Acquisitions

12 Months Ended

Sep. 30, 2023

On April 29, 2022, we completed the acquisition of the L3H S&N business for a total purchase price of approximately $5.0 million in cash, exclusive of transaction costs and expenses and subject to certain post-closing working capital adjustments, resulting in a final adjusted purchase consideration transferred of $4.9 million. Following the closing, S&N results are included in our consolidated financial statements beginning on the acquisition date. Revenue and net income of S&N of $31.1 million and $4.2 million, respectively, is included in our consolidated statements of operations and comprehensive loss for the fiscal year ended September 30, 2023. Revenue and net income of S&N from the acquisition date of $10.1 million and $0.5 million, respectively, is included in our consolidated statements of operations and comprehensive loss for the fiscal year ended September 30, 2022.

On August 9, 2022, we completed the acquisition of EMCORE Chicago, pursuant to which we acquired substantially all of KVH’s assets and liabilities primarily related to its FOG and Inertial Navigation Systems business, including property interests in the Tinley Park facility located at 8412 West 185th St., Tinley Park, Illinois (the “Tinley Park Facility”), for aggregate consideration of approximately $55.0 million, exclusive of transaction costs and expenses and subject to certain post-closing working capital adjustments. Following the closing, EMCORE Chicago results are included in our consolidated financial statements beginning on the acquisition date. Revenue and net loss of EMCORE Chicago of $35.9 million and $14.8 million, respectively, is included in our consolidated statements of operations and comprehensive loss for the fiscal year ended September 30, 2023. The loss was primarily attributable to the impairment and write off of goodwill of $15.9 million. Revenue and net income of EMCORE Chicago from the acquisition date of $6.1 million and $0.7 million, respectively, is included in our consolidated statements of operations and comprehensive loss for the fiscal year ended September 30, 2022.

Final Purchase Price Allocation

The total purchase price for the S&N acquisition was allocated to the assets acquired and liabilities assumed based on the estimated fair values as of the acquisition date. Since the acquisition, the purchase price allocation for S&N changed by a $2.3 million reduction to contract assets and a $0.6 million reduction to the asset retirement obligation, resulting in a corresponding increase to intangible assets and goodwill acquired. Goodwill is measured as the excess of the fair value of the purchase consideration transferred over the fair value of the identifiable net assets.

The table below represents the final purchase price allocation to the assets acquired and liabilities assumed of S&N based on their estimated fair values as of the acquisition date based on management’s best estimates and assumptions:


(in thousands)	Amount
Tangible assets acquired:
Accounts receivable	$	803
Inventory	370
Contract assets	3,920
Operating lease right-of-use assets	1,529
Property, plant, and equipment	1,996
Net pension benefit assets	1,727
Intangible assets acquired	2,740
Goodwill	3,108
Liabilities assumed:
Accounts payable	(1,226)
Accrued expenses	(622)
Contract liabilities	(6,024)
Operating lease liabilities	(1,565)
Asset retirement obligations	(1,895)
Total purchase consideration	$	4,861

The total purchase price for the EMCORE Chicago acquisition was allocated to the assets acquired and liabilities assumed based on the estimated fair values as of the acquisition date. Since the acquisition, the purchase price allocation for EMCORE Chicago changed by a $3.3 million reduction to inventory resulting in a corresponding increase to intangible assets and goodwill acquired. Goodwill is measured as the excess of the fair value of the purchase consideration transferred over the fair value of the identifiable net assets.

The table below represents the final purchase price allocation to the assets acquired and liabilities assumed of EMCORE Chicago based on their estimated fair values as of the acquisition date based on management’s best estimates and assumptions:


(in thousands)	Amount
Tangible assets acquired:
Accounts receivable	$	4,977
Inventory	7,479
Prepaid expenses and other current assets	1,483
Property, plant, and equipment	14,442
Intangible assets acquired	13,470
Goodwill	15,867
Liabilities assumed:
Accounts payable	(1,699)
Accrued expenses	(485)
Contract liabilities	(637)
Other long-term liabilities	(8)
Total purchase consideration	$	54,889

Included in intangible assets acquired as of September 30, 2023 are customer relationships of $3.0 million, technology of $2.4 million, IPR&D of $5.9 million, and trademarks of $2.2 million.

For the fiscal years ended September 30, 2023 and 2022, the Company incurred transitional and transaction costs of approximately $4.3 million and $6.1 million, respectively, in connection with the S&N and EMCORE Chicago acquisitions, which were expensed as incurred and included in SG&A within the accompanying consolidated statements of operations and comprehensive loss.

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information presented for the fiscal year ended September 30, 2022 does not purport to be indicative of the results of operations that would have been achieved had the acquisition been consummated on October 1, 2021, nor of the results which may occur in the future. The pro forma amounts are based upon available information and certain assumptions that the Company believes are reasonable.


	Year Ended September 30, 2022
(in thousands, except per share data)	EMCORE (excluding EMCORE Chicago)		EMCORE Chicago		Pro Forma Adjustments			Pro Forma Combined
Revenue	$	118,029	$	31,757	$	—		$	149,786
Cost of revenue	89,486		24,347		683		(a)	114,516
Gross profit	28,543		7,410		(683)			35,270
Operating expense:
Selling, general, and administrative	33,294		9,670		(4,102)		(a)(b)	38,862
Research and development	18,401		4,946		(1,057)		(a)(b)	22,290
Severance	1,357		(4)		—			1,353
Gain on sale of assets	(2,685)		—		—			(2,685)
Impairment charge	2,956		—		—			2,956
Total operating expense	53,323		14,612		(5,159)			62,776
Operating loss	(24,780)		(7,202)		4,476			(27,506)
Other (expense) income:
Interest expense, net	(139)		—		(1,060)		(c)	(1,199)
Foreign exchange gain	(352)		—		—			(352)
Pension income	148		—		—			148
Other income	—		137		—			137
Total other expense	(343)		137		(1,060)			(1,266)
Loss before income tax benefit	(25,123)		(7,065)		3,416			(28,772)
Income tax benefit (expense)	139		(42)		(19)		(d)(e)	78
Net loss	(24,984)		(7,107)		3,397			(28,694)
Foreign exchange translation adjustment	172		—		—			172
Pension adjustment	441		—		—			441
Comprehensive loss	$	(24,371)	$	(7,107)	$	3,397		$	(28,081)
Per share data:
Net loss per basic share:	$	(0.67)			$	—		$	(0.77)
Weighted-average number of basic and diluted shares outstanding	37,269				$	—		37,269

(a) Reflects the impact to depreciation expense and amortization expense as a result of the change in fair value of property, plant, and equipment and intangible assets acquired. Adjustment was made to the unaudited pro forma combined statements of operations for the nine months ended September 30, 2022.

(b) Reflects the deduction of various sales, general, and administrative and research and development expenses allocated from corporate overhead to EMCORE Chicago during the periods presented that will not be incurred on an ongoing basis as a result of existing EMCORE management structures in place, which will provide the same support to EMCORE Chicago upon completion of the transition services agreement entered into between EMCORE and KVH in connection with the EMCORE Chicago acquisition. Amounts were estimated based on historical allocation included in the stand-alone financial statements of EMCORE Chicago. However, actual costs to be incurred associated with corporate support may vary under the EMCORE structure.

(d) Reflects the current tax expense due to additional income and deferred income tax expense related to deferred tax liability generated from annual tax amortization of indefinite-lived assets that were acquired for the periods presented. Such amounts were determined based on the effective tax rate of EMCORE rather than statutory tax rates as a result of a tax valuation allowance covering substantially all deferred tax assets and the existence of tax loss carryforwards present at both entities.

(e) Reflects the deduction of the income tax expense related to the FIN 48 liability of EMCORE Chicago that is not assumed by EMCORE.