EMCORE Corporation

Form SD-2023

Exhibit 1.01

Conflict Minerals Report

Conflict Minerals Disclosure

I.              Introduction

EMCORE Corporation is providing this Conflict Minerals Report (“CMR”) for the calendar year ended December 31, 2023, as an exhibit to Form SD, pursuant to Rule 13p-1 under the Securities Exchange Act of 1934 (the “Rule”), as amended. The Rule requires disclosure of certain information when a company manufactures or contracts to manufacture a product and any “conflict mineral” specified in the Rule is necessary for the functionality or production of such product. Conflict Minerals are defined by paragraph (d)(3) of Form SD as columbite-tantalite (coltan), cassiterite, gold, wolframite, or their derivatives, which are limited to tantalum, tin, and tungsten, or any other mineral or its derivatives determined by the U.S. Secretary of State to be financing conflict in the Covered Countries (collectively, “Conflict Minerals” or “3TG”). The “Covered Countries” for purposes of the Rule and this CMR are the Democratic Republic of the Congo (“DRC”) and any country that shares an internationally recognized border with the DRC.

As used in this document, “EMCORE,” the “Company” and the words "we," "our," and "us" refer to EMCORE Corporation and its subsidiaries.

II.            Overview

Company Profile

We are a leading provider of inertial navigation products for the aerospace and defense markets and have also been a manufacturer of lasers and optical subsystems for use in the Cable TV (“CATV”) industry. We leverage industry-leading Photonic Integrated Chip (PIC), Quartz MEMS, and Lithium Niobate chip-level technology to deliver state-of-the-art component and system-level products across our end-market applications. Over the last five years, we have expanded our scale and portfolio of inertial sensor products through the acquisitions of Systron Donner Inertial, Inc. in June 2019, the Space and Navigation business of L3Harris Technologies, Inc. in April 2022, and the FOG and Inertial Navigation Systems business of KVH Industries, Inc. in August 2022. We have vertically-integrated manufacturing capability at our facilities in Budd Lake, NJ, Concord, CA, Tinley Park, IL, and Alhambra, CA. Our manufacturing facilities maintain ISO 9001 quality management certification, and we are AS9100 aerospace quality certified at our facilities in Budd Lake and Concord. These facilities support our vertically-integrated manufacturing strategy for quartz, FOG, and Ring Laser Gyro products for navigation systems.

As described in this CMR, certain of our operations manufacture, or contract to manufacture, products that contain 3TGs that are necessary to the functionality or production of those products. However, we do not directly source 3TGs from mines, smelters or refiners. We believe that, in most cases, we are several steps removed in the supply chain from these market participants, limiting our influence over their sourcing. We must therefore rely on our direct suppliers to provide information regarding the origin of necessary 3TGs that are included in our products, including sources of 3TGs that are supplied to them by sub-tier suppliers.

Conflict Minerals Policy

We are committed to responsible sourcing from our suppliers and each supplier is required to provide information about their Conflict Minerals programs and sourcing practices related to 3TGs by submitting a CMRT (as defined below). At our request, each of our suppliers shall permit us to assess its practices and procedures and shall provide us with any information reasonably requested. In addition, each supplier agrees to provide information to us necessary for us to comply with our Conflict Minerals reporting requirements, including without limitation information under the Responsible Minerals Initiative’s (“RMI”) Conflict Minerals Reporting Template (“CMRT”). Our Conflict Minerals Policy is available on our corporate website at http://emcore.com/our-company/quality-management/supply-chain-management/.

III.         Reasonable Country of Origin Inquiry Information

We have conducted a good faith reasonable country of origin inquiry (“RCOI”) to determine whether the 3TGs included in and necessary to the functionality of our products described under “Product Description” in Section V below originated in the Covered Countries or came from recycled or scrap sources. We engaged a leading 3TGs data management consultant (the “Consultant”) to assist us in conducting this RCOI. We utilized a software-as-a-service (SaaS) platform provided by the Consultant to complete and track supplier communications, as well as allow suppliers to upload completed CMRTs for validation, assessment and management. The platform also provides functionality that meets the OECD Guidance (as defined below) process expectations by evaluating the quality of each supplier response and assigning a health score based on the supplier’s declaration of process engagement. Additionally, the metrics provided in this report, as well as the step-by-step process for supplier engagement and upstream due diligence investigations performed, are managed through this platform.

The use of the CMRT allowed for some elimination of Irrelevant suppliers. We also periodically reviewed the supplier list to ensure that irrelevant or “out of scope” suppliers were removed from the survey process. Our program continues to include automated data validation on all submitted CMRTs. The goal of data validation is to increase the accuracy of submissions and identify any contradictory answers in the CMRT. This data validation is based on questions within the declaration tab of the CMRT which helps to identify areas that require further classification or risk assessment, as well as understand the due diligence efforts of the Tier 1 suppliers. The results of this data validation contribute to the program’s health assessment and are shared with the suppliers to ensure they understand areas that require clarification or improvement.

All submitted forms are accepted and classified as valid or invalid so that data is still retained. Suppliers are contacted in regard to invalid forms and are encouraged to submit a valid form. Suppliers are also provided with guidance on how to correct these validation errors in the form of feedback to their CMRT submission, training courses and direct engagement help through the Consultant’s multilingual Supplier Experience team. Since some suppliers may remain unresponsive to feedback, we track program gaps to account for future improvement opportunities. As of May 14, 2024, there were three invalid supplier submissions that could not be corrected.

The Consultant compared the list of smelters and refiners provided in our suppliers’ responses to the lists of smelters maintained by the RMI and, if a supplier indicated that a facility was certified as conflict-free, confirmed that the facility was listed on RMI’s list of validated conflict free smelters and refiners of 3TGs.

To the extent applicable, our RCOI utilized the same processes and procedures for our due diligence described in Section IV below. This RCOI process included conducting an inquiry of our direct suppliers using a mechanism common in the technology industry: the CMRT version 6.01. Based on the results of our RCOI, we are required to exercise due diligence on the source and chain of custody of the necessary 3TGs contained in our products. Our due diligence efforts are discussed further in Section IV of this CMR.

IV.         Due Diligence Process and Measures Performed

Based on the results of our RCOI, the Consultant engaged by us also assisted us in conducting due diligence on the source and chain of custody of 3TGs in our products. Our due diligence measures are designed to attempt to ascertain the facilities used to process any 3TGs in our products, the country of origin of any 3TGs in our products and the mine(s) or location of origin with the greatest possible specificity.

The design of our due diligence system, its conformity with an internationally-recognized due diligence framework, and a description of the measures we have undertaken to exercise our due diligence, are detailed below.

Our due diligence measures have been designed to conform in all material respects to the internationally- recognized due diligence guidance of the Organization for Economic Co-operation and Development (“OECD”) Due Diligence Guidance for Responsible Supply Chain of Minerals from Conflict- Affected and High-Risk Areas (Second Edition), and its related supplements. This OECD guidance (the “OECD Guidance”) is the only due diligence framework recognized by the Securities and Exchange Commission (“SEC”) to date. The OECD Guidance stresses five main areas of due diligence design, detailed below in IV(a) – (e).

Due diligence requires our necessary reliance on data provided by direct suppliers and third-party audit programs. There is a risk of incomplete or inaccurate data as the process cannot fully be owned by us. However, through continued outreach and process validation, this aligns with industry standards and market expectations for downstream companies’ due diligence.

a.           Establish Strong Company Management Systems

First, we have assigned a Director of Supply Chain Management to (i) manage the 3TGs compliance program, (ii) liaise with the Consultant, (iii) conduct reviews of collected data, and (iv) make decisions regarding the due diligence program, including risk mitigation. Second, we have requested that suppliers of goods incorporated into our products provide us with CMRTs for their products (see below, Section IV(b & c)). Third, our position statement with respect to 3TGs, which is located on our website (https://emcore.com/our-company/quality-management/supply-chain-management/), encourages our suppliers to source responsibly, through their sub-suppliers and on down through their own supply chains. In this position statement, we encourage our suppliers and their sub suppliers to use smelters or refiners ( “SORs”) that are conformant to assessment protocols for conflict-free sourcing wherever possible. Using its Responsible Minerals Assurance Process (“RMAP”) audit program, the RMI, an organization founded by members of the Electronic Industry Citizen Coalition (“EICC”), and the Global e-Sustainability Initiative (“GeSI”), is taking action to address responsible sourcing, using independent third-party audits to identify SORs that have systems in place to assure sourcing of only conflict-free materials.

We also leverage the Consultant’s managed services in order to work with dedicated program specialists who support our Conflict Minerals program. We communicate regularly with the Consultant’s team in order to receive updates on program status. Each member of the Consultant’s customer success team is trained in Conflict Minerals compliance and understands the intricacies of the CMRT and Conflict Minerals reporting, as well as Section 1502 of the Dodd-Frank Act.

Grievance Mechanisms

We established multiple longstanding grievance mechanisms whereby employees and suppliers can report violations of our policies, including with respect to Conflict Minerals. Suppliers and others outside of EMCORE may contact our Conflict Minerals team to communicate with us, including to report grievances. In addition, our employees may anonymously report suspected violations using our anonymous ethics hotline, either via our website at https://emcore.ethicspoint.com or by calling 1-833-626-1524 in the United States, or with the associated country code outside the United States.

Maintain Records

We have adopted a policy to retain relevant Conflict Minerals related documentation for a period of 5 years, including supplier responses to CMRTs, and implemented this policy through the Consultant.  The Consultant stores all of the information and findings from this process in a database that can be audited by internal or external parties.

b.            Identify and Assess Risk in the Supply Chain

To obtain chain of custody declarations from our suppliers, we utilize the CMRT described above. This CMRT is distributed to all of our suppliers, with regular and persistent follow-ups (“Escalations”), to ensure maximum compliance and feedback. The CMRT includes questions on (i) the use and origin of 3TGs in our components, (ii) supplier engagement with their sub-tier suppliers, and (iii) smelters and points of origin of the constituent 3TGs. The Consultant provides suppliers with guidance and requirements to prepare them ahead of time for full compliance in completing the CMRT, our principal information-gathering step on the origin, source and chain of custody of 3TGs contained in components and materials supplied to us. This kit includes materials to educate suppliers about the SEC rule on 3TGs, responsible supply chain management, and a letter that suppliers can use if they need to request information from their sub-tier suppliers.

The CMRT responses are only a first step in our engagement with suppliers. The responses from suppliers are then individually validated and examined both for completeness and any internal inconsistencies between the data they provide. Any of these issues are resolved with our suppliers by phone and email. This follow-up to incomplete or invalid information is described further in Section IV(c), below.

To the extent that a completed response identified a smelter or refiner, the Consultant determined if the smelter had been audited against a standard in conformance with the OECD Guidance, such as the Responsible Minerals Assurance Process (“RMAP”). We do not have a direct relationship with smelters and refiners and do not perform direct audits of these entities within the supply chain. SORs that have completed an RMAP audit are considered to be DRC-conflict free. In cases where the SORs’ due diligence practices have not been audited against the RMAP standard or they are considered non-conformant by RMAP, follow-ups are made to suppliers reporting those facilities. SORs are then assessed for the potential for sourcing risk. We also attempted to ascertain whether the smelter or refiner information provided was specific to the products supplied to us to determine whether the identified SORs are in our supply chain.

Each facility that meets the RMI definition of a smelter or refiner of a 3TGs mineral is assessed according to red flag indicators defined in the OECD Guidance. The Consultant uses numerous factors to determine the level of risk that each smelter poses to the supply chain by identifying red flags. These factors include:

As part of our risk management plan under the OECD Guidance, when facilities with red flags were reported on a CMRT by one of the suppliers surveyed, risk mitigation activities are initiated. Through the Consultant’s software, submissions that include any smelters of concern immediately produce a receipt instructing the supplier to take their own risk mitigation actions, including submission of a product specific CMRT to better identify the connection to products that they supply to us, and escalating up to removal of these red flag smelters from their supply chain. In addition, suppliers are guided to the educational materials on mitigating the risks identified through the data collection process.

c.            Design and Implement a Strategy to Respond to Identified Risks

As outlined above, we have developed processes for Escalations and supplier engagement. This allows us to direct needed questions and follow-up to suppliers based on their varying responses to the CMRT. Escalations are used when, among other issues, suppliers are late in responding, have incomplete information, provide feedback inconsistent with prior responses, or when other issues are identified. An Escalation may include individual written requests for information, conference calls and meetings. Each Escalation is dated and tagged in our data management system for a variety of further actions. These actions might include direct supplier contact through our business channels, changes of scope of the diligence request, reformatting supplier responses into the correct format, time extensions for delayed responses, follow-up with alternative contacts in the supplying organization, or the dropping of outdated component parts from our products list.

d.            Carry Out Independent Third-Party Audit of Supply Chain Due Diligence at Identified Points in the Supply Chain

Because we do not source 3TG directly from SORs, we rely on third parties, including the RMI, to coordinate and conduct third-party audits of these facilities. We utilize the published results of these third-party audits to determine whether a specified smelter or refiner processes 3TG that directly or indirectly finances or benefits armed groups. The Consultant also directly contacts smelters and refiners that are not currently enrolled in the RMAP to encourage their participation and gather information regarding each facilities’ sourcing practices on behalf of its compliance partners.

e.            Report on Supply Chain Due Diligence

This CMR is available under “Quality Management” and “Supply Chain Management” in the “Company” section of our website at https://emcore.com/our-company/quality-management/supply-chain-management/. We will file a Form SD (and CMRs, as necessary) with the SEC on an annual basis, pursuant to the Rule.

V.            Due Diligence Results

Supply chain outreach is required to identify the upstream sources of origin of tin, tantalum, tungsten and gold. Following the industry standard process, CMRTs are sent to and requested from Tier 1 suppliers, who are expected to follow this process until the smelter and refiner sources are identified. As of May 14, 2024, there were 368 suppliers in scope of the Conflict Minerals program and 261 provided a completed CMRT. Our total response rate for this reporting year was 71%.

b.            Upstream Data Transparency

All smelters and refiners listed by suppliers in completed CMRTs, which appear on the RMI-maintained smelters list, are attached in Appendix A. As is a common practice when requests are sent upstream in the supply chain, those who purchase materials from smelters may not be able to discern exactly which companies’ product lines the materials may end up in. As a result, those providing the smelters and refiners have the practice of listing all smelters and refiners they may purchase from within the reporting period. Therefore, the SORs (as sources) listed in Appendix A are likely to be more comprehensive than the list of SORs which actually processed the 3TGs contained in our products.

Although the potential for over-reporting is understood, we have taken measures to validate these sources of origin against validated audit programs intended to verify the material types and mine sources of origin for these smelters and refiners. Suppliers that identified these specific SORs of concern on their CMRT were contacted in accordance with the OECD Guidance to inform them of the potential for risk, and to evaluate whether or not these SORs could be connected to our products. The suppliers were asked to complete a user-defined or product-level CMRT specific to the materials, products or piece parts purchased by us, rather than a company-level CMRT, to better identify the connection to products that they supply to us. Other suppliers were evaluated internally to determine if they were in fact still active suppliers. If not, they were removed from the scope of data collection.

c.            Countries of Origin

Appendix B includes an aggregated list of countries of origin from which the reported facilities collectively source 3TGs, based on information provided through the CMRT data collection process, from direct smelter outreach and the RMAP. As mentioned in the above section, it is understood that many responses may provide more data than can be directly linked to products sold by us. Therefore, Appendix B may contain more countries than those that our products are being sourced from. We have taken, or intend to take, the following steps to improve the due diligence conducted to further mitigate any risk that the necessary 3TGs in our products could benefit armed groups in the DRC or adjoining countries:

d.            Smelter & Refiner Risk Evaluation

Understanding the risks associated with the smelters and refiners potentially providing material into our supply chain is an important part of the due diligence process. Through the Consultant, comprehensive and ongoing analysis is conducted by the Consultant’s smelter library manager to assess sourcing risk. This information is used to:

The following risk categories are used for smelter evaluation and risk determination:

VI.           Product Description; Processing Facilities

Product Description – Our business is of a broad portfolio of compound semiconductor-based products for the aerospace and defense markets and, previously and historically, the Broadband market.

· Inertial Navigation Products

These include products ranging from tactical to navigational grade gyros (including fiber optics gyroscopes, ring laser gyroscopes and Quartz MEMS gyroscopes), accelerometers, IMU and INS that have broad application within the aerospace and defense markets, including guidance, navigation, control, pointing, and stabilization applications in commercial and military aircraft, unmanned aerial systems, unmanned autonomous vehicles, land vehicles, precision guided weapons, and industrial and marine.

· Defense Optoelectronics Products

These included transmitters, receivers, subsystems, and systems that transport ultra-broadband, wideband radio frequency and microwave signals between satellite hub equipment and antenna dishes, with applications including satellite antenna remoting and signal distribution, inter- and intra-facility links, site diversity systems, high-performance supertrunking links, electronic warfare systems, and radar testing. These product families were sold in connection with the sale of our Defense Optoelectronics business to Ortel LLC in October 2023.

· Cable TV Lasers and Transmitters Products

These included forward and return-path 1310 nm and 1550 nm distributed feedback analog lasers, optical receivers optimized for CATV, data over cable service interface specification 3.1 and wireless, broadband photodiodes used in forward-and return-path broadband, subassembly components, analog fiber-optic transmitters, quadrature amplitude modulation transmitters, and CATV fiber amplifiers. These product families were sold in connection with the sale of our CATV business to Ortel LLC in October 2023.

· Optical Sensing Products

These included narrow linewidth 1310 and 1550 nm DFB lasers optimized for Light Detecting and Ranging (“LiDAR”) and distributed sensing applications and a continuous wavelength, coherent optical source laser for frequency modulation continuous wavelength (“FMCW”) sensing LiDAR applications. These product families were sold in connection with the sale of our optical sensing business to Ortel LLC in October 2023.

· Data Center Chips

These included custom chip devices tailored to specific customer requirements and applications for linear, coherent laser sources. These product families were sold in connection with the sale of our Chips business to HieFo Corporation in April 2024.

Processing Facilities – Based on our RCOI or due diligence process, as applicable, and the information received from our suppliers, the facilities listed on Appendix A were identified by our suppliers as the smelters and refiners that processed the 3TG present in and necessary to the functionality of products manufactured by us in the calendar year ended December 31, 2023.

Due to our position in the supply chain, which we discuss above, we rely on our suppliers for accurate smelter and refiner information. Our due diligence measures cannot provide adequate certainty regarding the source and chain of custody of the necessary 3TGs contained in our in-scope products. The information from our suppliers is still evolving and may contain company level declarations. As such, this smelter list is presented in good faith as the best information we have to date. This list may contain smelters that are not in our supply chain and there may be other smelters not yet identified in our due diligence process. We will continue to update the list as our information and the relevant third-party data from RMI, LBMA, and RJC improves.

VII.         Future Due Diligence

We will continue to communicate our expectations and information requirements to our direct suppliers. Over time, we anticipate that the amount of information globally on the traceability and sourcing of the necessary 3TGs in our products will increase and improve our knowledge. We will continue to make inquiries to our direct suppliers and undertake additional risk assessments when potentially relevant changes in facts or circumstances are identified. If we become aware of a supplier whose due diligence needs improvement, we may continue the trade relationship while that supplier improves its compliance program. We expect our suppliers to take similar measures with their suppliers to ensure alignment throughout the supply chain.

In addition to those above, we will undertake the following steps during the next compliance period:

Appendix A

Smelter and Refiner Information

*      The information in this column is based on smelter or refiner information made publicly available by RMI as of May 14, 2024. The terms used have the following meanings:

**      Certain suppliers reported the presence of this entity that was sanctioned by the United States Department of Treasury, Office of Foreign Assets Control on March 17, 2022, specifically, CID003185 - African Gold Refinery (“AGR”). Because of the over-reporting nature of the industry CMRT information collection process, and the nature of the supply chains and goods, we are unable to confirm AGR was or is active in our supply chain.

The information provided in this Appendix is based on the information collected from our suppliers and is provided in good faith. We will continue to update it as our due diligence process and third-party data evolves.