EMCORE (EMKR) - 2025 Q1 - Quarterly Report

Company Transition and Restructuring - The company completed its transition from a broadband company to an inertial navigation company by selling its cable TV, wireless, sensing, and defense optoelectronics business lines in October 2023[92]. - The April 2023 restructuring eliminated approximately 200 positions, representing about 50% of the total workforce, and resulted in annualized cost savings of approximately $17.0 million[101][104]. - The company eliminated approximately 200 positions, representing about 50% of its total workforce prior to the reductions, as part of the May 2024 Restructuring[132]. - Annualized cost savings from the May 2024 Restructuring are approximately $17.0 million, excluding severance costs[133]. - The company incurred one-time employee severance costs of approximately $2.9 million during the fiscal year ended September 30, 2024, along with $2.2 million in restructuring expenses[104]. Financial Performance - Revenue for the three months ended December 31, 2024, decreased by $4.8 million, or 20.0%, compared to the same period in the prior year, primarily due to decreased FOG sales and the termination of the TAIMU program[122]. - Gross profit increased by $0.2 million, or 3.0%, with gross margin rising from 25% to 36% relative to the same period in the prior year, driven by lower costs from restructuring activities[124]. - Selling, general, and administrative expenses increased by $0.6 million, or 8.5%, primarily due to higher professional service costs associated with a proposed Merger Agreement[126]. - Research and development expenses decreased by $2.0 million, or 54.8%, compared to the same period in the prior year, due to completed cost reduction activities[128]. - The company incurred a net loss of $5.5 million for the three months ended December 31, 2024, with cash used in operating activities decreasing by 17.0% compared to the previous period[139]. Mergers and Acquisitions - The company expects the merger with Parent to close during the quarter ending March 31, 2025, with shareholders receiving $3.10 per share in cash[97][100]. - The merger agreement is subject to customary closing conditions, including shareholder approval and the absence of any material adverse effects[99]. - The company has expanded its portfolio through acquisitions, including Systron Donner Inertial, L3Harris Technologies' S&N business, and KVH Industries' FOG and inertial navigation systems[92]. - The company is exploring options to address capitalization and liquidity, including a Merger Agreement entered into on November 7, 2024[135]. Capital and Liquidity - The company has a credit facility with a reduced borrowing capacity of $4.6 million under the Forbearance Agreement, down from $40.0 million[108]. - The company prepaid approximately $9.4 million to fully repay amounts outstanding under the Credit Agreement, including $8.5 million of principal and $0.8 million of accrued interest[111]. - The company raised approximately $15.6 million from an offering of 2,260,000 shares at $5.00 per share in August 2023[136]. - The company anticipates sufficient financial resources to meet cash requirements for operations and capital expenditures for at least the next 12 months[134]. - The company has substantial doubt about its ability to continue as a going concern, which could significantly impact its stock price and shareholder value[134]. Manufacturing and Operations - The company has fully vertically-integrated manufacturing capabilities at its facilities in Budd Lake, NJ, Concord, CA, and Tinley Park, IL, supporting its inertial navigation products[93]. - The company’s manufacturing processes involve extensive quality assurance systems and performance testing, maintaining ISO 9001 and AS9100 certifications[93][94]. - Restructuring expenses totaled approximately $0.9 million, primarily related to the Chief Restructuring Officer and discontinuance of in-house component manufacturing[129]. - The company is facing increased instability in global economic conditions, which may lead to longer sales cycles and increased manufacturing costs[118]. Stock and Warrants - A reverse stock split at a ratio of 10:1 was approved and became effective on April 1, 2024, adjusting the number of shares and equity awards accordingly[105]. - The company issued a warrant to purchase 1,810,528 shares of common stock at an exercise price of $2.73 per share, exercisable for 10 years[130]. - The fair value of the warrant liability was recorded as $6.6 million as of December 31, 2024, reflecting a net expense of $1.9 million for the three months ended December 31, 2024[130]. Asset Sales - The company entered into an Asset Purchase Agreement with HieFo Corporation for the sale of assets related to its discontinued chips business for a purchase price of $2.9 million[113]. - The company completed the PF Transaction during the three months ended December 31, 2023, with a purchase price of $2.9 million in cash[136].