10-Q 1 axti-20230331x10q.htm 10-Q
8830008830000001051627--12-312023Q1falseAXT INCDE88300088300088300043586000435540000000.8550.8550.8550.7500.5850.460.250.400http://fasb.org/us-gaap/2021-01-31#AccruedLiabilitiesCurrent180000000010516272016-01-012022-12-3100010516272015-01-012015-12-310001051627us-gaap:SecuredDebtMemberaxti:BankOfChinaMember2023-01-310001051627us-gaap:SecuredDebtMemberaxti:BankOfBeijingMember2022-12-310001051627us-gaap:SecuredDebtMemberaxti:BankOfBeijingMember2022-05-310001051627us-gaap:SecuredDebtMemberaxti:BankOfBeijingMember2022-04-300001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberaxti:LoanFromRelatedPartyMember2022-05-012022-05-3100010516272014-10-270001051627us-gaap:RetainedEarningsMember2023-03-310001051627us-gaap:PreferredStockMember2023-03-310001051627us-gaap:ParentMember2023-03-310001051627us-gaap:NoncontrollingInterestMember2023-03-310001051627us-gaap:CommonStockMember2023-03-310001051627us-gaap:AdditionalPaidInCapitalMember2023-03-310001051627us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310001051627us-gaap:RetainedEarningsMember2022-12-310001051627us-gaap:PreferredStockMember2022-12-310001051627us-gaap:ParentMember2022-12-310001051627us-gaap:NoncontrollingInterestMember2022-12-310001051627us-gaap:CommonStockMember2022-12-310001051627us-gaap:AdditionalPaidInCapitalMember2022-12-310001051627us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001051627us-gaap:RetainedEarningsMember2022-03-310001051627us-gaap:PreferredStockMember2022-03-310001051627us-gaap:ParentMember2022-03-310001051627us-gaap:NoncontrollingInterestMember2022-03-310001051627us-gaap:CommonStockMember2022-03-310001051627us-gaap:AdditionalPaidInCapitalMember2022-03-310001051627us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310001051627us-gaap:RetainedEarningsMember2021-12-310001051627us-gaap:PreferredStockMember2021-12-310001051627us-gaap:ParentMember2021-12-310001051627us-gaap:NoncontrollingInterestMember2021-12-310001051627us-gaap:CommonStockMember2021-12-310001051627us-gaap:AdditionalPaidInCapitalMember2021-12-310001051627us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.8PercentSeptember2023DueDateMemberaxti:NingboBankMember2022-12-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.8PercentJune2023DueDateMemberaxti:NingboBankMember2022-12-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.8PercentAugust2023DueDateMemberaxti:NingboBankMember2022-12-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.6PercentJanuary2022DueDateMemberaxti:BankOfChinaMember2022-12-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.5PercentNovember2023DueDateMemberaxti:NingboBankMember2022-12-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.5PercentDecember2023DueDateMemberaxti:NingboBankMember2022-12-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.4PercentSeptember2023DueDateMemberaxti:IndustrialBankMember2022-12-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.4PercentJune2023DueDateMemberaxti:IndustrialBankMember2022-12-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.3PercentSeptember2023DueDateMemberaxti:NanjingBankMember2022-12-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.3PercentNovember2023DueDateMemberaxti:NanjingBankMember2022-12-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.2PercentMay2023DueDateMemberaxti:BankOfBeijingMember2022-12-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.2PercentApril2023DueDateMemberaxti:BankOfChinaMember2022-12-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith3.3PercentDecember2023DueDateMemberaxti:BankOfCommunicationsMember2022-12-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith3.2PercentJuly2023DueDateMemberaxti:IndustrialAndCommercialBankOfChinaMember2022-12-310001051627axti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCoMemberaxti:BankLoanWith4.8PercentMarch2023DueDateMemberaxti:NingboBankMember2022-12-310001051627axti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCoMemberaxti:BankLoanWith4.8PercentJune2023DueDateTwoMemberaxti:NingboBankMember2022-12-310001051627axti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCoMemberaxti:BankLoanWith3.6PercentMay2023DueDateMemberaxti:NingboBankMember2022-12-310001051627us-gaap:EmployeeStockOptionMember2022-01-012022-12-310001051627us-gaap:EmployeeStockOptionMember2022-12-310001051627us-gaap:PerformanceSharesMember2023-03-012023-03-310001051627us-gaap:PerformanceSharesMember2022-02-012022-02-280001051627srt:ChiefFinancialOfficerMemberus-gaap:PerformanceSharesMember2023-03-152023-03-150001051627srt:ChiefExecutiveOfficerMemberus-gaap:PerformanceSharesMember2023-03-152023-03-150001051627srt:ChiefFinancialOfficerMemberus-gaap:PerformanceSharesMember2022-02-152022-02-150001051627srt:ChiefExecutiveOfficerMemberus-gaap:PerformanceSharesMember2022-02-152022-02-150001051627us-gaap:EmployeeStockOptionMember2022-01-012022-03-310001051627srt:ChiefFinancialOfficerMemberus-gaap:PerformanceSharesMember2021-02-172021-02-170001051627srt:ChiefExecutiveOfficerMemberus-gaap:PerformanceSharesMember2021-02-172021-02-170001051627us-gaap:RestrictedStockMember2022-12-310001051627us-gaap:PerformanceSharesMember2022-12-310001051627us-gaap:RestrictedStockMember2023-01-012023-03-310001051627us-gaap:PerformanceSharesMemberus-gaap:ShareBasedCompensationAwardTrancheOneMember2023-01-012023-03-310001051627srt:ReportableGeographicalComponentsMembersrt:NorthAmericaMember2023-01-012023-03-310001051627srt:ReportableGeographicalComponentsMembersrt:EuropeMember2023-01-012023-03-310001051627srt:ReportableGeographicalComponentsMembercountry:TW2023-01-012023-03-310001051627srt:ReportableGeographicalComponentsMembercountry:JP2023-01-012023-03-310001051627srt:ReportableGeographicalComponentsMembercountry:CN2023-01-012023-03-310001051627srt:ReportableGeographicalComponentsMemberaxti:AsiaPacificExcludingJapanAndTaiwanMember2023-01-012023-03-310001051627srt:ReportableGeographicalComponentsMember2023-01-012023-03-310001051627axti:SubstratesMember2023-01-012023-03-310001051627axti:RawMaterialsAndOthersMember2023-01-012023-03-310001051627srt:ReportableGeographicalComponentsMembersrt:NorthAmericaMember2022-01-012022-03-310001051627srt:ReportableGeographicalComponentsMembersrt:EuropeMember2022-01-012022-03-310001051627srt:ReportableGeographicalComponentsMembercountry:TW2022-01-012022-03-310001051627srt:ReportableGeographicalComponentsMembercountry:JP2022-01-012022-03-310001051627srt:ReportableGeographicalComponentsMembercountry:CN2022-01-012022-03-310001051627srt:ReportableGeographicalComponentsMemberaxti:AsiaPacificExcludingJapanAndTaiwanMember2022-01-012022-03-310001051627srt:ReportableGeographicalComponentsMember2022-01-012022-03-310001051627axti:SubstratesMember2022-01-012022-03-310001051627axti:RawMaterialsAndOthersMember2022-01-012022-03-310001051627axti:ChaoyangKaimeiQuartzCoLtdMemberus-gaap:PrepaidExpensesAndOtherCurrentAssetsMemberaxti:ChaoyangLimeiSemiconductorTechnologyCo.Ltd.Member2023-01-012023-03-310001051627axti:ChaoyangKaimeiQuartzCoLtdMemberaxti:ChaoyangLimeiSemiconductorTechnologyCo.Ltd.Member2022-09-012022-09-300001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberaxti:LoanFromRelatedPartyMemberaxti:BeijingTongmeiXtalTechnologyMember2021-12-012021-12-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberaxti:LoanFromRelatedPartyMemberaxti:MinorityInvestorMember2021-10-012021-10-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberaxti:LoanFromRelatedPartyMemberaxti:MinorityInvestorMember2021-09-012021-09-300001051627srt:NorthAmericaMember2023-03-310001051627country:CN2023-03-310001051627srt:NorthAmericaMember2022-12-310001051627country:CN2022-12-310001051627us-gaap:ConstructionInProgressMember2023-03-310001051627axti:ConstructionInProgressOtherConsolidatedSubsidiariesMember2023-03-310001051627axti:ConstructionInProgressManufacturingEquipmentPurchasesMember2023-03-310001051627axti:ConstructionInProgressDingxinAndKazuoLocationsMember2023-03-310001051627us-gaap:ConstructionInProgressMember2022-12-310001051627axti:ConstructionInProgressOtherConsolidatedSubsidiariesMember2022-12-310001051627axti:ConstructionInProgressManufacturingEquipmentPurchasesMember2022-12-310001051627axti:ConstructionInProgressDingxinAndKazuoLocationsMember2022-12-310001051627us-gaap:SecuredDebtMemberaxti:BankOfChinaMember2023-01-012023-01-310001051627us-gaap:SecuredDebtMemberaxti:BankOfBeijingMember2023-01-012023-01-310001051627axti:ChaoyangKaimeiQuartzCoLtdMemberaxti:ChaoyangLimeiSemiconductorTechnologyCo.Ltd.Member2023-01-012023-01-310001051627axti:XiaoyiXinganGalliumCo.Ltd.Memberus-gaap:SubsequentEventMember2023-04-012023-04-300001051627axti:BeijingJiyaSemiconductorMaterialCo.LtdInvestmentMemberus-gaap:SubsequentEventMember2023-04-012023-04-300001051627axti:BeijingJiyaSemiconductorMaterialCo.LtdInvestmentMember2022-08-012022-08-310001051627axti:XiaoyiXinganGalliumCo.Ltd.Member2022-07-012022-07-310001051627axti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCo.LtdInvestmentMember2022-06-012022-06-300001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMember2021-05-012021-05-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMember2021-02-012021-02-280001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberaxti:LoanToRelatedPartyMemberaxti:BeijingTongmeiXtalTechnologyMember2022-05-012022-05-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberaxti:LoanFromRelatedPartyMemberaxti:MinorityInvestorMember2022-05-012022-05-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberaxti:LoanToRelatedPartyMemberaxti:BeijingTongmeiXtalTechnologyMember2022-04-012022-04-300001051627us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310001051627us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberaxti:LoanFromRelatedPartyMemberaxti:MinorityInvestorMember2022-04-012022-04-300001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberaxti:LoanFromRelatedPartyMemberaxti:BeijingTongmeiXtalTechnologyMember2022-04-012022-04-300001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberaxti:LoanFromRelatedPartyMember2022-04-012022-04-300001051627axti:ChaoyangXinmeiMember2022-04-012022-04-300001051627axti:ChaoYangShuoMeiHighPuritySemiconductorMaterialsCoLtdMember2023-01-012023-01-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberaxti:LoanFromRelatedPartyMemberaxti:BeijingTongmeiXtalTechnologyMember2022-05-012022-05-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberaxti:BeijingTongmeiXtalTechnologyMemberaxti:LoanFromRelatedPartyMember2022-05-012022-05-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberaxti:LoanFromRelatedPartyMemberaxti:BeijingTongmeiXtalTechnologyMember2022-01-012022-01-310001051627axti:NanjingJinMeiGalliumCo.LtdInvestmentMemberaxti:NanjingJinMeiGalliumCo.LtdInvestmentMember2023-03-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberaxti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMember2023-03-310001051627axti:ChaoYangShuoMeiHighPuritySemiconductorMaterialsCoLtdMemberaxti:ChaoYangShuoMeiHighPuritySemiconductorMaterialsCoLtdMember2023-03-310001051627axti:ChaoyangJinmeiGalliumCo.LtdMemberaxti:ChaoyangJinmeiGalliumCo.LtdMember2023-03-310001051627axti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCo.LtdInvestmentMemberaxti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCo.LtdInvestmentMember2023-03-310001051627axti:BeijingTongmeiXtalTechnologyMember2021-06-300001051627axti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCo.LtdInvestmentMember2020-11-300001051627axti:ChaoyangJinmeiGalliumCo.LtdMemberaxti:ChaoyangJinmeiGalliumCo.LtdMember2020-08-310001051627axti:ChaoyangJinmeiGalliumCo.LtdMemberaxti:ChaoyangJinmeiGalliumCo.LtdMember2020-07-310001051627axti:BeijingTongmeiXtalTechnologyMember2023-03-310001051627axti:NanjingJinMeiGalliumCo.LtdInvestmentMember2020-12-310001051627axti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCo.LtdInvestmentMember2020-12-310001051627axti:BankOfBeijingMember2022-05-3100010516272020-05-3100010516272020-05-012020-05-310001051627axti:BeijingTongmeiXtalTechnologyMember2020-12-310001051627axti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCo.LtdInvestmentMember2020-12-012020-12-310001051627us-gaap:OtherAssetsMember2023-03-310001051627us-gaap:OtherAssetsMember2022-12-310001051627axti:XiaoyiXinganGalliumCo.Ltd.Member2022-12-310001051627axti:EmeishanJiaMeiHighPurityMetalsCo.LtdInvestmentMember2022-12-310001051627axti:DonghaiCountyDongfangHighPurityElectronicMaterialsCo.LtdInvestmentMember2022-12-310001051627axti:ChaoyangKaimeiQuartzCoLtdMember2022-12-310001051627axti:BeijingJiyaSemiconductorMaterialCo.LtdInvestmentMember2022-12-310001051627axti:NanjingJinMeiGalliumCo.LtdInvestmentMemberaxti:EmeishanJiaMeiHighPurityMetalsCo.LtdInvestmentMember2023-03-310001051627axti:NanjingJinMeiGalliumCo.LtdInvestmentMemberaxti:BeijingJiyaSemiconductorMaterialCo.LtdInvestmentMember2023-03-310001051627axti:XiaoyiXinganGalliumCo.Ltd.Member2023-03-310001051627axti:EmeishanJiaMeiHighPurityMetalsCo.LtdInvestmentMember2023-03-310001051627axti:DonghaiCountyDongfangHighPurityElectronicMaterialsCo.LtdInvestmentMember2023-03-310001051627axti:ChaoyangKaimeiQuartzCoLtdMember2023-03-310001051627axti:BeijingJiyaSemiconductorMaterialCo.LtdInvestmentMember2023-03-310001051627axti:ChaoYangShuoMeiHighPuritySemiconductorMaterialsCoLtdMember2023-01-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMember2022-07-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMember2022-05-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMember2022-04-300001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMember2022-01-310001051627us-gaap:RestrictedStockMember2023-03-310001051627us-gaap:EmployeeStockOptionMember2023-03-310001051627us-gaap:PerformanceSharesMember2023-03-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberaxti:LoanFromRelatedPartyMemberaxti:BeijingTongmeiXtalTechnologyMember2022-01-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberaxti:LoanFromRelatedPartyMemberaxti:MinorityInvestorMember2021-12-310001051627us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMemberaxti:AxtTongmeiInc.Member2021-06-300001051627us-gaap:CorporateBondSecuritiesMember2023-03-310001051627us-gaap:CertificatesOfDepositMember2023-03-310001051627us-gaap:CorporateBondSecuritiesMember2022-12-310001051627us-gaap:CertificatesOfDepositMember2022-12-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.8PercentSeptember2023DueDateMemberaxti:NingboBankMember2023-03-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.8PercentJune2023DueDateMemberaxti:NingboBankMember2023-03-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.8PercentAugust2023DueDateMemberaxti:NingboBankMember2023-03-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.6PercentJanuary2022DueDateMemberaxti:BankOfChinaMember2023-03-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.5PercentNovember2023DueDateMemberaxti:NingboBankMember2023-03-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.5PercentJanuary2024DueDateMemberaxti:NingboBankMember2023-03-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.5PercentDecember2023DueDateMemberaxti:NingboBankMember2023-03-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.4PercentSeptember2023DueDateMemberaxti:IndustrialBankMember2023-03-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.4PercentJune2023DueDateMemberaxti:IndustrialBankMember2023-03-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.3PercentSeptember2023DueDateMemberaxti:NanjingBankMember2023-03-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.3PercentNovember2023DueDateMemberaxti:NanjingBankMember2023-03-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.2PercentOneJanuary2024DueDateThreeMemberaxti:BankOfBeijingMember2023-03-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.2PercentMay2023DueDateMemberaxti:BankOfBeijingMember2023-03-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith4.2PercentApril2023DueDateMemberaxti:BankOfChinaMember2023-03-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith3.7PercentJanuary2024DueDateMemberaxti:ChinaMerchantsBankMember2023-03-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith3.5PercentJanuary2024DueDateTwoMemberaxti:BankOfChinaMember2023-03-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith3.5PercentJanuary2024DueDateOneMemberaxti:BankOfChinaMember2023-03-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith3.3PercentJanuary2024DueDateTwoMemberaxti:BankOfCommunicationsMember2023-03-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith3.3PercentDecember2023DueDateMemberaxti:BankOfCommunicationsMember2023-03-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith3.2PercentJuly2023DueDateMemberaxti:IndustrialAndCommercialBankOfChinaMember2023-03-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith2.8PercentOneMarch2024DueDateOneMemberaxti:BankOfChinaMember2023-03-310001051627axti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCoMemberaxti:BankLoanWith4.8PercentMarch2023DueDateMemberaxti:NingboBankMember2023-03-310001051627axti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCoMemberaxti:BankLoanWith4.8PercentJune2023DueDateTwoMemberaxti:NingboBankMember2023-03-310001051627axti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCoMemberaxti:BankLoanWith3.6PercentSeptember2023DueDateMemberaxti:NingboBankMember2023-03-310001051627axti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCoMemberaxti:BankLoanWith3.6PercentMay2023DueDateMemberaxti:NingboBankMember2023-03-310001051627axti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCoMemberaxti:BankLoanWith2.8PercentDecember2023DueDateMemberaxti:IndustrialAndCommercialBankOfChinaMember2023-03-310001051627axti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCoMemberaxti:BankLoanWith2.4PercentJanuary2024DueDateMemberaxti:BankOfChinaMember2023-03-310001051627axti:ChaoYangJinMeiGalliumLtd.Memberaxti:ChaoYangShuoMeiHighPuritySemiconductorMaterialsCoLtdMember2023-01-310001051627axti:MinorityInvestorsMember2023-01-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith3.3PercentJanuary2023DueDateOneMemberaxti:BankOfCommunicationsMember2022-12-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:BankLoanWith2.7PercentMarch2023DueDateMemberaxti:BankOfChinaMember2022-12-310001051627axti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCoMemberaxti:BankLoanWith2.8PercentDecember2023DueDateMemberaxti:IndustrialAndCommercialBankOfChinaMember2022-12-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberaxti:BeijingTongmeiXtalTechnologyMember2022-01-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberaxti:BeijingTongmeiXtalTechnologyMember2021-12-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberaxti:LoanFromRelatedPartyMemberaxti:MinorityInvestorMember2021-10-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberaxti:LoanFromRelatedPartyMemberaxti:MinorityInvestorMember2021-09-300001051627axti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCo.LtdInvestmentMember2020-01-012020-12-310001051627axti:BeijingTongmeiXtalTechnologyMember2021-01-012021-01-310001051627axti:TopFiveMajorCustomersMemberus-gaap:SalesMemberus-gaap:CustomerConcentrationRiskMember2023-01-012023-03-310001051627axti:MajorCustomerOneMemberus-gaap:SalesMemberus-gaap:CustomerConcentrationRiskMember2023-01-012023-03-310001051627axti:MajorCustomerOneMemberus-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMember2023-01-012023-03-310001051627axti:MajorCustomerTwoMemberus-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMember2022-01-012022-12-310001051627axti:TopFiveMajorCustomersMemberus-gaap:SalesMemberus-gaap:CustomerConcentrationRiskMember2022-01-012022-03-310001051627axti:MajorCustomerOneMemberus-gaap:SalesMemberus-gaap:CustomerConcentrationRiskMember2022-01-012022-03-3100010516272022-03-3100010516272021-12-310001051627us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CertificatesOfDepositMember2023-03-310001051627us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CertificatesOfDepositMember2023-03-310001051627us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CertificatesOfDepositMember2022-12-310001051627us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CertificatesOfDepositMember2022-12-310001051627us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateBondSecuritiesMember2023-03-310001051627us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateBondSecuritiesMember2023-03-310001051627us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateBondSecuritiesMember2022-12-310001051627us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateBondSecuritiesMember2022-12-310001051627us-gaap:InvestmentsMember2023-03-310001051627us-gaap:CorporateBondSecuritiesMember2023-03-310001051627us-gaap:CertificatesOfDepositMember2023-03-310001051627us-gaap:InvestmentsMember2022-12-310001051627us-gaap:CorporateBondSecuritiesMember2022-12-310001051627us-gaap:CertificatesOfDepositMember2022-12-310001051627us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-03-310001051627us-gaap:FairValueMeasurementsRecurringMember2023-03-310001051627us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001051627us-gaap:FairValueMeasurementsRecurringMember2022-12-310001051627us-gaap:RestrictedStockMember2023-01-012023-03-310001051627us-gaap:EmployeeStockOptionMember2023-01-012023-03-310001051627us-gaap:RestrictedStockMember2022-01-012022-03-310001051627us-gaap:EmployeeStockOptionMember2022-01-012022-03-310001051627us-gaap:SellingGeneralAndAdministrativeExpensesMember2023-01-012023-03-310001051627us-gaap:ResearchAndDevelopmentExpenseMember2023-01-012023-03-310001051627us-gaap:CostOfSalesMember2023-01-012023-03-310001051627us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-01-012022-03-310001051627us-gaap:ResearchAndDevelopmentExpenseMember2022-01-012022-03-310001051627us-gaap:CostOfSalesMember2022-01-012022-03-310001051627us-gaap:MachineryAndEquipmentMember2023-03-310001051627us-gaap:LeaseholdImprovementsMember2023-03-310001051627us-gaap:BuildingMember2023-03-310001051627us-gaap:MachineryAndEquipmentMember2022-12-310001051627us-gaap:LeaseholdImprovementsMember2022-12-310001051627us-gaap:BuildingMember2022-12-310001051627axti:ChaoYangTongmeiXtalTechnologyCoLtdMemberaxti:AccountsPayableBalanceSheetLocationMemberaxti:RawMaterialsPurchasesFromRelatedPartyMemberaxti:DonghaiCountyDongfangHighPurityElectronicMaterialsCoLtdMember2023-03-310001051627axti:ChaoYangTongmeiXtalTechnologyCoLtdMemberaxti:AccountsPayableBalanceSheetLocationMemberaxti:RawMaterialsPurchasesFromRelatedPartyMemberaxti:DonghaiCountyDongfangHighPurityElectronicMaterialsCoLtdMember2022-12-3100010516272023-05-010001051627axti:ChaoYangShuoMeiHighPuritySemiconductorMaterialsCoLtdMember2022-04-300001051627axti:ChaoyangKaimeiQuartzCoLtdMember2022-04-300001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMember2021-05-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMember2021-02-280001051627axti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCoMemberaxti:KazuoMember2023-03-310001051627axti:KazuoMember2023-03-310001051627axti:DingxingMember2023-03-310001051627axti:CrossLicenseAgreementMember2023-01-012023-03-310001051627us-gaap:EmployeeStockOptionMember2023-01-012023-03-310001051627us-gaap:PerformanceSharesMember2023-03-150001051627axti:ScenarioPerformanceMinimumFinancialMetricMembersrt:ChiefFinancialOfficerMemberus-gaap:PerformanceSharesMember2023-03-152023-03-150001051627axti:ScenarioPerformanceMinimumFinancialMetricMembersrt:ChiefExecutiveOfficerMemberus-gaap:PerformanceSharesMember2023-03-152023-03-150001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberus-gaap:SubsequentEventMember2023-04-012023-04-300001051627us-gaap:PerformanceSharesMember2023-01-012023-03-310001051627us-gaap:PerformanceSharesMember2021-10-012021-12-310001051627axti:ChaoyangJinmeiGalliumCo.LtdMemberaxti:ChaoyangJinmeiGalliumCo.LtdMember2020-08-012020-08-310001051627axti:EmeishanJiaMeiHighPurityMetalsCo.LtdInvestmentMemberus-gaap:SubsequentEventMember2023-05-012023-05-310001051627axti:BeijingTongmeiXtalTechnologyMember2020-01-012020-12-310001051627axti:BeijingTongmeiXtalTechnologyMember2023-01-012023-03-310001051627axti:BeijingTongmeiXtalTechnologyMember2021-01-252021-01-250001051627axti:NanjingJinMeiGalliumCoLtdMemberaxti:NanjingJinMeiGalliumCo.LtdInvestmentMember2020-01-012020-12-310001051627axti:NanjingJinMeiGalliumCoLtdMemberaxti:BeijingTongmeiXtalTechnologyMember2020-01-012020-12-310001051627axti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCoLtdMemberaxti:BeijingTongmeiXtalTechnologyMember2020-01-012020-12-310001051627us-gaap:PerformanceSharesMember2023-02-140001051627axti:NanjingJinMeiGalliumCoLtdMember2023-01-012023-03-310001051627axti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCoLtdMember2020-01-012020-12-310001051627axti:TopFiveMajorCustomersMemberus-gaap:SalesMember2023-01-012023-03-310001051627us-gaap:SalesMember2023-01-012023-03-310001051627us-gaap:AccountsReceivableMember2023-01-012023-03-310001051627axti:MajorCustomerTwoMemberus-gaap:AccountsReceivableMember2022-01-012022-12-310001051627axti:TopFiveMajorCustomersMemberus-gaap:SalesMember2022-01-012022-03-310001051627axti:MajorCustomerOneMemberus-gaap:SalesMember2022-01-012022-03-310001051627us-gaap:RetainedEarningsMember2023-01-012023-03-310001051627us-gaap:NoncontrollingInterestMember2023-01-012023-03-310001051627us-gaap:RetainedEarningsMember2022-01-012022-03-310001051627axti:BeijingTongmeiXtalTechnologyMemberaxti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMember2022-07-012022-07-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMember2022-07-012022-07-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberaxti:ChaoYangShuoMeiHighPuritySemiconductorMaterialsCoLtdMember2022-08-012022-08-310001051627axti:ChaoYangShuoMeiHighPuritySemiconductorMaterialsCoLtdMember2022-08-012022-08-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMemberaxti:ChaoYangShuoMeiHighPuritySemiconductorMaterialsCoLtdMember2022-07-012022-07-310001051627axti:ChaoyangKaimeiQuartzCoLtdMember2022-07-012022-07-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMember2021-05-012021-05-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMember2021-02-012021-02-280001051627srt:SubsidiariesMember2023-03-310001051627axti:NanjingJinMeiGalliumCo.LtdInvestmentMember2023-03-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMember2023-03-310001051627axti:ChaoYangShuoMeiHighPuritySemiconductorMaterialsCoLtdMember2023-03-310001051627axti:ChaoyangJinmeiGalliumCo.LtdMember2023-03-310001051627axti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCo.LtdInvestmentMember2023-03-310001051627srt:SubsidiariesMember2022-12-310001051627axti:NanjingJinMeiGalliumCo.LtdInvestmentMember2022-12-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMember2022-12-310001051627axti:ChaoYangShuoMeiHighPuritySemiconductorMaterialsCoLtdMember2022-12-310001051627axti:ChaoyangJinmeiGalliumCo.LtdMember2022-12-310001051627axti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCo.LtdInvestmentMember2022-12-310001051627axti:BeijingTongmeiXtalTechnologyMember2021-01-250001051627us-gaap:NoncontrollingInterestMember2022-01-012022-03-310001051627axti:BeijingTongmeiXtalTechnologyMember2021-06-012021-06-300001051627srt:MaximumMember2023-01-012023-03-310001051627axti:FiveMinorityInvestmentsMember2023-01-012023-03-310001051627axti:FiveMinorityInvestmentsMember2022-01-012022-03-3100010516272023-03-3100010516272022-12-3100010516272022-01-012022-12-310001051627us-gaap:PerformanceSharesMember2023-02-142023-02-140001051627us-gaap:PerformanceSharesMember2022-03-142022-03-140001051627us-gaap:ParentMember2023-01-012023-03-310001051627us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-3100010516272023-01-012023-03-310001051627us-gaap:ParentMember2022-01-012022-03-310001051627us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-3100010516272022-01-012022-03-310001051627axti:BeijingBoyuSemiconductorVesselCraftworkTechnologyCo.LtdInvestmentMember2020-12-31xbrli:pureiso4217:USDaxti:companyaxti:customeraxti:employeexbrli:sharesutr:sqftiso4217:USDxbrli:sharesaxti:segment

0

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended March 31, 2023

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 000-24085

AXT, INC.

(Exact name of registrant as specified in its charter)

DELAWARE

94-3031310

(State or other jurisdiction of
Incorporation or organization)

(I.R.S. Employer
Identification No.)

4281 Technology Drive, Fremont, California 94538

(Address of principal executive offices) (Zip code)

(510) 438-4700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

Common Stock, $0.001 par value

AXTI

The NASDAQ Stock Market LLC

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  No 

Indicate by check-mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  No 

Indicate by check-mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer 

Non-accelerated filer

Smaller reporting company 

Emerging growth company 

If an emerging growth company, indicate by check-mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check-mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES  NO 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class

Outstanding at May 1, 2023

Common Stock, $0.001 par value

43,586,892

AXT, INC.

FORM 10-Q

TABLE OF CONTENTS

Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022

3

Condensed Consolidated Statements of Operations for the three months ended March 31,2023 and 2022

4

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2023 and 2022

5

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022

6

Notes To Condensed Consolidated Financial Statements

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

30

Item 3. Quantitative and Qualitative Disclosures About Market Risk

48

Item 4. Controls and Procedures

51

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

52

Item 1A. Risk Factors

52

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

78

Item 3. Defaults upon Senior Securities

78

Item 4. Mine Safety Disclosures

78

Item 5. Other Information

78

Item 6. Exhibits

79

Signatures

81

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

AXT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except per share data)

    

March 31, 

    

December 31, 

 

2023

2022

ASSETS

Current assets:

Cash and cash equivalents

$

35,436

$

34,948

Restricted cash

9,457

6,400

Short-term investments

 

7,016

 

9,339

Accounts receivable, net of allowances of $307 and $307 as of March 31, 2023 and December 31, 2022

 

21,345

 

29,252

Inventories

 

91,678

 

89,629

Prepaid expenses and other current assets

 

12,070

 

13,977

Total current assets

 

177,002

 

183,545

Long-term investments

 

1,642

 

2,118

Property, plant and equipment, net

 

162,524

 

161,017

Operating lease right-of-use assets

1,659

1,761

Other assets

 

23,796

 

21,631

Total assets

$

366,623

$

370,072

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

6,766

$

10,084

Accrued liabilities

 

13,201

 

18,164

Bank loans

52,821

47,078

Total current liabilities

 

72,788

 

75,326

Noncurrent operating lease liabilities

1,275

1,322

Other long-term liabilities

 

4,222

 

3,678

Total liabilities

 

78,285

 

80,326

Commitments and contingencies (Note 16)

Redeemable noncontrolling interests (Note 18)

44,920

44,846

Stockholders’ equity:

Preferred stock Series A, $0.001 par value; 2,000 shares authorized; 883 shares issued and outstanding as of March 31, 2023 and December 31, 2022 (Liquidation preference of $7,743 and $7,699 as of March 31, 2023 and December 31, 2022)

 

3,532

 

3,532

Common stock, $0.001 par value; 70,000 shares authorized; 43,586 and 43,554 shares issued and outstanding as of March 31, 2023 and December 31, 2022

 

44

 

44

Additional paid-in capital

 

236,192

 

235,308

Accumulated deficit

 

(17,507)

 

(14,159)

Accumulated other comprehensive loss

 

(2,260)

 

(3,118)

Total AXT, Inc. stockholders’ equity

 

220,001

 

221,607

Noncontrolling interests

 

23,417

 

23,293

Total stockholders’ equity

 

243,418

 

244,900

Total liabilities, redeemable noncontrolling interests and stockholders’ equity

$

366,623

$

370,072

See accompanying notes to condensed consolidated financial statements.

3

ub

AXT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share data)

    

Three Months Ended

    

March 31, 

2023

    

2022

Revenue

$

19,405

$

39,653

Cost of revenue

 

14,295

 

26,345

Gross profit

 

5,110

 

13,308

Operating expenses:

Selling, general and administrative

 

5,952

 

6,450

Research and development

 

3,595

 

3,159

Total operating expenses

 

9,547

 

9,609

Income (loss) from operations

 

(4,437)

 

3,699

Interest expense, net

 

(397)

 

(183)

Equity in income of unconsolidated joint ventures

 

1,034

 

1,125

Other income (expense), net

 

282

 

(9)

Income (loss) before provision for income taxes

 

(3,518)

 

4,632

Provision for income taxes

 

148

 

660

Net income (loss)

 

(3,666)

 

3,972

Less: Net (income) loss attributable to noncontrolling interests and redeemable noncontrolling interests

 

318

 

(807)

Net income (loss) attributable to AXT, Inc.

$

(3,348)

$

3,165

Net income (loss) attributable to AXT, Inc. per common share:

Basic

$

(0.08)

$

0.07

Diluted

$

(0.08)

$

0.07

Weighted-average number of common shares outstanding:

Basic

 

42,498

 

41,871

Diluted

 

42,498

 

42,662

See accompanying notes to condensed consolidated financial statements.

4

AXT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited, in thousands)

Three Months Ended

March 31, 

    

2023

    

2022

    

 

Net income (loss)

$

(3,666)

$

3,972

Other comprehensive income (loss), net of tax:

Change in foreign currency translation gain, net of tax

 

887

 

590

Change in unrealized gain (loss) on available-for-sale debt investments, net of tax

 

111

 

(172)

Total other comprehensive income, net of tax

 

998

 

418

Comprehensive income (loss) attributable to AXT, Inc.

 

(2,668)

 

4,390

Less: Comprehensive loss (income) attributable to noncontrolling interests and redeemable noncontrolling interests

 

178

 

(898)

Comprehensive income (loss) attributable to AXT, Inc.

$

(2,490)

$

3,492

See accompanying notes to condensed consolidated financial statements.

5

AXT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

Three Months Ended

March 31, 

    

2023

    

2022

Cash flows from operating activities:

Net income (loss)

$

(3,666)

$

3,972

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization

 

2,118

 

1,983

Amortization of marketable securities premium

 

7

 

23

Stock-based compensation

 

915

 

1,088

Loss on disposal of equipment

 

5

 

24

Equity in income of unconsolidated joint ventures

 

(1,034)

 

(1,125)

Deferred tax assets

(10)

(8)

Changes in operating assets and liabilities:

Accounts receivable

 

7,982

 

(4,915)

Inventories

 

(1,466)

 

(2,586)

Prepaid expenses and other current assets

 

1,965

 

810

Other assets

 

(1,055)

 

(341)

Accounts payable

 

(3,351)

 

(2,299)

Accrued liabilities

 

(1,568)

 

(4,867)

Other long-term liabilities, including royalties

 

(2,376)

 

(665)

Net cash used in operating activities

 

(1,534)

 

(8,906)

Cash flows from investing activities:

Purchases of property, plant and equipment

 

(3,616)

 

(6,294)

Proceeds from sales and maturities of available-for-sale debt securities

 

2,903

 

Net cash used in investing activities

 

(713)

 

(6,294)

Cash flows from financing activities:

Proceeds from common stock options exercised

 

8

 

Proceeds from bank loans

 

18,372

 

10,718

Payments on bank loans

(12,810)

(2,799)

Proceeds from capital increase in subsidiary shares from noncontrolling interest

203

Net cash provided by financing activities

 

5,773

 

7,919

Effect of exchange rate changes on cash and cash equivalents, and restricted cash

 

19

 

12

Net increase (decrease) in cash and cash equivalents, and restricted cash

 

3,545

 

(7,269)

Cash and cash equivalents, and restricted cash at the beginning of the year

 

41,348

 

36,763

Cash and cash equivalents, and restricted cash at the end of the period

$

44,893

$

29,494

Supplemental disclosure of non-cash flow information:

Conversion of related party borrowings to Additional Paid-in Capital

$

$

1,887

Investment in subsidiary shares from noncontrolling interest

$

72

$

410

See accompanying notes to condensed consolidated financial statements.

6

AXT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation

The accompanying condensed consolidated financial statements of AXT, Inc. (“AXT,” the “Company,” “we,” “us,” and “our” refer to AXT, Inc. and all of its consolidated subsidiaries) are unaudited, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, this interim quarterly financial report does not include all disclosures required by U.S. GAAP. In the opinion of our management, the unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, considered necessary to present fairly the financial position, results of operations and cash flows of AXT and our consolidated subsidiaries for all periods presented.

Our management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these condensed consolidated financial statements in conformity with U.S. GAAP. Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. These estimates and assumptions may change as new events occur and additional information is obtained. Actual results could differ materially from those estimates.

The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected in the future or for the full fiscal year. It is recommended that these condensed consolidated financial statements be read in conjunction with our consolidated financial statements and the notes thereto included in our 2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2023.

The condensed consolidated financial statements include the accounts of AXT, and our consolidated subsidiaries, Beijing Tongmei Xtal Technology Co., Ltd. (“Tongmei”), AXT-Tongmei, Inc. (“AXT-Tongmei”), Baoding Tongmei Xtal Technology Co., Ltd. (“Baoding Tongmei”), ChaoYang Tongmei Xtal Technology Co., Ltd. (“ChaoYang Tongmei”), ChaoYang LiMei Semiconductor Technology Co., Ltd. (“ChaoYang LiMei”), ChaoYang XinMei High Purity Semiconductor Materials Co., Ltd. (“ChaoYang XinMei”), Nanjing JinMei Gallium Co., Ltd. (“JinMei”), ChaoYang JinMei Gallium Ltd. (“ChaoYang JinMei”), ChaoYang ShuoMei High Purity Semiconductor Materials Co., Ltd. (“ChaoYang ShuoMei”), MaAnShan JinMei Gallium Ltd., (“MaAnShan JinMei”) and Beijing BoYu Semiconductor Vessel Craftwork Technology Co., Ltd. (“BoYu”). All significant inter-company accounts and transactions have been eliminated. Investments in business entities in which we do not have controlling interests, but have the ability to exercise significant influence over operating and financial policies (generally 20-50% ownership), are accounted for by the equity method. As of March 31, 2023 and December 31, 2022, we have five companies accounted for by the equity method. For the majority-owned subsidiaries that we consolidate, we reflect the portion we do not own as either noncontrolling interests in stockholder’s equity or as redeemable noncontrolling interests in temporary equity on our condensed consolidated balance sheets and in our condensed consolidated statements of operations.

When market conditions are warranted, we intend to construct facilities at the ChaoYang LiMei location to provide us with additional production capacity. For the three months ended March 31, 2023, expenses associated with ChaoYang LiMei had a de minimis impact on our condensed consolidated financial statements.

In February 2021, Tongmei signed a joint venture agreement with certain investors to fund a new company, ChaoYang XinMei. The agreement called for a total investment of approximately $3.0 million, of which Tongmei would fund approximately $1.8 million for a 58.5 percent ownership of ChaoYang XinMei. In February 2021, the investors completed the initial funding of approximately $1.5 million. Tongmei’s portion of the investment was approximately $0.9 million. In May 2021, the investors completed the funding of the remaining balance of approximately $1.5 million. Tongmei’s portion of the final investment was approximately $0.9 million, for a total investment of approximately $1.8 million for a 58.5 percent ownership of ChaoYang XinMei. In September 2021 and October 2021, ChaoYang XinMei received funding from a minority investor of $0.9 million and $1.0 million, respectively. In December 2021 and January

7

2022, ChaoYang XinMei received funding from Tongmei of $1.4 million and $1.4 million, respectively. In January 2022, the China local government certified this additional funding in ChaoYang XinMei as an equity investment. Tongmei’s ownership remained at 58.5% after these equity investments. In April 2022, Tongmei entered into a capital increase agreement (the “Capital Increase Agreement”) with minority investors to further invest $4.5 million in ChaoYang XinMei. Tongmei’s portion of the investment was approximately $2.6 million, of which $1.1 million was invested in April 2022 and $0.8 million was invested in May 2022. The minority investors’ portion of the investment was approximately $1.9 million, of which $0.7 million was invested in April 2022 and $0.6 million was invested in May 2022. As a result, noncontrolling interests increased $1.4 million and redeemable noncontrolling interests increased $0.1 million. Tongmei’s ownership remained at 58.5% after the April 2022 and May 2022 equity investments. In July 2022, Tongmei and the minority investors further invested $0.8 million and $0.6 million in ChaoYang XinMei, respectively. This completed the investment obligations under the Capital Increase Agreement. As a result, noncontrolling interests increased $610,000 and redeemable noncontrolling interests increased $57,000. Tongmei’s ownership remained at 58.5% after the July 2022 equity investment.

In April 2022, ChaoYang JinMei signed a joint venture agreement with a certain investor to fund a new company, ChaoYang ShuoMei, our consolidated subsidiary. The agreement calls for a total investment of approximately $4.4 million, of which ChaoYang JinMei will fund approximately $3.3 million for a 75 percent ownership of ChaoYang ShuoMei. In July and August 2022, ChaoYang JinMei completed the initial funding of $1.0 million in ChaoYang ShuoMei. In August 2022, the investor invested $334,000 in ChaoYang ShuoMei. As a result, noncontrolling interests increased $406,000 and redeemable noncontrolling interests increased $73,000. In January 2023, ChaoYang ShuoMei received $0.5 million in funding from ChaoYang JinMei and $0.2 million in funding from one of the minority investors. As a result, noncontrolling interests increased $0.2 million and redeemable noncontrolling interests increased $36,000. ChaoYang JinMei’s ownership of ChaoYang ShuoMei remained at 75% after these equity investments.

In April 2022, Tongmei signed a joint venture agreement with certain investors to fund a new company, ChaoYang KaiMei Quartz Co., Ltd (“ChaoYang KaiMei”). The agreement called for a total investment of approximately $7.6 million, of which Tongmei would fund approximately $3.0 million for a 40 percent ownership of ChaoYang KaiMei. In July 2022, the investors completed the initial funding of approximately $2.2 million. Tongmei’s portion of the investment was approximately $0.9 million.

All activities for MaAnShan JinMei ceased during the first half of 2022 and the subsidiary was subsequently dissolved in May 2022. The dissolution of MaAnShan JinMei had a de minimis impact on the condensed consolidated results.

During the quarter ended December 31, 2020, Tongmei entered into two sets of definitive transaction documents, each consisting of a capital increase agreement along with certain supplemental agreements in substantially the same form (collectively, the “Capital Investment Agreements”), with several private equity investors in China.

In preparation for Tongmei’s application for a listing of shares in an initial public offering (the “IPO”) on the Shanghai Stock Exchange’s Sci-Tech innovAtion boaRd (the “STAR Market”), in late December 2020, we reorganized our entity structures in China. JinMei and BoYu and its subsidiaries were assigned to Tongmei and effectively merged with Tongmei although they retained their own respective legal entity status and are wholly owned subsidiaries of Tongmei. The 33% minority interest stakeholders of BoYu converted their ownership to a 7.59% minority interest in Tongmei. The 8.5% minority interest stakeholders, employees of JinMei, converted their ownership to a 0.38% minority interest in Tongmei. Further, a number of employees, key managers and contributors purchased a 0.4% minority interest in Tongmei. Additionally, Baoding Tongmei and ChaoYang Tongmei, were assigned to Tongmei as wholly owned subsidiaries. In 2020, the private equity funds (the “Investors”) had transferred approximately $48.1 million of new capital to Tongmei. An additional investment of approximately $1.5 million of new capital was funded in January 2021. Under China regulations these investments must be formally approved by the appropriate government agency and are not deemed to be dilutive until such approval is granted. The government approved the approximately $49 million investment in its entirety on January 25, 2021, at which time the Investors owned a redeemable noncontrolling interest in Tongmei of 7.28%. As of March 31, 2023, Tongmei’s noncontrolling interests and redeemable noncontrolling interests totaled approximately 14.5%. AXT remains the controlling stakeholder of Tongmei and holds a majority of the board of director positions of Tongmei. In June 2021, AXT sold AXT-Tongmei to Tongmei for $1. Since Tongmei is 85.5%

8

owned by AXT, and the transaction was between common interest holders, the transaction was accounted for at net book value and resulted in an increase of $1.2 million to noncontrolling interests and $1.2 million to redeemable noncontrolling interests.

Note 2. Investments and Fair Value Measurements

Our cash and cash equivalents consist of cash and instruments with original maturities of less than three months. Our investments consist of instruments with original maturities of more than three months. As of March 31, 2023 and December 31, 2022, our cash, cash equivalents and debt investments are classified as follows (in thousands):

March 31, 2023

December 31, 2022

 

    

    

Gross

    

Gross

    

    

    

Gross

    

Gross

    

 

Amortized

Unrealized

Unrealized

Fair

Amortized

Unrealized

Unrealized

Fair

 

    

Cost

    

Gain

    

(Loss)

    

Value

    

Cost

    

Gain

    

(Loss)

    

Value

 

Classified as:

Cash and restricted cash

$

44,893

$

$

$

44,893

$

41,348

$

$

$

41,348

Cash equivalents:

Certificates of deposit 1

Total cash, restricted cash and cash equivalents

 

44,893

 

 

 

44,893

 

41,348

 

 

 

41,348

Investments (available-for-sale):

Certificates of deposit 2

 

6,440

 

(148)

 

6,292

 

6,440

 

(175)

 

6,265

Corporate bonds

 

2,410

 

 

(44)

 

2,366

 

5,320

 

 

(128)

 

5,192

Total investments

 

8,850

 

 

(192)

 

8,658

 

11,760

 

 

(303)

 

11,457

Total cash, restricted cash, cash equivalents and investments

$

53,743

$

$

(192)

$

53,551

$

53,108

$

$

(303)

$

52,805

Contractual maturities on investments:

Due within 1 year 3

$

7,170

$

7,016

$

9,600

$

9,339

Due after 1 through 5 years 4

 

1,680

 

1,642

 

2,160

 

2,118

$

8,850

$

8,658

$

11,760

$

11,457

1.Certificates of deposit with original maturities of less than three months.
2.Certificates of deposit with original maturities of more than three months.
3.Classified as “Short-term investments” in our condensed consolidated balance sheets.
4.Classified as “Long-term investments” in our condensed consolidated balance sheets.

We manage our debt investments as a single portfolio of highly marketable securities that is intended to be available to meet our current cash requirements. Certificates of deposit and corporate bonds are typically held until maturity.

Historically, the gross unrealized losses related to our portfolio of available-for-sale debt securities were immaterial, and primarily due to normal market fluctuations and not due to increased credit risk or other valuation concerns. There was an insignificant amount of gross unrealized losses on our available-for-sale debt securities as of March 31, 2023, and historically, such gross unrealized losses have been temporary in nature and we believe that it is probable the principal and interest will be collected in accordance with the contractual terms. We review our debt investment portfolio at least quarterly, or when there are changes in credit risks or other potential valuation concerns, to identify and evaluate whether an allowance for credit losses or impairment would be necessary. Factors considered in determining whether a loss is temporary include the magnitude of the decline in market value, the length of time the market value has been below cost (or adjusted cost), credit quality, and our ability and intent to hold the securities for a period of time sufficient to allow for any anticipated recovery in market value.

9

The following table summarizes the fair value and gross unrealized losses related to available-for-sale debt securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2023 (in thousands):

In Loss Position

In Loss Position

Total In

 

< 12 months

> 12 months

Loss Position

 

Gross

Gross

Gross

 

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

 

As of March 31, 2023

    

Value

    

(Losses)

    

Value

    

(Losses)

    

Value

    

(Losses)

 

Investments:

Certificates of deposit

$

2,113

$

(47)

$

4,179

$

(101)

$

6,292

$

(148)

Corporate bonds

 

 

 

2,016

 

(44)

 

2,016

(44)

Total in loss position

$

2,113

$

(47)

$

6,195

$

(145)

$

8,308

$

(192)

The following table summarizes the fair value and gross unrealized losses related to available-for-sale debt securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2022 (in thousands):

In Loss Position

In Loss Position

Total In

 

< 12 months

> 12 months

Loss Position

 

    

    

    

Gross

    

    

    

Gross

    

    

    

Gross

 

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

 

As of December 31, 2022

Value

(Loss)

Value

(Loss)

Value

(Loss)

 

Investments:

Certificates of deposit

$

2,118

$

(42)

$

4,146

$

(133)

$

6,264

$

(175)

Corporate bonds

 

 

 

4,842

 

(128)

 

4,842

(128)

Total in loss position

$

2,118

$

(42)

$

8,988

$

(261)

$

11,106

$

(303)

Restricted Cash

We maintain restricted cash in connection with cash balances temporarily restricted for regular business operations. In May 2022, Tongmei and the Bank of Beijing signed a credit facility for $3.4 million. As a condition of the credit facility we must maintain a time deposit at the Bank of Beijing as collateral, and therefore we placed time deposits of $2.9 million and $1.0 million at the Bank of Beijing in April 2022 and May 2022, respectively. In December 2022, we placed another time deposit of $2.5 million at the Bank of Beijing as collateral for a bank loan of $2.3 million received by Tongmei in January 2023. In January 2023, our consolidated subsidiary, ChaoYang LiMei, placed a time deposit of $3.0 million at the Bank of China as collateral for a bank loan of $2.9 million received by Tongmei in January 2023. The bank loans have a term of 12 months, therefore the May 2022 bank loan, the January 2023 bank loans and the time deposits are classified as short-term in our condensed consolidated balance sheets. The time deposits have been excluded from the Company’s cash and cash equivalents balance. As of March 31, 2023, $9.5 million was included in restricted cash in our condensed consolidated balance sheets.

Investments in Privately-held Raw Material Companies

We have made strategic investments in private companies located in China in order to gain access at a competitive cost to raw materials that are critical to our substrate business (see Note 7). The investment balances for the non-consolidated companies are accounted for under the equity method and included in “Other assets” in the condensed consolidated balance sheets and totaled $16.5 million and $14.6 million as of March 31, 2023 and December 31, 2022, respectively. As of March 31, 2023, there were five companies accounted for under the equity method.

10

Fair Value Measurements

We invest primarily in money market accounts, certificates of deposits, corporate bonds and notes, and government securities. We review our debt investment portfolio for credit loss at least quarterly or when there are changes in credit risk or other potential valuation concerns. As of March 31, 2023 and December 31, 2022, the total unrealized loss, net of tax, included in accumulated other comprehensive income was immaterial. We believe it is probable the principal and interest will be collected in accordance with the contractual terms, and the unrealized loss on these securities was due to normal market fluctuations, and not due to increased credit risk or other valuation concerns. Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), establishes three levels of inputs that may be used to measure fair value. Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets of the asset or identical assets. Level 2 instrument valuations are obtained from readily-available, observable pricing sources for comparable instruments. Level 3 instrument valuations are obtained from unobservable inputs in which there is little or no market data, which require us to develop our own assumptions. On a recurring basis, we measure certain financial assets and liabilities at fair value, primarily consisting of our short-term and long-term debt investments.

The type of instrument valued based on quoted market prices in active markets include our money market funds, which are generally classified within Level 1 of the fair value hierarchy. We classify our available-for-sale debt securities including certificates of deposit and corporate bonds as having Level 2 inputs. The valuation techniques used to measure the fair value of these financial instruments having Level 2 inputs were derived from bank statements, quoted market prices, broker or dealer statements or quotations, or alternative pricing sources with reasonable levels of price transparency.

We place short-term foreign currency hedges that are intended to offset the potential cash exposure related to fluctuations in the exchange rate between the United States dollar and Japanese yen. We measure the fair value of these foreign currency hedges at each month end and quarter end using current exchange rates and in accordance with U.S. GAAP. At quarter end, any foreign currency hedges not settled are netted in “Accrued liabilities” on the condensed consolidated balance sheet and classified as Level 3 assets and liabilities. As of March 31, 2023, the net change in fair value from the placement of the hedge to settlement at each month end during the quarter had a de minimis impact on the condensed consolidated results. There were no changes in valuation techniques or related inputs in the three months ended March 31, 2023. There have been no transfers between fair value measurements levels during the three months ended March 31, 2023.

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis in accordance with ASC 820 as of March 31, 2023 (in thousands):

    

    

Quoted Prices in

    

Significant

 

Active Markets of

Significant Other

Unobservable

 

Balance as of

Identical Assets

Observable Inputs

Inputs

 

    

March 31, 2023

    

(Level 1)

    

(Level 2)

    

(Level 3)

 

Assets:

Investments:

Certificates of deposit

$

6,292

$

$

6,292

$

Corporate bonds

 

2,366

 

 

2,366

 

Total

$

8,658

$

$

8,658

$

11

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis in accordance with ASC 820 as of December 31, 2022 (in thousands):

    

    

Quoted Prices in

    

Significant

 

Active Markets of

Significant Other

Unobservable

 

Balance as of

Identical Assets

Observable Inputs

Inputs

 

    

December 31, 2022

    

(Level 1)

    

(Level 2)

    

(Level 3)

 

Assets:

Investments:

Certificates of deposit

$

6,265

$

$

6,265

$

Corporate bonds

 

5,192

 

 

5,192

 

Total

$

11,457

$

$

11,457

$

Items Measured at Fair Value on a Nonrecurring Basis

Certain assets that are subject to nonrecurring fair value measurements are not included in the table above. These assets include investments in privately-held companies accounted for by the equity or cost method (see Note 7). We did not record any other-than-temporary impairment charges for these investments during the three months ended March 31, 2023 and 2022, respectively.

Note 3. Inventories

The components of inventories are summarized below (in thousands):

March 31, 

December 31, 

    

2023

    

2022

 

Inventories:

Raw materials

$

41,543

$

46,476

Work in process

 

46,943

 

39,956

Finished goods

 

3,192

 

3,197

$

91,678

$

89,629

As of March 31, 2023 and December 31, 2022, carrying values of inventories were net of inventory reserves of $25.9 million and $24.7 million, respectively, for excess and obsolete inventory and $50,000 and $47,000, respectively, for lower of cost or net realizable value reserves.

Note 4. Property, Plant and Equipment, Net

The components of our property, plant and equipment are summarized below (in thousands):

March 31, 

December 31, 

2023

2022

Property, plant and equipment:

Machinery and equipment, at cost

$

64,263

$

62,797

Less: accumulated depreciation and amortization

(39,596)

(38,477)

Building, at cost

119,066

118,550

Less: accumulated depreciation and amortization

(21,355)

(20,403)

Leasehold improvements, at cost

 

7,551

 

7,430

Less: accumulated depreciation and amortization

(5,721)

(5,559)

Construction in progress

 

38,316

 

36,679

$

162,524

$

161,017

As of March 31, 2023, the balance of construction in progress was $38.3 million, of which $29.4 million was related to our buildings in our new Dingxing and Kazuo locations, $4.8 million was for manufacturing equipment purchases not yet placed in service and $4.1 million was for construction in progress for our other consolidated

12

subsidiaries. As of December 31, 2022, the balance of construction in progress was $36.7 million, of which $27.2 million was for our buildings in our new Dingxing and Kazuo locations, $5.4 million was for manufacturing equipment purchases not yet placed in service and $4.1 million was for our construction in progress at our other consolidated subsidiaries. 

Note 5. Accrued Liabilities

The components of accrued liabilities are summarized below (in thousands):

March 31, 

December 31, 

    

2023

    

2022

 

Accrued compensation and related charges

$

3,039

$

4,774

Preferred stock dividends payable

2,901

2,901

Advances from customers

1,115

338

Accrued product warranty

915

669

Other tax payable