UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Markone):
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ___________
Commission File Number: 0-22175
EMCORE CORPORATION
(Exact name of Registrant as specified in its charter)
NEW JERSEY
(State or other jurisdiction of incorporation or organization)
22-2746503
(IRS Employer Identification No.)
394 ELIZABETH AVENUE
SOMERSET, NJ 08873
(Address of principal executive offices) (zip code)
(732) 271-9090
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the registrant's no par value common
stock as of February 13, 1998 was 9,321,107.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EMCORE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(Unaudited)
THREE MONTHS ENDED
DECEMBER 31,
1997 1996
--------------------------
Revenue $12,357 $8,591
Cost of sales 6,376 6,724
--------------------------
Gross profit 5,981 1,867
--------------------------
Operating expenses:
Selling, general and administrative 3,074 2,202
Research and development:
Acquired in-process research & development 29,294
Recurring research & development 2,836 2,250
--------------------------
Total operating expenses 35,204 4,452
--------------------------
Operating loss (29,223) (2,585)
--------------------------
Other expense:
Stated interest expense 70 197
Imputed warrant interest expense, non-cash. 96 1,016
--------------------------
Total other expense 166 1,213
--------------------------
Net loss ($29,389) ($3,798)
==========================
Earnings per common share -- basic ($4.15) ($1.27)
==========================
Earnings per common share -- diluted ($4.15) ($0.86)
==========================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
EMCORE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, SEPTEMBER 30,
1997 1997
------------ -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $3,301 $3,653
Restricted cash 250 313
Accounts receivable, net of allowance for doubtful accounts
of approximately $707 and $697 at December 31, 1997 and
September 30, 1997, respectively 7,857 8,439
Accounts receivable, related party 2,000 2,500
Inventories, net 9,168 7,186
Other current assets 482 120
------------ -------------
Total current assets 23,058 22,211
Property and equipment, net 19,242 16,798
Other assets 3,839 454
------------ -------------
Total assets $46,139 $39,463
============ =============
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $6,924 $4,050
Accrued expenses 3,621 3,868
Advanced billings 1,193 1,998
Capital lease obligation, current portion 613 15
Other current liabilities 31 124
------------ -------------
Total current liabilities 12,382 10,055
Subordinated notes, net 7,551 7,499
Capital lease obligation, net of current portion 1,252 78
------------ -------------
Total liabilities 21,185 17,632
------------ -------------
SHAREHOLDERS' EQUITY:
Common stock, no par value, 23,529,411 shares authorized,
9,319,287 shares issued and outstanding December 31, 1997,
6,000,391 shares issued and outstanding September 30, 1997 85,787 45,817
Accumulated deficit (53,166) (23,777)
Notes receivable from warrant issuances and stock sales (7,667) (209)
------------ -------------
Total shareholders' equity 24,954 21,831
------------ -------------
Total liabilities and shareholders' equity $46,139 $39,463
============ =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
EMCORE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
1997 1996
--------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ($29,389) ($3,798)
--------- --------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Depreciation and amortization 1,601 1,017
Acquired in-process research and development, non-cash 29,294
Compensatory stock issuances 88
Provision for doubtful accounts 10 60
Detachable warrant accretion and valuation 97 3,716
Provision for inventory valuation 30 60
Change in assets and liabilities:
Accounts receivable 1,191 (3,662)
Inventories (1,876) (1,722)
Costs in excess of billings on uncompleted contracts (146) (38)
Other current assets (194) 17
Other assets (93) (2,891)
Accounts payable 2,851 1,065
Accrued expenses (1,546) 269
Advanced billings (806) 1,609
Other current liabilities (93) (12)
--------- --------
Total adjustments 30,408 (512)
--------- --------
Net cash provided by (used in) operating activities 1,019 (4,310)
--------- --------
INVESTING ACTIVITIES:
Purchase of property, plant, and equipment (1,627) (1,156)
Acquisition, cash acquired 193
Payments on restricted cash 63
--------- --------
Net cash used in investing activities (1,371) (1,156)
--------- --------
FINANCING ACTIVITIES:
Payments on notes payable and long-term debt (50)
Proceeds from borrowings under demand note facility 6,000
Net proceeds from stock options exercise 38
Proceeds from exercise of stock warrants 12
--------- --------
Net cash provided by financing activities 0 6,000
--------- --------
Net (decrease) increase in cash and cash equivalents ($352) $534
Cash and cash equivalents, beginning of year 3,653 1,367
--------- --------
Cash and cash equivalents, end of year $3,301 $1,901
========= ========
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Cash paid during the period for interest $398 $51
========= ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
EMCORE CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
SHAREHOLDERS' TOTAL
COMMON STOCK ACCUMULATED NOTES SHAREHOLDERS'
SHARES AMOUNT DEFICIT RECEIVABLES EQUITY
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1995 2,994 $16,638 ($14,982) ($146) $1,510
Issuance of common stock purchase warrants 2,340 2,340
Notes receivable due from shareholders in connection
with issuance of detachable warrants (152) (152)
Net loss (3,176) (3,176)
------------------------------------------------------------------
BALANCE OF SEPTEMBER 30, 1996 2,994 18,978 (18,158) (298) 522
Issuance of common stock purchase warrants 3,601 3,601
Issuance of common stock in initial public offering,
net of issuance cost of $3,110 2,875 22,765 22,765
Issuance of common stock on exercise of warrants 94 384 384
Issuance of common stock on exercise of stock
options 35 54 54
Redemptions of notes receivable from shareholders 32 32
Forgiveness of notes receivable from shareholder 57 57
401(k) matching contribution 2 35 35
Net loss (5,619) (5,619)
------------------------------------------------------------------
BALANCE OF SEPTEMBER 30, 1997 6,000 45,817 (23,777) (209) 21,831
Warrant exercise by conversion of sub-debt 14 57 57
Warrant exercise in exchange for notes
receivable 1,828 7,458 (7,458)
Issuance of common stock in connection with
the acquisition of MODE 1,462 32,329 32,329
Compensatory stock issuances 5 88 88
Stock option exercise 10 38 38
Net loss (29,389) (29,389)
------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997 (UNAUDITED) 9,319 $85,787 ($53,166) ($7,667) 24,954
==================================================================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
EMCORE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. INTERIM FINANCIAL INFORMATION
The accompanying unaudited condensed consolidated financial statements of
EMCORE Corporation (the "Company") reflect all adjustments considered necessary
by management to present fairly the Company's consolidated financial position as
of December 31, 1997 and December 31, 1996, and the consolidated results of
operations and the consolidated cash flows for the quarters ended December 31,
1997, and December 31, 1996. All adjustments reflected in the accompanying
unaudited condensed consolidated financial statements are of a normal recurring
nature. The results of operations for the three months ended December 31, 1997,
are not necessarily indicative of the results for the fiscal year ending
September 30, 1998, or any future interim period.
NOTE 2. ACQUISITION
On December 5, 1997, the Company acquired all of the outstanding capital
stock of MicroOptical Devices, Inc. ("MODE") in exchange for 1,461,866 shares of
EMCORE common stock, 200,966 common stock purchase options (exercise prices
ranging from $0.43 to $0.59), and 47,188 common stock purchase warrants
(exercise prices ranging from $4.32 to $5.92). The purchase price was
approximately $32,829,000 including direct acquisition costs of approximately
$500,000. The acquisition of MODE was recorded using the purchase method of
accounting. Accordingly, the results of operations of the acquired business and
the fair values of the acquired tangible and intangible assets and assumed
liabilities are included in the Company financial statements as of the effective
date. The allocation of the fair value of the net assets acquired is as follows:
Net tangible assets $707,000
Goodwill 2,828,000
Acquired in-process research and development 29,294,000
-----------
Total purchase price $32,829,000
===========
The amount allocated to acquired in-process research and development was
determined through an independent valuation. Amounts allocated to acquired
in-process research and development were immediately written off in the period
of acquisition. Goodwill is being amortized over a period of three years.
The following unaudited pro forma basis financial information reflects the
combined results of operations of the Company and MODE (in thousands), as if
MODE had been acquired as of October 1, 1996 and October 1, 1997. The summary
includes the impact of certain adjustments, such as goodwill amortization and
the number of shares outstanding.
(Unaudited) (Unaudited)
Year ended Quarter ended
September 30, 1997 December 31, 1997
------------------ -----------------
Revenue $48,313 $12,457
Net loss before extraordinary item 8,769 991
Net loss 9,055 991
Net loss, per share $1.35 $0.14
The unaudited pro forma results of operations are not necessarily
indicative of what actually would have occurred if the acquisition had occurred
on October 1, 1996 or October 1, 1997. In addition, the unaudited pro forma
results of operations are not intended to be a projection of future results that
might be achieved from the combined entity. The foregoing pro forma results of
operations does not reflect the non-recurring write-off of acquired in-process
research and development.
NOTE 3. DEBT
On March 31, 1997, the Company entered into a $10.0 million revolving loan
agreement (the "Agreement"). The Agreement bears interest at the rate of Prime
plus 50 basis points, subject to periodic quarterly decreases, and has a
revolving loan maturity date and expires on September 30, 1998. As of December
31, 1997, there were no borrowings under the Agreement, however, in January
1998, the Company borrowed $3.0 million at an interest rate of 8.25%.
<PAGE>
NOTE 4. INVENTORIES
The components of inventories consisted of the following (in thousands):
AS OF AS OF
DECEMBER 31, 1997 SEPTEMBER 30, 1997
----------------- ------------------
Raw materials 7,494 $6,514
Work-in-progress 1,674 672
------ ------
Total $9,168 $7,186
====== ======
NOTE 5. EARNINGS PER SHARE
Basic earnings per common share was calculated by dividing net income by
the weighted average number of common shares outstanding during the period.
Diluted earnings per share was calculated by dividing net income by the sum of
the weighted average number of common shares outstanding plus all additional
common shares that would have been outstanding if potentially dilutive common
shares had been issued. The following table reconciles the number of shares
utilized in the earnings per share calculations for the three month period
ending December 31, 1997 and 1996, respectively.
Three Months Three Months
Ended December 31, Ended December 31,
1997 1996
------------------ ------------------
Net income ............................ ($29,389) ($3,798)
======== =======
Earnings per common share - basic ..... ($ 4.15) ($1.27)
======= ======
Earnings per common share - diluted ... ($ 4.15) ($0.86)
======= ======
Common Share - basic .................. 7,075 2,994
Effect of dilutive securities:
Stock options ......................... -- --
Other ................................. -- 1,444
------- ------
Common shares - diluted ............... 7,075 4,438
======= ======
Under the provisions of Securities and Exchange Commission Staff Bulletin
No. 64 ("SAB" No. 64), common stock and common stock equivalents issued by the
Company within one year or in contemplation of the Company's initial public
offering (the "IPO") are treated as if they were outstanding for all periods
presented prior to the Company's IPO. After the IPO is effective, the
determination of common stock and equivalents has been determined on a basis
consistent with APB Opinion No. 15, which states "outstanding options and
warrants should be included in the EPS computation ONLY if they have a dilutive
effect."
NOTE 6. RELATED PARTIES
In fiscal 1997, the Company entered into a non-exclusive and non-refundable
technology licensing and royalty agreement with Uniroyal Technology Corporation
("UTC") for the process technology to develop and manufacture of high brightness
light emitting diodes ("LEDs"). Effective January 1998, UTC's Chairman/CEO and
his son resigned from the Company's Board of Directors.
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
EMCORE, founded in 1984, designs and develops compound semiconductor
materials and process technology and is a leading manufacturer of production
systems used to fabricate compound semiconductor wafers. Compound semiconductors
are used in a broad range of applications in wireless communications,
telecommunications, computers, and consumer and automotive electronics. The
Company provides its customers, both in the US and internationally, with
materials science expertise, process technology and compound semiconductor
production systems that enable the manufacture of commercial volumes of
high-performance electronic and optoelectronic devices. In response to the
growing need of its customers to cost effectively get to market faster with
higher volumes of new and improved high performance products, the Company has
expanded its product offerings to include the design, development and production
of compound semiconductor wafers and package-ready devices.
On December 5, 1997, the Company purchased MicroOptical Devices, Inc.
("MODE"). MODE is one of the market leaders in the design and development of
high-quality optical components and subsystems based on vertical cavity surface
emitting laser ("VCSEL") technology, which offers superior performance at lower
cost over conventional semiconductor laser technologies. MODE's microlasers and
optical subsystems provide design, performance and significant cost advantages
over their technical predecessors such as edge-emitting solid state lasers.
Through the integration of VCSELs with leading OEM systems design, VCSELs are
expected to provide enhanced performance benefits to market applications such as
Internet access, onboard photonics, gigabit ethernet, local area networks,
microarea networks, DVD and fiberoptic switching. MODE's Gigalase(TM) and
Gigarray(TM) technology developments to date are currently being evaluated by a
variety of domestic and international OEM customers in the areas of data
communications, telecommunications, optical storage and sensing.
RESULTS OF OPERATIONS:
REVENUES The Company's first quarter revenue increased 43.8% from $8.6
million for the quarter ended December 31, 1996, to $12.4 million for the
quarter ended December 31, 1997. The revenue increase in the three month period
was primarily attributable to the introduction of compound semiconductor wafers
and package-ready devices into the Company's product lines, as well as payments
related to a licensing agreement for product development technology. Revenues
relating to systems and materials accounted for 54.4% and 45.6% for the three
months ended December 31, 1997 and 1996, respectively. Systems revenue includes
production systems, service and components. Materials revenues include wafers,
devices and payments for product development technology under a licensing
agreement. International sales accounted for approximately 44.2% and 64.3% of
revenues for the three months ended December 31, 1997 and 1996, respectively.
The Company believes that in the future its revenues and consequential
results of operations in a quarterly period could be impacted by the timing of
customer development projects and related purchase orders for the Company's
varied products, new product announcements and releases by the Company, and
economic conditions generally and the compound semiconductor industry
environment specifically.
COST OF SALES/GROSS PROFIT Cost of sales includes direct material and labor
costs, allocated manufacturing and service overhead, and installation and
warranty costs. Gross profit increased from 21.7% of revenue for the quarter
ended December 31, 1996, to 48.4% of revenue for the quarter ended December 31,
1997. The gross profit percentage increase was primarily attributable to higher
margins on materials related revenues.
SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative
expenses increased by 39.6% from $2.2 million for the quarter ended December 31,
1996, to $3.1 million in the quarter ended December 31, 1997. The increase was
largely due to increases in sales personnel headcount to support both domestic
and foreign markets and general headcount additions to sustain the internal
administrative support necessary for the Company's increased business, as well
as higher variable expenses attributable to increased revenues. In addition, the
Company recognized approximately $71,000 of goodwill amortization for the
quarter in connection with the acquisition of MODE on December 5, 1997. As a
percentage of revenue, selling, general and administrative expenses decreased
from 25.6% for the first quarter of the prior year to 24.9% for the first
quarter of the current year.
RESEARCH AND DEVELOPMENT Research and development expenses increased
significantly from $2.3 million in the quarter ended December 31, 1996, to $32.1
million in the quarter ended December 31, 1997. Of this amount, approximately
$29.3 million pertained to the Company's December 5, 1997, one-time non-cash
charge for acquired in-process research and development in connection with the
purchase of MODE. Absent this non-recurring charge, research and development was
$2.8 million, or a 26.0% increase over the first quarter of fiscal 1996. As a
percentage of revenue, excluding the one-time non-cash charge for acquired
in-process research and development, research and development expenses decreased
from 26.2% for the first quarter of the prior year to 23.0% for the first
quarter of the current year. To maintain growth and market leadership in
epitaxial technology, the Company expects to continue to invest a significant
amount of its resources in research and development.
OPERATING INCOME (LOSS) Not including the operations of MODE acquired on
December 5, 1997 nor the one-time non-cash charge of $29.3 million relating to
the acquired research and development, operating profit increased $3.3 million
from a loss of $2.6 million in the quarter ended December 31, 1996, to income of
$0.7 million in the quarter ended December 31, 1997. Including MODE's operations
from the date of acquisition and the $29.3 million charge, the Company's
operating profit decreased $26.6 million from a loss of $2.6 million in the
quarter ended December 31, 1996, to a loss of $29.2 million in the quarter ended
December 31, 1997. The change in operating loss is primarily due to the purchase
of MODE and corresponding one-time non-cash charge for acquired in-process
research and development.
OTHER EXPENSE During fiscal 1996, the Company issued detachable warrants
along with subordinated notes to certain of its existing shareholders. In the
first quarter of fiscal year 1997, the Company also issued detachable warrants
in return for a $10.0 million demand note facility (the "Facility") guarantee by
a director of the Company, affiliated with the Company's majority shareholder,
who provided collateral for the Facility. The Company subsequently assigned a
value to these detachable warrants using the Black-Scholes Option Pricing Model.
The Company recorded the subordinated notes at a carrying value that is subject
to periodic accretions, using the interest method, and reflected the Facility
detachable option value as a debt issuance cost. The consequent expense of these
warrant accretion amounts and the now terminated Facility debt issuance cost is
charged to "Imputed warrant interest, non-cash," and amounted to $1.0 million
and $91,000 for the quarters ended December 31, 1996 and December 31, 1997,
respectively. As of December 31, 1996, the Company had borrowed $6.0 million
under the Facility. This amount was repaid on March 31, 1997. The interest
expense under the Facility resulted in higher stated interest expense for the
quarter ended December 31, 1996.
NET INCOME/LOSS Excluding the operations of MODE and the one-time charge of
$29.3 million, net income increased $4.3 million from a net loss of $3.8 million
in the quarter ended December 31, 1996, to net income of $0.5 million in the
quarter ended December 31, 1997. Including MODE's operations from the date of
acquisition and the $29.3 million charge, the Company's net loss increased $25.6
million from a loss of $3.8 million in the quarter ended December 31, 1996, to a
loss of $29.4 million in the quarter ended December 31, 1997. This year-to-date
loss increase was primarily attributable to the aforementioned write-off of
acquired in-process research and development in connection with the acquisition
of MODE on December 5, 1997.
BACKLOG
The Company's order backlog decreased 6.7% from $23.8 million as of
December 31, 1996, to $22.2 million as of December 31, 1997. The Company
includes in backlog only customer purchase orders which have been accepted by
the Company and for which shipment dates have been assigned within the 12 months
to follow and research contracts that are in process or awarded. Wafer and
device contract agreements extending longer than one year in duration are
included in backlog only for the ensuing 12 months with respect to wafers and 3
months with respect to devices. Some of these agreements currently extend over
12 months. The Company receives partial advance payments or irrevocable letters
of credit on most production system orders and has never experienced an order
cancellation. Although the Company has increased its capacity to meet continued
increased production needs, there can be no assurance that the Company will be
consistently able to increase its capacity to meet its scheduled needs.
LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents decreased by
$352,000 from $3.7 million at September 30, 1997, to $3.3 million at December
31, 1997. For the three months ended December 31, 1997, net cash provided by
operations amounted to $1.0 million, primarily due to the Company's increase in
accounts payable and decrease in accounts receivable which was offset by the
Company's net losses excluding one-time charges, increase in inventory, and
decrease in accrued expenses and advanced billings. For the three months ended
December 31, 1997, net cash used in investment activities amounted to $1.4
million due to purchase and manufacture of new equipment for the facilitation of
the Company's wafer and package ready device product lines and clean room
modifications and enhancements.
On March 31, 1997, the Company entered into a $10.0 million revolving loan
(the "Agreement"). The Agreement bears interest at the rate of Prime plus 50
basis points, subject to periodic quarterly decreases, and has a revolving loan
maturity date and expires on September 30, 1998. As of December 31, 1997, there
were no borrowings under the Agreement, however, in January 1998, the Company
borrowed $3.0 million at an interest rate of 8.25%.
The Company believes that its current liquidity, together with the
Agreement, should be sufficient to meet its cash needs for working capital
through fiscal 1998. However, if cash generated from operations is insufficient
to satisfy the Company's liquidity requirements, the Company may be required to
raise funds through equity or debt offerings or obtain additional credit
facilities if possible. Additional funding may not be available when needed or
on terms acceptable to the Company, which could have a material adverse effect
on the Company's business financial conditions or operations.
At December 31, 1997, the Company employed 307 full-time employees, up
50.5% from 204 as of December 31, 1996 and up 186.9% from the 107 employees at
December 31, 1995. The increase in the number of employees since the end of 1995
is a direct result of the Company's increased manufacturing needs to meet the
demand for its compound semiconductor production systems and materials. None of
the Company's employees are covered by a collective bargaining agreement. The
Company considers its relationship with its employees to be good.
OUTLOOK On December 5, 1997, the Company purchased MODE. MODE is one of the
market leaders in the design and development of high-quality components and
subsystems based on VCSEL technology, which is expected to offer superior
performance and higher efficiency over conventional compound semiconductor
technologies.
MODE's microlasers and optical subsystems provide design, performance and
significant cost advantages over their technical predecessors such as
edge-emitting solid state lasers. Through the integration of VCSELs with leading
OEM systems design, VCSELs are expected to provide enhanced performance benefits
to market applications such as Internet access, onboard photonics, gigabit
ethernet, local area networks, microarea networks such as chip-to-chip and
board-to-board applications, DVD and fiberoptic switching. MODE's Gigalase(TM)
and Gigarray(TM) technology developments to date are currently being evaluated
by a variety of domestic and international OEM customers in the areas of data
communications, telecommunications, optical storage and sensing.
The Company believes that VCSEL technology may address a number of
technical bandwidth challenges applicable to the high-speed computing and
communications markets, allowing optoelectronic applications to perform their
functions at higher speeds with lower costs than traditional optoelectronic
systems. The Company believes that with the acquisition of MODE, it will be well
positioned to actively participate in the development of the next-generation
optoelectronic laser market which is estimated to grow to one billion dollars by
the year 2000.
Under the terms of the agreement, the Company issued 1,461,866 shares of
Common Stock, 200,966 common stock purchase options and 47,118 common stock
purchase warrants in exchange of 100% of the outstanding capital stock of MODE.
The acquisition purchase price amounted to approximately $32.8 million. The
acquisition was recorded under the purchase method of accounting and a
significant portion of the purchase price was taken as a one-time charge of
approximately $29.3 million by the Company related to the write-off of
acquired in-process research and development.
Historically the Company has generated significant revenues from its
TurboDisc(TM) product line from Asian customers. Continued economic and
currency-related uncertainty in the region could impact the Company's future
TurboDisc(TM) sales in this market.
The Company believes it possess the technological "know how" to capitalize
on all of these market opportunities. However, there can be no assurance that
the Company will maintain sufficient growth in sales levels to support the
associated labor, equipment and facility costs.
INFORMATION RELATING TO FORWARD LOOKING STATEMENTS
Management's Discussion and Analysis of Financial Condition and Results of
Operations includes forward-looking statements that reflect the Company's
current expectations or beliefs concerning future results and events. The words
"expects", "intends", "believes", "anticipates", "likely", "will", and similar
expressions identify forward-looking statements. These forward-looking
statements are subject to certain risks and uncertainities which could cause
actual results and events to differ materially from those anticipated in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, statements about future financial performance of the
Company and MODE and the effect of the acquisition on the Company's business;
continued acceptance of the Company's MOCVD technologies, as well as the market
success of VCSEL technologies; the Company's ability to achieve and implement
the planned enhancements of products and services on a timely and cost-effective
basis and customer acceptance of those product introductions; product
obsolescence due to advances in technology and shifts in market demand;
competition and resulting price pressures; business conditions; economic and
stock market conditions, particularly in the U.S., Europe and Japan, and their
impact on sales of the Company's products and services; risks associated with
foreign operations, including currency and political risks; and such other risk
factors as may have been or may be included from time to time in the Company's
reports filed with the Securities and Exchange Commission.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits:
11 - Statement of Computation of Per Share Amounts
27 - Financial Data Schedule
(b) Reports on Form 8-K:
Form 8-K dated December 22, 1997
Form 8-K/A dated December 24, 1997
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EMCORE CORPORATION
Date: February 13, 1998 By: /s/ Reuben F. Richards, Jr.
---------------------------------
Reuben F. Richards, Jr.
President and Chief Executive Officer
Date: February 13, 1998 By: /s/ Thomas G. Werthan
---------------------------------
Thomas G. Werthan
Vice President, Finance and Administration
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
11 Statement of Computation of Per Share Amounts
27 Financial Data Schedule
EXHIBIT 11
EMCORE CORPORATION
STATEMENT OF COMPUTATION OF PER SHARE AMOUNTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(Unaudited)
THREE MONTHS
ENDED DECEMBER 31,
1997 1996
---- ----
Net loss ($29,389) ($3,798)
========= ========
Basic earning per share calculation:
Weighted average shares outstanding:
Common stock 7,075 2,994
Common stock equivalents (1)
--------- --------
Primary weighted average
Common shares and equivalents 7,075 2,994
Net loss per share ($4.15) ($1.27)
========= ========
Fully diluted earnings per share calculation (2):
Weighted average shares outstanding:
Common stock 7,075 2,994
Common stock equivalents (1) 1,444
--------- --------
Primary weighted average
Common shares and equivalents 7,075 4,438
========= ========
Net loss per share ($4.15) ($0.86)
========= ========
__________________
(1) Under the provisions of Securities and Exchange Commission Staff Bulletin
No. 64 ("SAB" No. 64), common stock and common stock equivalents issued by
the company within one year or in contemplation of the Company's offering
are treated as if they were outstanding for all periods presented prior to
the Company's IPO. After the IPO is effective, the determination of common
stock and equivalents has been determined on a basis consistent with APB
Opinion No. 15, which states "outstanding options and warrants should be
included in the EPS computation only if they have a dilutive effect."
(2) This calculation is submitted in accordance with Securities Exchange Act of
1934 Release No. 9083 although not required by footnote 2 of paragraph 14
of APB Opinion No. 15 because it results in dilution of less than 3%.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF EMCORE CORPORATION FOR THE QUARTERLY PERIOD
ENDED DECEMBER 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 3,551
<SECURITIES> 0
<RECEIVABLES> 8,564
<ALLOWANCES> (707)
<INVENTORY> 9,168
<CURRENT-ASSETS> 23,058
<PP&E> 31,631
<DEPRECIATION> (12,389)
<TOTAL-ASSETS> 46,139
<CURRENT-LIABILITIES> 12,382
<BONDS> 0
0
0
<COMMON> 85,787
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 46,139
<SALES> 12,357
<TOTAL-REVENUES> 12,357
<CGS> 6,376
<TOTAL-COSTS> 6,376
<OTHER-EXPENSES> 35,204
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 166
<INCOME-PRETAX> (29,389)
<INCOME-TAX> 0
<INCOME-CONTINUING> (29,389)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (29,389)
<EPS-PRIMARY> (4.15)
<EPS-DILUTED> (4.15)
</TABLE>
