercised was $0.9 million and $87,000, respectively.

As of September 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 2.0 years.

Valuation Assumptions

There were no stock option grants for the fiscal years ended September 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 fiscal year ended September 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	648,043		$5.80	—	$0.00
Vested	(374,969	)	$5.40	—	$0.00
Forfeited	(39,537	)	$5.23	—	$0.00
Non-vested as of September 30, 2018	1,011,621		$6.04	8,154	$8.20

As of September 30, 2018, there was approximately $5.0 million of remaining unamortized stock-based compensation expense associated with RSUs, which will be expensed over a weighted average remaining service period of approximately 2.9 years. The 1.0 million outstanding non-vested and expected to vest RSUs have an aggregate intrinsic value of approximately $4.8 million and a weighted average remaining contractual term of 1.7 years. For fiscal years ended September 30, 2018, 2017 and 2016, the intrinsic value of RSUs vested was approximately $2.3 million, $3.4 million and $1.6 million, respectively. For the fiscal years ended September 30, 2017 and 2016, the weighted average grant date fair value of RSUs granted was $8.20 and $5.53 per share, respectively.

As of September 30, 2018, there was approximately $45,000 of remaining unamortized stock-based compensation expense associated with RSAs, which will be expensed over a weighted average remaining service period of approximately 2.0 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 fiscal year ended September 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 September 30, 2018	397,777		$8.48	33,333	$12.25

As of September 30, 2018, there was approximately $1.5 million of remaining unamortized stock-based compensation expense associated with PSUs, which will be expensed over a weighted average remaining service period of approximately 1.3 years. The 0.4 million outstanding non-vested and expected to vest PSUs have an aggregate intrinsic value of approximately $1.9 million and a weighted average remaining contractual term of 1.3 years. For the fiscal year ended September 30, 2018, the intrinsic value of PSUs vested was approximately $1.4 million. There were no PSUs vested in the fiscal years ended September 30, 2017 and 2016. For the fiscal year ended September 30, 2017, the weighted average grant date fair value of PSUs granted was $8.34. There was no PSUs granted in the fiscal year ended September 30, 2016.

As of September 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 1.0 year.

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 fiscal year ended September 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 Fiscal Years Ended September 30,
(in thousands)	2018		2017		2016
Employee stock options	$	32	$	45	$	38
Restricted stock units and awards	1,742		1,643		1,683
Performance stock units and awards	1,343		1,367		—
Employee stock purchase plan	276		300		223
Outside director equity awards and fees in common stock	255		247		218
Total stock-based compensation expense	$	3,648	$	3,602	$	2,162



Stock-based Compensation Expense - by expense type	For the Fiscal Years ended September 30,
(in thousands)	2018		2017		2016
Cost of revenue	$	450	$	492	$	345
Selling, general, and administrative	2,584		2,605		1,445
Research and development	614		505		372
Total stock-based compensation expense	$	3,648	$	3,602	$	2,162

For the fiscal year ended September 30, 2017, total stock-based compensation expense did not agree with the amount listed on our statements of shareholders' equity due to the timing difference between the expense accrued and the issuance of common stock for the payment of outside directors' fees. For the fiscal year ended September 30, 2016, 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 due to reclassification of stock-based compensation expense related to discontinued operations.

The stock-based compensation expense above relates to continuing operations. Stock-based compensation within selling, general and administrative expense was higher for the fiscal year ended September 30, 2017 due to stock-based compensation expense associated with the grants of PSUs and PRSAs. Included within discontinued operations is $0, $0 and $(77,000) of stock-based compensation expense for the fiscal year ended September 30, 2018, 2017 and 2016, 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, 2018, we had 34.5 million and 27.6 million shares of common stock issued and outstanding, respectively. There were no shares of preferred stock issued or outstanding as of September 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 the fiscal years ended September 30, 2018, 2017 and 2016 was approximately $0.5 million, $0.5 million and $0.4 million, respectively.

(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 Fiscal Years Ended September 30,
(in thousands, except per share)	2018			2017		2016
Numerator:
(Loss) income from continuing operations	$	(17,453	)	$	8,221	$	2,619
Loss from discontinued operations	—			14		5,647
Undistributed earnings allocated to common shareholders for basic and diluted net income per share	(17,453		)	8,235		8,266
Denominator:
Denominator for basic net income per share - weighted average shares outstanding	27,266			26,659		25,979
Dilutive options outstanding, unvested stock units, unvested stock awards and ESPP	—			885		539
Denominator for diluted net income per share - adjusted weighted average shares outstanding	27,266			27,544		26,518

Net (loss) income per basic share:
Continuing operations	$	(0.64	)	$	0.31	$	0.10
Discontinued operations	—			0.00		0.22
Net (loss) income per basic share	$	(0.64	)	$	0.31	$	0.32

Net (loss) income per diluted share:
Continuing operations	$	(0.64	)	$	0.30	$	0.10
Discontinued operations	—			0.00		0.21
Net (loss) income per diluted share	$	(0.64	)	$	0.30	$	0.31
Weighted average antidilutive options, unvested restricted stock units and awards, unvested performance stock units and ESPP shares excluded from the computation	949			398		508

Average market price of common stock	$	5.87		$	8.92	$	5.88

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 fiscal year ended September 30, 2018 due to the Company incurring a net loss for the period. For the fiscal year ended September 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. For the fiscal year ended September 30, 2016 we excluded 0.5 million of weighted average outstanding stock options and RSUs 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.

Per the amended ESPP, the total number of shares of common stock on which options may be granted under the ESPP are 3,250,000 shares. With the special dividend paid in July 2016, the total number of shares of common stock on which options may be granted under the ESPP were increased by 265,574 shares to a total of 3,515,574 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, 2018, 2017 and 2016 totaled 171,000, 133,000 and 193,000 shares, respectively. As of September 30, 2018, the total amount of common stock issued under the ESPP totaled 2,775,016 shares and the total shares remaining available for issuance under the ESPP totaled 740,558.

Future Issuances

As of September 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	69,980
Unvested restricted stock units	1,011,621
Unvested performance stock units and awards (at 200% maximum payout)	862,220
Purchases under the employee stock purchase plan	740,558
Issuance of stock-based awards under the Equity Plans	1,474,701
Purchases under the officer and director share purchase plan	88,741
Total reserved	4,247,821