Assets and Liabilities Held for Sale and Discontinued Operations

3 Months Ended

Dec. 31, 2023

Discontinued Operations and Disposal Groups [Abstract]

Assets and Liabilities Held for Sale and Discontinued Operations

In April 2023, we initiated a restructuring program that includes the strategic shutdown of our Broadband business segment (including our cable TV, wireless, sensing and chips product lines) and the discontinuance of our defense optoelectronics product line. During the quarter ended September 30, 2023, the Broadband business segment and defense optoelectronics product line were considered as held for sale based upon (i) the existence of an executed non-binding letter of intent to sell our Broadband business segment (other than our chips product line) and our defense optoelectronics product line and (ii) in consideration of ongoing negotiations for the sale of the chips product line business.

In October 2023, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”), by and among the Company, Photonics Foundries, Inc., a Delaware corporation (“PF”), and Ortel LLC, a Delaware limited liability company and wholly owned subsidiary of PF (the “Buyer”), pursuant to which (i) the Company agreed to transfer to the Buyer, and Buyer agreed to assume, substantially all of the assets and liabilities primarily related to the Company’s cable TV, wireless, sensing and defense optoelectronics business lines (the “Businesses”), including with respect to employees, contracts, intellectual property and inventory, and (ii) Buyer agreed to provide a limited license back to the Company of patents being sold to the Buyer (the “Transaction”). The Transaction excluded the Company’s chip business, indium phosphide wafer fabrication facilities and all assets not primarily related to the Businesses.

The signing and closing of the Transaction occurred simultaneously, except with respect to the assets of the Company located in China. In November 2023, the Company transferred to the Buyer, and the Buyer assumed, substantially all of the assets and liabilities of each of the Company’s subsidiaries in China.

In connection with the Transaction, the parties entered a transition services agreement pursuant to which the Company is providing certain migration and transition services to facilitate an orderly transaction of the operation of the Businesses to the Buyer in the 12-month period following consummation of the Transaction, and the Company and the Buyer entered into a sublease pursuant to which the Company is subleasing to the Buyer one of the Company’s buildings (occupying approximately

12,500 square feet) at its Alhambra, California facility for the 12-month period immediately following the closing of the Transaction without payment of rent. With respect to the Buyer’s assumption of our manufacturing agreement with our electronics manufacturing services (“EMS”) provider for our cable TV products, the Company (i) made a payment to the EMS provider in the amount of approximately $0.4 million immediately prior to the closing of the transaction and (ii) provided a guaranty of PF’s and the Buyer’s obligations with respect to payment of certain long-term liabilities that were originally agreed to and set forth in the manufacturing agreement and assigned to PF and the Buyer in the Transaction, in an aggregate amount expected to equal up to approximately $5.5 million, approximately $4.3 million of which will not become payable, if at all, until January 2026, provided that if such guaranty is exercised by the EMS provider, the Company will have the right to require the Buyer to reassign to the Company all intellectual property assigned to the Buyer in the Transaction and the Company will have the right to recover damages from PF and the Buyer.

In October 2023, the Company entered into a non-binding letter of intent with a buyer to sell substantially all of the assets and liabilities related to the Company’s chips business line, including assets related to the Company’s indium phosphide wafer fabrication operations and subsequently collected a $1.0 million deposit.

As of December 31, 2023, the chip business was disclosed as held for sale in the condensed consolidated balance sheet. As of September 30, 2023, the Broadband business segment and defense optoelectronics business lines were disclosed as held for sale in the consolidated balance sheet.

The following table presents key components of assets and liabilities that were classified as held for sale on the condensed consolidated balance sheets:


(in thousands)	December 31, 2023		September 30, 2023
Cash	$	—	$	81
Accounts receivable, net of credit loss of $0	—		974
Inventory, net	2,528		10,063
Other current assets	—		1,154
Property, plant, and equipment, net	2,988		4,131
Operating lease right-of-use assets	—		56
Total assets	5,516		16,459
Remeasurement of assets	1,645		9,195
Assets held for sale	3,871		7,264
Accounts payable	195		1,854
Accrued expenses and other current liabilities	161		1,697
Operating lease liabilities - current	—		22
Operating lease liabilities - non-current	—		36
Other comprehensive income	—		1,053
Total liabilities	$	356	$	4,662

For the three months ended December 31, 2023 and 2022, the results of the Chips business were disclosed as discontinued operations in the condensed consolidated statements of operations. For the three months ended December 31, 2022, the Broadband business segment and defense optoelectronics business lines were disclosed as discontinued operations.

As of the quarter ended December 31, 2023, the Company's expected loss on the remeasurement of assets of the discontinued business line to fair value was $1.6 million. The selling costs were approximately $0.2 million.

The following table presents key components of net loss that were classified as discontinued operations on the condensed consolidated statements of operations:


	Three Months Ended December 31,
(in thousands)	2023		2022
Revenue	$	216	$	4,975
Cost of Revenue	(1,282)		(6,294)
Gross Profit	(1,066)		(1,319)
Selling, general, and administrative	250		655
Research and development	—		1,136
Severance	—		459
Other income	—		(48)
Loss from discontinued operations	$	(1,316)	$	(3,521)