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Member2023-12-310001051627axti:NanjingJinMeiGalliumCo.LtdInvestmentMember2023-12-310001051627axti:ChaoyangXinmeiHighPuritySemiconductorMaterialsCo.LtdMember2023-12-310001051627axt inc:朝阳硕美高纯半导体材料有限公司成员2023-12-310001051627axt inc:朝阳金美镓有限公司成员2023-12-310001051627axt inc:北京博宇半导体器皿工艺科技有限公司投资成员2023-12-310001051627axt inc:北京同美晶体科技成员2021-01-250001051627axt inc:北京同美晶体科技成员2021-06-012021-06-300001051627srt:最高成员2024-01-012024-09-300001051627axt inc:东海县东方高纯电子材料有限公司投资成员2023-11-012023-11-300001051627axt inc:东海县东方高纯电子材料有限公司投资成员2023-10-012023-12-310001051627axt inc:五个少数投资成员2024-07-012024-09-300001051627axt inc:五个少数投资成员2024-01-012024-09-300001051627axt inc:五个少数投资成员2023-07-012023-09-300001051627axt inc:五个少数投资成员2023-01-012023-09-300001051627axt inc:北京佳获半导体材料股份有限公司投资成员2024-09-3000010516272023-01-012023-09-300001051627axt inc:峨眉山佳美高纯金属股份有限公司投资成员2024-01-012024-09-300001051627axt inc:北京通玫晶技术成员axt inc:工银会员2024-01-012024-09-300001051627axt inc:北京博宇半导体船舶工艺科技有限公司会员axt inc:兴业银行会员2023-01-012023-12-3100010516272024-09-3000010516272023-12-3100010516272024-01-012024-09-3000010516272023-01-012023-12-310001051627美元指数:PerformanceShares会员2023-02-142023-02-140001051627母公司成员2024-07-012024-09-300001051627us-gaap:额外实收资本成员2024-07-012024-09-3000010516272024-07-012024-09-300001051627美元指数:母公司会员2024-04-012024-06-300001051627美元指数:额外实收资本会员2024-04-012024-06-3000010516272024-04-012024-06-300001051627美元指数:母公司会员2024-01-012024-03-310001051627美元指数:其他资本溢价成员2024-01-012024-03-3100010516272024-01-012024-03-310001051627美元指数:母公司成员2023-07-012023-09-300001051627美元指数:其他资本溢价成员2023-07-012023-09-3000010516272023-07-012023-09-300001051627美元指数:母公司成员2023-04-012023-06-300001051627美元指数:其他资本溢价成员2023-04-012023-06-3000010516272023-04-012023-06-300001051627美元指数:母公司成员2023-01-012023-03-310001051627美元指数:其他资本溢价成员2023-01-012023-03-3100010516272023-01-012023-03-310001051627axt inc: 朝阳凯美石英有限公司成员2023-09-30iso4217:美元指数xbrli:纯形axti:companyaxti:customerxbrli股份平方英尺iso4217:USDxbrli:sharesaxti:segment

0

美国
证券交易委员会

华盛顿特区20549

表格10-Q

(标记一)

根据1934年证券交易法第13或15(d)条进行的季度报告

截至季度结束 2024年9月30日

或者

根据1934年证券交易法第13或15(d)条进行的过渡报告

在从 到的过渡期间

委员会文件号 000-24085

AXt,INC.

(根据其章程规定的注册人准确名称)

特拉华。

94-3031310

(国家或其他管辖区的
注册或组织)

(IRS雇主
唯一识别号码)

4281 Technology Drive, Fremont, 加利福尼亚州 94538

,(主要行政办公地址) (邮政编码)

(510) 438-4700

(注册人电话号码,包括区号)

在法案第12(b)条的规定下注册的证券:

每个类别的名称:

    

交易代码

    

注册在每个交易所的名称:

普通股,每股0.001美元面值

AXTI

股市 纳斯达克 股票市场有限责任公司

请以复选标记形式指示:报告主体(1)在过去12个月内已按照1934年证券交易所法案第13或第15(d)条的规定提交了所有要求提交的报告(或要求提交此类报告的较短时期),并且(2)在过去90天内一直受到此类提交要求的约束。 

请通过复选标记指出注册申报人是否在过去12个月内(或注册申报人需要提交此类文件的更短期间)根据《Regulation S-T》规则405(本章第232.405条)要求提交每个交互式数据文件。 

请勾选表示注册申报人是大型责任审核加速器、加速器、非加速器、较小的报告公司还是新兴增长公司。请参阅《交易所法》第120亿.2条对“大型责任审核加速器”、“加速器”、“较小的报告公司”和“新兴增长公司”的定义。

大型加速归档人

加速文件提交人 

非加速报告人

小型报表公司

新兴成长公司

如果是新兴成长公司,请在复选框中标明注册者是否选择不使用按照《交易所法》第13(a)条规定提供的任何新的或修订后的财务会计准则的延期过渡期。

请通过复选框标明注册者是否为外壳公司(定义见《交易所法》120亿条规定)。是 不是

截至2024年11月1日, 44,750,581 注册公司普通股中有0.001美元面值的股份流通。

AXt,INC.

第10-Q表格

目录

页面

第一部分 财务信息

项目1:基本报表(未经审计)

截至2024年9月30日和2023年12月31日的精简合并资产负债表

3

2024年9月30日和2023年的三个月和九个月的营运基本报表

4

2024年9月30日和2023年截至九个月的控件综合损益简明综合报表

5

2024年9月30日止九个月的精简合并现金流量表和2023年

6

简明综合基本报表附注

7

项目2. 管理层对财务状况和业绩的讨论与分析

35

项目3.有关市场风险的定量和定性披露

56

项目4.控制和程序

58

第二部分。其他信息

项目1.法律诉讼

59

项目1A.风险因素

59

项目2. 未注册的股权销售和款项使用

86

项目3. 高级证券违约

86

项目4.矿山安全披露

86

项目5.其他信息

86

项目6.附件

87

签名

88

2

目录

第一部分 财务信息

项目1:基本报表(未经审计)

AXt,INC.

简明综合资产负债表S

(未经审计,单位为千,除每股数据外)

    

九月30日

    

运营租赁负债:

 

2024

2023

资产

流动资产:

现金

$

24,898

$

37,752

限制性现金

13,893

12,362

短期投资

 

 

2,140

应收账款,减去$的信贷损失263 和$579 截至2024年9月30日和12月31日的股票

 

27,970

 

19,256

存货

 

86,109

 

86,503

预付费用和其他流动资产

 

14,991

 

12,643

总流动资产

 

167,861

 

170,656

物业、厂房和设备,净值

 

166,459

 

166,348

经营租赁权使用资产

2,451

2,799

其他

 

18,809

 

18,898

总资产

$

355,580

$

358,701

负债、可赎回非控制权益和股东权益

流动负债:

应付账款

$

12,780

$

9,617

应计负债

 

11,941

 

19,019

短期贷款

54,052

52,921

流动负债合计

 

78,773

 

81,557

非流动工程租赁负债

1,993

2,351

其他长期负债

 

8,595

 

5,647

负债合计

 

89,361

 

89,555

承诺和担保(详见第12注)

可赎回的非控股权益(附注18)

41,237

41,663

股东权益:

优先股,系列A,每股面值 $215688680,截至2023年12月31日和2024年3月31日,已发行并流通股数分别为 $227838680。0.001 面值; 2,000 股份已授权; 883 于2024年9月30日和2023年12月31日已发行并流通的股份(偏爱清算价值为$8,008 和$7,875 截至2024年9月30日和2023年12月31日

 

3,532

 

3,532

普通股,每股面值为 $0.0001;0.001 面值; 70,000 股份已授权; 44,677 并且 44,239 截至2024年9月30日和2023年12月31日,发行并流通的股份数量

 

45

 

44

额外实收资本

 

240,770

 

238,452

累积赤字

 

(38,576)

 

(32,040)

累计其他综合损失

 

(5,038)

 

(5,999)

AXt公司股东权益总额

 

200,733

 

203,989

非控制权益

 

24,249

 

23,494

股东权益总额

 

224,982

 

227,483

负债、可赎回的非控制性权益和股东权益总计

$

355,580

$

358,701

请参阅附注事项的简明合并财务报表。

3

目录

ub

AXt,INC.

简明合并利润表

(未经审计,单位为千,除每股数据外)

    

结束于3个月的期间

    

结束于9个月的期间

九月30日

9月30日

2024

    

2023

2024

    

2023

营业收入

$

23,645

$

17,366

$

74,256

$

55,366

营运成本

 

17,963

 

15,500

 

54,828

 

46,675

毛利润

 

5,682

 

1,866

 

19,428

 

8,691

营业费用:

销售、一般和管理费用

 

5,650

 

5,667

 

17,656

 

17,439

研发费用

 

3,438

 

2,926

 

10,410

 

9,261

总营业费用

 

9,088

 

8,593

 

28,066

 

26,700

营运亏损

 

(3,406)

 

(6,727)

 

(8,638)

 

(18,009)

利息支出,净额

 

(391)

 

(381)

 

(1,022)

 

(1,143)

未合并联营企业的权益

 

1,007

 

369

 

2,495

 

2,344

其他收入,净额

 

529

 

223

 

2,052

 

1,282

税前亏损

 

(2,261)

 

(6,516)

 

(5,113)

 

(15,526)

所得税征(免)额

 

626

 

(101)

 

1,021

 

(92)

净亏损

 

(2,887)

 

(6,415)

 

(6,134)

 

(15,434)

减少:归属于非控股利益和可赎回非控股利益的净(收益)损失

 

(50)

 

592

 

(402)

 

1,174

归属于AXt,Inc.的净损失

$

(2,937)

$

(5,823)

$

(6,536)

$

(14,260)

AXt,Inc.归属于普通股的净亏损每股:

基本

$

(0.07)

$

(0.14)

$

(0.15)

$

(0.34)

摊薄

$

(0.07)

$

(0.14)

$

(0.15)

$

(0.34)

普通股股份加权平均数:

基本

 

43,157

 

42,638

 

43,079

 

42,574

摊薄

 

43,157

 

42,638

 

43,079

 

42,574

请参阅附注事项的简明合并财务报表。

4

目录

AXt, INC.

基本报表综合损益表

(未经审计,以千为单位)

结束于3个月的期间

结束于9个月的期间

9月30日

9月30日

    

2024

    

2023

    

2024

    

2023

 

净亏损

$

(2,887)

$

(6,415)

$

(6,134)

$

(15,434)

其他综合收益(损失), 净额(税后):

外币翻译盈亏变动(税后净额)

 

3,932

 

(580)

 

1,175

 

(6,938)

可供出售债务投资未实现收益变动,税后净额

 

5

 

65

 

20

 

253

其他综合收益(损失),净所得税后

 

3,937

 

(515)

 

1,195

 

(6,685)

归属于AXt,Inc.的综合收益(损失)

 

1,050

 

(6,930)

 

(4,939)

 

(22,119)

减:归属于非控制股东及可赎回非控制股东的综合(损益)

 

(798)

 

701

 

(636)

 

2,396

归属于AXt,Inc.的综合收益(损失)

$

252

$

(6,229)

$

(5,575)

$

(19,723)

请参阅附注事项的简明合并财务报表。

5

目录

AXt,INC.

现金流量表简明综合报表

(未经审计,以千为单位)

结束于9个月的期间

9月30日

    

2024

    

2023

经营活动现金流量:

净亏损

$

(6,134)

$

(15,434)

用于调节净亏损至经营活动现金流量净额的调整项目:

折旧和摊销

 

6,736

 

6,424

可交易证券溢价摊销

 

 

18

股票补偿

 

2,344

 

2,718

设备处置损失

 

 

18

将权益法投资的回报作为股息支付

2,063

3,666

未合并联营企业的权益

 

(2,495)

 

(2,344)

递延所得税资产

(22)

122

经营性资产和负债变动:

应收账款

 

(8,526)

 

9,594

存货

 

1,134

 

(1,013)

预付费用和其他流动资产

 

(5,823)

 

1,909

其他

 

1,173

 

219

应付账款

 

3,043

 

(3,375)

应计负债

 

(1,387)

 

(1,742)

其他长期负债

 

(5,488)

 

1,194

经营活动产生的净现金流量

 

(13,382)

 

1,974

投资活动现金流量:

购买固定资产

 

(5,604)

 

(11,178)

可供出售债务证券的销售收益和到期收益

 

2,160

 

7,423

Proceeds from sales of equity securities - 15% Jia Mei

 

 

827

Investments in non-marketable equity investments

(560)

(1,918)

投资活动产生的净现金流出

 

(4,004)

 

(4,846)

筹集资金的现金流量:

行使普通股期权所得款项

 

28

 

10

短期银行借款款项

 

41,582

 

42,197

短期银行贷款偿还

(42,295)

(40,673)

来自非控制股东子公司股份增资的款项

708

长期贷款的收益

5,831

长期贷款的付款

(643)

筹资活动产生的现金净额

 

4,503

 

2,242

汇率变动对现金和限制性现金的影响

 

1,560

 

(1,418)

现金和受限现金的净减少

 

(11,323)

 

(2,048)

年初的现金和限制性现金

 

50,114

 

41,348

期末现金和限制性现金

$

38,791

$

39,300

非现金流量信息的补充披露:

应收票据用于购买固定资产

$

3,608

$

从非控制股权持有人处投资子公司股份

$

$

308

与在建工程相关的应付款项,包括在应计负债中

$

149

$

3,315

请参阅附注事项的简明合并财务报表。

6

目录

AXt,INC.

简明合并财务报表附注

(未经审计)

注释1. 报告的基础

AXt,Inc.(以下简称为“AXt”,“公司”,“我们”和“我们”均指AXt,Inc.及其所有的子公司)的附属公司简明合并财务报表未经审计,并按照美国通用会计准则(“U.S. GAAP”)制定的美国的中期财务信息和《10-Q表格》的指示以及《S-X法规》第10条的要求编制。因此,本中期季度财务报告未包含美国通用会计准则要求的所有披露以供完整合并财务报表。在我们管理层的意见中,未经审计的简明合并财务报表反映了所有调整,仅包括被认为必要的常规调整,以公正地呈现公司所有期间的财务状况、经营业绩和现金流量。

我们的管理层就资产和负债的报告以及揭示潜在资产和负债方面作出了众多估计和假设,以符合美国通用会计准则。由于COVID-19大流行,全球经济和金融市场出现了不确定性和混乱。这些估计和假设可能随着新事件的发生和获得的额外信息而发生变化。实际结果可能与这些估计存在实质性差异。

2024年9月30日结束的三个月和九个月的运营结果并不一定能反映未来或整个财年所预期的结果。建议阅读这些简明合并财务报表时结合我们年度报告中包括于2023年12月31日提交给证券交易委员会(“SEC”)的《10-K表格》以及我们于2024年3月15日提交给SEC的季度报告中附注在2024年3月31日、2024年6月30日提交给SEC的季度报告,分别于2024年5月10日和2024年8月9日提交给SEC。

精简综合财务报表包括AXt及其子公司北京同美晶科技有限公司(“同美”)、AXt-Tongmei 公司(“AXt-Tongmei”)、保定同美晶科技有限公司(“保定同美”)、朝阳同美晶科技有限公司(“朝阳同美”)、朝阳力美半导体科技有限公司(“朝阳力美”)、朝阳信美高纯度半导体材料有限公司(“朝阳信美”)、南京金美镓有限公司(“金美”)、朝阳金美镓有限公司(“朝阳金美”)、朝阳硕美高纯度半导体材料有限公司(“朝阳硕美”)、马鞍山金美镓有限公司(“马鞍山金美”)及北京博誉半导体器皿工艺技术有限公司(“博誉”)。所有重要的公司间账户和交易已经被消除。我们对那些虽没有控制权但有能力对经营和财务政策产生重大影响(一般20-50%的持股权益)的企业投资采用权益法进行会计处理。截至2024年9月30日和2023年12月31日,我们有 家公司采用权益法核算。2023年5月,我们通过向第三方出售部分嘉美股份,将对峨眉山嘉美高纯金属有限公司(“嘉美”)的持股比例从 25百分比至 10%的份额降至$827,000左右。由于我们持股比例降低以及无法对嘉美的经营产生重大影响,截至2023年5月,我们不再将嘉美作为综合财务报表中的权益投资进行披露。我们对嘉美投资在售出时重新计量其公允价值。今后对公允价值的任何变化均通过净收益确认(“公允价值法”)。对于我们合并的控股子公司,我们反映我们不拥有的部分,或者作为我们综合财务报表和综合损益表中的非控股权益,或者作为我们综合财务报表和综合损益表中的可赎回的非控股权益。

根据有利的市场条件,我们打算在朝阳丽美的位置建设设施,以为我们提供额外的生产能力。 截至2024年9月30日的三个和九个月,与朝阳丽美相关的费用对我们的简明综合财务报表几乎没有影响。

7

目录

2021年2月,铜煤公司与特定投资者签署了一份合资协议,为一家名为朝阳新美的新创业公司提供基金支持。该协议要求总投资额约为$3.0 百万元,其中铜煤公司将为朝阳新美提供约$1.8 million for a 58.5 的股权。2021年2月,铜煤公司和投资者完成了约为$1.5 百万元的初次投资。铜煤公司在这次投资中的部分约为$0.9 百万元。2021年5月,铜煤公司和投资者完成了约为$1.5 的剩余资金注资。铜煤公司在最终投资中的部分约为$0.9 百万美元,总投资额约为$1.8 百万美元的投资 58.5 持有朝阳新梅0.9 百万和$1.0 分别获得一家少数投资方的$百万美元1.4 分别获得了来自同美的$百万美元和$百万美元的基金1.4 分别收到了来自同美的$百万美元和$百万美元的投资4.5 在朝阳新梅获得这笔额外投资后,中国当地政府在2022年1月认证其为股权投资。2022年4月,同美与少数投资方签订了一份资本增加协议(“资本增加协议”),进一步在朝阳新梅投资约$百万美元。同美在此次投资中的份额约为$2.6 百万美元,其中$1.1 在2022年4月投资了1000万美元和$0.8 在2022年5月投资了1000万美元。 少数投资者所占投资约为$1.9 百万,其中400万美元投资于2022年4月,500万美元投资于2022年5月。 结果,非控股权益增加百万美元,可赎回的非控股权益增加百万美元。 2022年7月,同美和少数投资者又投资了$0.7 百万美元和$0.6 百万美元分别投资于2022年4月和2022年5月。 结果,非控股权益增加百万美元,可赎回的非控股权益增加百万美元。 2022年7月,童美和少数投资者进一步投资了$1.4 百万美元,可赎回的非控股权益增加百万美元。 2022年7月,同美和少数投资者再次投资了$0.1 美创业公司和少数投资者进一步投资了$0.8 百万美元和美元0.6 Chaoyang Xinmei分别投资了百万美元。这完成了增资协议下的投资义务。因此,非控股权益增加了610,000 ,赎回性非控股权益增加了美元57,000。通过这些股权投资后,桐梅的所有权保持在 58.5%。

2022年4月,朝阳金美与某些投资者签署了一项合资协议,为一个新公司创业公司朝阳硕美提供资金,成为我们的合并子公司(“朝阳硕美合资协议”)。朝阳硕美合资协议要求总投资约为美元4.4 百万美元,其中朝阳金美将出资约美元3.3 投资了一千万美元用于购买 75 拥有朝阳金梅百分之1.0 美元的初步投资334,000 美元。因此,非控制权益增加了406,000 美元,可赎回的非控制权益增加了73,000百万美元的资金。0.5 百万美元的投资,并从其中一位少数投资者那里获得了0.2 百万美元的资金。因此,非控制权益增加了0.2 百万美元,并赎回的非控制权益增加了$36,000。2023年5月,朝阳硕美收到了$1.0 百万美元的融资,其中包括来自朝阳金美的$0.3 百万美元的融资,其中包括来自一位少数投资者的$。因此,非控制权益增加了$0.4 百万美元,并赎回的非控制权益增加了$75,000。2023年8月,朝阳硕美收到了$0.6 百万美元的融资,其中包括来自朝阳金美的$0.2 百万美元的融资,其中包括来自一位少数投资者的$。因此,非控制权益增加了$0.2 百万美元和可赎回的非控股权益增加了$44,000朝阳金美已完成其在朝阳硕美合资协议下的投资义务。朝阳金美对朝阳硕美的所有权仍保持在 75%的股份投资后这些股权投资。

2022年4月,通美与某些投资者签署了一项合资协议,为一家名为朝阳凯美石英有限公司(“朝阳凯美”)的新公司提供资金(“朝阳凯美合资协议”),总投资约为$7.6 百万美元,其中通美将为了获得3.0 %的朝阳凯美所有权,资助约$ 40 百万美元。2022年7月,通美和投资者完成了约$的首次融资。2.2 百万美元。通美在投资中的部分大约为$0.9 百万美元。2023年1月,通美向朝阳开美投资了$0.9 百万美元。2023年7月和8月,通美分别向朝阳开美投资了约$0.6 百万美元。2023年9月,通美与同一群投资者再次达成合资协议。根据这项新协议,需要额外投资约$5.6 百万美元,通美承诺资助约$2.3 百万美元。2023年12月,通美首次额外投资了约$0.6 百万美元,随后在2024年6月和7月分别进行了约$0.3 百万美元的额外投资。通美对朝阳开美的持股比例保持在 40% 在这些股权投资之后。

万安山金煤的所有活动在2022年上半年停止,随后于2022年5月解散。万安山金煤的解散对简明合并财务报表的影响不大。

8

目录

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 their 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铜煤中的少数股权。此外,许多员工、关键经理和贡献者购买了 0.4铜煤中的少数股权。此外,保定铜煤和朝阳铜煤被指定为铜煤的全资子公司。2020年,私募股权基金(“投资者”)已向铜煤转移了约48.1 百万美元的新资金。2021年1月,又注资约1.5 百万美元的新资金。根据中国法规,这些投资必须得到相关政府机构的正式批准,在获得批准之前不被视为具有稀释效应。政府于2021年1月25日全额批准约49 百万美元的投资,届时投资者持有铜煤可赎回的非控制权益 7.28。截至2024年9月30日,铜煤的非控制权益和可赎回的非控制权益总额约为 14.5。我们仍然是铜煤的控股股东,并持有铜煤董事会的大部分董事职位。2021年6月,我们以1的价格将AXt-Tongmei出售给了 85.5持有我们的%股权,并且交易是在共同利益持有人之间进行的,交易按净账面价值计入,并导致非控股权益增加$1.2 百万至非控股权益和$1.2 百万至可赎回的非控股权益。

注2. 投资和公平价值计量

我们的投资包括原始到期日超过三个月的工具。 截至2024年9月30日和2023年12月31日,我们的现金和债务投资分类如下(以千为单位):

2024年9月30日

2023年12月31日

 

    

    

总额

    

Gross

    

    

    

总和

    

总和

    

 

按摊销计算的

未实现

未实现的

公平

摊销的

未实现

未实现

公允

 

    

成本

    

Gain

    

(亏损)

    

    

成本

    

收益

    

(亏损)

    

价值

 

分类为:

现金和受限制的现金

$

38,791

$

$

$

38,791

$

50,114

$

$

$

50,114

投资(可供出售):

存单 1

 

 

 

 

2,160

 

(20)

 

2,140

现金总额,受限制的现金和投资

$

38,791

$

$

$

38,791

$

52,274

$

$

(20)

$

52,254

投资的合约到期

一年内到期 2

$

$

$

2,160

$

2,140

$

$

$

2,160

$

2,140

1.存款证书的原始到期日超过三个月。
2.在我们的简明综合资产负债表中分类为“短期投资”。

我们将债务投资管理为一揽子高度市场化证券的单一投资组合,此投资组合旨在应对我们目前的现金需求。存款证书和公司债券通常持有至到期日。

从历史来看,我们以可供出售债务证券组成的投资组合的总未实现损失相对较小,主要是由于正常市场波动,而不是由于增加的信用风险或其他估值问题。

9

目录

关注。 截至2024年9月30日,我们持有的可供出售债务证券存在微不足道的未实现损失,而且从历史数据看,此类未实现损失通常是暂时性的,我们认为按照合同条款收回本金和利息的可能性很大。我们至少每季度或在信用风险或其他潜在估值问题发生变化时审查我们的债务投资组合,以确定是否需要为信用损失或减值设置准备金。确定损失是否为暂时性的考虑因素包括市场价值下降幅度、市场价值低于成本(或调整后成本)的时间长短、信用质量以及我们持有证券并打算持有足够时间以便预期市场价值的任何恢复。

以下表格总结了截至2024年9月30日持有的可供出售债务证券的公允价值和未实现损失,按投资类别和个别证券持续处于未实现损失位置的时间长度分类(以千为单位):

亏损中

亏损中

总计

 

< 12 个月

> 12 个月

亏损位置

 

总和

总和

总和

 

公允

未实现

公允

未实现

公允

未实现

 

截至2024年9月30日

    

价值

    

(亏损)

    

价值

    

(亏损)

    

价值

    

(亏损)

 

投资:

定期存单

$

$

$

$

$

$

全部处于亏损位置

$

$

$

$

$

$

以下表格总结了截至2023年12月31日的可供出售债务证券的公允价值和毛未实现损失,按投资类别和证券处于连续未实现损失位置的时间长度进行汇总(以千为单位):

处于亏损状态

处于亏损状态

总计

 

< 12个月

> 12 个月

亏损位置

 

    

    

    

总和

    

    

    

总和

    

    

    

总和

 

公允

未实现

公允

未实现

公允

未实现

 

截至2023年12月31日

价值

(亏损)

价值

(亏损)

价值

(亏损)

 

投资:

定期存单

$

$

$

2,140

$

(20)

$

2,140

$

(20)

处于亏损位置的总计

$

$

$

2,140

$

(20)

$

2,140

$

(20)

受限制现金

我们持有受限现金,与因常规业务操作暂时受限的现金余额有关。这些余额已被排除在公司的现金余额之外。截至2024年9月30日,受限现金中包含了$13.9 百万美元被包括在我们的简明综合资产负债表中的受限现金中。

对私人持有的原材料公司的投资

我们已经在中国对其他一家私人公司进行了战略性投资,以获取对原材料的竞争成本,这对我们的基板业务至关重要(见注7)。 非合并公司的投资余额按权益法核算,在精简合并资产负债表中计入“其他资产”,截至2024年9月30日和2023年12月31日,分别总计$13.5 百万美元和美元12.5 百万美元。截至2024年9月30日,按权益法核算的公司有 家。 我们的一项股权投资,Beijing JiYa Semiconductor Material Co., Ltd.(“JiYa”),确定其中一项股权投资已完全减值,并将资产余额减记为 。 这导致了一笔$754,000 在我们2023年第二季度的财务报告中计提减值损失。除上述提及外,截至2024年和2023年9月30日的三个月和九个月期间,其他投资未发生减值损失。 没有 在2024年和2023年9月30日结束的三个月和九个月期间,我们对这些投资的剩余部分未发生减值损失。

2023年5月,我们减少了对佳美的持股。 25百分比至 10%的份额降至$827,000由于我们持股比例减少以及我们无法对佳美的经营施加重大影响,我们采用了公允价值计量法进行会计处理。

10

目录

report on the investment in Jia Mei. Our investments under the fair value method are reviewed for other-than-temporary declines in value on a quarterly basis. We monitor our investments for impairment and record reductions in carrying value when events or changes in circumstances indicate that the carrying value may not be recoverable. As of September 30, 2024, our investments in this unconsolidated company had a carrying value of $551,000 and were included in “Other assets” in the condensed consolidated balance sheets. As a result of the share sale, we recognized a gain of $575,000. Additionally, in accordance with Accounting Standards Codification (“ASC”) 321-10-35-2, we adjusted the investment in Jia Mei to its fair value at the time of the sale, which resulted in a gain of $383,000. The gain resulting from the sale and the subsequent remeasurement was incorporated as a component of “Equity in income of unconsolidated joint ventures” in the condensed consolidated statements of operations in the second quarter of 2023.

公允价值衡量

我们主要投资于存款单据、公司债券和票据、政府证券以及货币市场账户。我们会定期或在信用风险或其他潜在估值担忧发生变化时审查我们的债务投资组合。截至2024年9月30日和2023年12月31日,在其他综合收益中包括的净未实现损失总额,扣除税款后为微不足道。我们认为按照合同条款收回本金和利息的可能性很高,这些证券的未实现损失是由于正常市场波动引起的,而不是由于信用风险增加或其他估值担忧。ASC 820建立了三个可能用于衡量公平值的输入级别。一级工具估值是从资产或相同资产的活跃交易市场的实时报价中获取的。二级工具估值是从可供获取的观察到的价格来源中为类似工具获取的。三级工具估值是从几乎没有市场数据的不可观察输入中获取的,这要求我们制定自己的假设。我们定期衡量某些按公平值计量的金融资产和负债,主要包括我们的短期和长期债务投资。 公允价值计量和披露建立了三个可能用于衡量公平值的输入级别。一级工具估值是从资产或相同资产的活跃交易市场的实时报价中获取的。二级工具估值是从可供获取的观察到的价格来源为类似工具获取的。三级工具估值是从几乎没有市场数据的不可观察输入中获取的,这要求我们制定自己的假设。我们定期衡量某些按公平值计量的金融资产和负债,主要包括我们的短期和长期债务投资。

基于活跃市场报价的一级市场价格来进行估值的工具类型包括我们的货币市场基金,通常被分类为公平值层次结构中的一级。我们将可供出售的债务证券(包括存款单据和公司债券)分类为具有二级输入的工具。用于衡量具有二级输入的这些金融工具的公允值的估算技术来源于银行报表、报价市价、经纪人或交易商报表或报价,或具有合理价格透明度的另类定价来源。

我们进行短期外币对冲,旨在抵消美元与日币汇率波动导致的现金风险。我们根据美国通用会计准则(U.S. GAAP)利用实时汇率,在每月末和季末衡量这些外币对冲的公允价值。在季末,未结算的外币对冲会在“应计负债”中抵销,并被分类为三级资产和负债。截至2024年9月30日,在整个季度,从对冲安排至每月末结算的公允价值变动对简明合并财务报表的影响微乎其微。

2024年9月30日前三个月和前九个月里,估值技术或相关输入没有发生变化。 没有 2024年9月30日前三个月和前九个月间,各种公允价值测量水平之间发生了转移。

以下表格总结了截至2024年9月30日根据ASC 820重复计量的金融资产和负债(以千为单位):

11

目录

    

    

在活跃市场中

    

重要的

 

活跃的市场

对于相同的重要其他方

不可观察的

 

截至目前余额

相同资产

可观察输入

输入

 

    

2024年9月30日

    

(一级)

    

(2级)

    

非市场可观察到的输入(三级)

 

资产:

投资:

定期存单

$

$

$

$

总计

$

$

$

$

以下表格总结了截至2023年12月31日按照ASC 820测量的我们的金融资产和负债的公允价值(以千为单位):

    

    

报价中

    

重要的

 

活跃的市场

重要的另一半

不可观察

 

截至日期的余额

相同的资产

可观察的输入

输入

 

    

2023年12月31日

    

(一级)

    

(2级)

    

(3级)

 

资产:

投资:

存款证书

$

2,140

$

$

2,140

$

总计

$

2,140

$

$

2,140

$

非经常性计量基础上的公允价值测量项目

表格中未包括一些资产,这些资产需进行非经常性公允价值测量。这些资产包括对私人持有公司的投资,按权益法或公允价值法进行核算(见注7)。我们在2024年和2023年截至9月30日的三个月和九个月内,未记录这些投资的除其他临时性减值损失。

注3. 存货

存货的元件如下所示(以千为单位):

9月30日

运营租赁负债:

    

2024

    

2023

 

存货:

原材料

$

30,535

$

32,910

在制品

 

52,676

 

50,008

成品

 

2,898

 

3,585

$

86,109

$

86,503

截至2024年9月30日和2023年12月31日,存货的账面价值已减去存货准备金$元23.2 分别获得了来自同美的$百万美元和$百万美元的基金21.9 百万,分别用于过剩和陈旧库存$元68,000 和$78,000,分别用于成本或净变现价值准备金。

12

目录

注意 4. 不动产、厂房和设备,净值

我们的不动产、厂房和设备的组成如下总结(以千为单位):

9月30日

运营租赁负债:

2024

2023

物业,厂房和设备:

机器和设备,按成本

$

68,288

$

65,918

减:累计折旧和摊销

(44,429)

(42,112)

建筑,成本

142,371

125,786

减:累计折旧和摊销

(26,463)

(23,339)

租赁改良,按成本

 

7,828

 

7,596

减:累计折旧和摊销

(6,446)

(5,984)

在建工程

 

25,310

 

38,483

$

166,459

$

166,348

截至2024年9月30日,施工中的余额为$25.3 百万,其中400万美元投资于2022年4月,500万美元投资于2022年5月。 结果,非控股权益增加百万美元,可赎回的非控股权益增加百万美元。 2022年7月,同美和少数投资者又投资了$18.5 百万与我们在新的丁星和和佐地点的建筑有关,$2.3 百万用于尚未投入使用的制造设备采购,$4.5 百万用于我们其他合并子公司的施工中的余额。截至2023年12月31日,施工中的余额为$38.5 百万,其中$31.2 百万用于我们在新的丁星和和佐地点的建筑,$3.1 百万用于尚未投入使用的制造设备采购,$4.2 百万是用于我们其他合并子公司的在建施工。

注5. 应计负债

应计负债的元件总结如下(单位:千):

9月30日,

12月31日,

    

2024

    

2023

 

优先股送转应付

$

2,901

$

2,901

与在建工程相关的应付款项

1,481

7,249

应计薪酬及相关费用

1,135

3,707

应计专业服务费

947

868

应计所得税$39,614

654

其他应交税费

564

493

经营租赁负债流动部分

488

458

应计产品保修

392

703

来自客户预付款

367

305

其他人事相关费用

336

286

销售退货的应计

45

39

其他应计负债

2,631

2,010

$

11,941

$

19,019

13

目录

备注6. 关联方交易

在2021年9月和2021年10月,我们的合并子公司朝阳新梅分别收到一位少数投资者提供的资金$0.9 分别获得了来自同美的$百万美元和$百万美元的基金1.0 百万美元。截至2021年12月31日,在我们的简明合并资产负债表中,有$1.9 百万美元计入非控股权利的短期贷款。2021年12月和2022年1月,同一子公司从铜煤获得了$1.4 百万美元和$1.4 分别增加了数百万美元。2022年1月,中国地方政府认证这笔额外资金作为超羊新梅的股权投资。结果,非控股权益增加了 $2.2 百万美元,可赎回的非控股权益增加百万美元。 2022年7月,同美和少数投资者再次投资了$0.2 百万美元。非控制股利短期借款减少至美元0。2022年4月,礼顺与少数投资者签署了增资协议,进一步向超阳新梅投资约合美元4.5 百万。2022年4月和2022年5月,超阳新梅分别从礼顺获得了美元和美元的资金,作为股权投资。2022年4月和2022年5月,少数投资者分别投资了美元和美元1.1 百万和0.8 百万美元,分别作为股权投资。2022年4月和2022年5月,少数投资者投资了0.7 百万美元和0.6 百万元及五百万元,分别。因此,非控股权益增加了$1.4 百万元和可赎回非控股权益增加了$0.1 美创业公司和少数投资者进一步投资了$0.8 百万元和$百万元0.6 Chaoyang Xinmei分别投资了百万美元。这完成了增资协议下的投资义务。因此,非控股权益增加了610,000 ,赎回性非控股权益增加了美元57,000。通过这些股权投资后,桐梅的所有权保持在 58.5%的股份投资后这些股权投资。

2022年9月,我们的合并子公司朝阳丽美完成了将土地及其附属建筑物出售给我们的股权投资实体。,朝阳开美,总代价为 $1.5 百万。2023年1月,朝阳开美向朝阳丽美支付了 $1.5 百万。截至2024年9月30日,有 $0 百万计入了我们简明合并资产负债表中的“预付费用和其他流动资产”。

我们的关联交易政策旨在禁止所有冲突。 在关联方与我们之间的交易中,除非经董事会批准,否则不得涉及利益。本政策适用于我们所有员工、董事以及我们的合并子公司。我们的高管在中国大陆合资企业的董事会上担任董事席位。有关详细信息,请参见第7注。

第7注。对私人持有的原材料公司的投资

为了以竞争成本获得对我们基板业务至关重要的原材料,我们在中国的私营公司进行了战略投资。这些公司是我们整体供应链战略的一部分。

截至2024年9月30日,投资情况总结如下(以千为单位):

截至投资余额

9月30日

运营租赁负债:

会计

所有权

*

公司

    

2024

    

2023

    

摊销方法

    

百分比

南京金美镓业有限公司。

$

592

$

592

 

合并

 

** 85.5

%

朝阳金美镓业有限公司。

1,820

1,820

合并

** 85.5

%

北京博宇半导体船舶工艺科技有限公司

 

1,346

 

1,346

 

合并

 

** 85.5

%

朝阳硕美高纯度半导体材料有限公司

3,122

3,122

合并

**** 75.0

%

朝阳新美高纯度半导体材料有限公司。

7,331

7,331

合并

 

*** 58.5

%

$

14,211

$

14,211

北京吉亚半导体材料有限公司。

$

4,681

3,806

股权

39

%

晓益兴安镓有限公司。

4,969

5,516

股权

** 25

%

朝阳凯美石英有限公司。

3,883

3,154

Equity

***** 40

%

$

13,533

$

12,476

峨眉山甲美高纯度金属有限公司。

 

551

 

551

 

公允价值

 

****** 10

%

$

551

$

551

* 这些百分比反映了在中国重新组织完成后目前生效的所有权,以及2021年1月私人股权投资者进行新资金注资完成后的所有权。 所有板块反映了中国重组完成时的所有权,以及2021年1月私募股权投资者完成新资金注资时的所有权。

14

目录

**在2020年底,为了鲁能董事会在科创板上市股份的申请,我们重新组织了在中国的实体结构。JinMei和BoYu及其子公司,之前隶属于AXt,Inc.,被分配给了鲁能并与鲁能有效合并,尽管它们保留了各自的法律实体地位,是鲁能的全资子公司。 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% 的股份是在Tongmei中的少数股东利益。此外,许多雇员、关键经理和贡献者购买了% 的少数股权。 0.4%。基金投资者在2020年转移了大约$48.1 百万美元的新资金。2021年1月,又注资约1.5 新资本金额于2021年初获得基金。根据中国法规,这些投资必须经有关政府机构正式批准,并在获得批准前不被视为稀释。政府于2021年1月25日批准了约$49 百万投资整体上,那时投资者在通酶持有可赎回的非控制性权益,占通酶 7.28。截至2024年9月30日,铜煤的非控制权益和可赎回的非控制权益总额约为 14.5%。AXt仍然是通酶的控股股东,并持有通酶董事会大部分董事职位。

***在2021年2月,通酶与某些投资者签署了一项合资协议,用于基金朝阳信盟。

**** In April 2022, ChaoYang JinMei signed a joint venture agreement with certain investor to fund a new company, ChaoYang ShuoMei.

***** In April 2022, Tongmei signed a joint venture agreement with certain investors to fund a new company, ChaoYang KaiMei.

****** In May 2023, we sold 15% of our equity investments in Jia Mei to a third party. We now own 10% of Jia Mei and account for it under the fair value method.

2023年5月,我们减少了对佳美的持股。 25百分比至 10%的份额降至$827,000考虑到我们所持股权的减少,我们不再对其运营和财务政策具有重大影响,因此我们采用公允价值核算方法对对嘉美的投资进行报告。由于股份出售,我们确认了一笔盈利$。575,000此外,根据ASC321-10-35-2,我们将对嘉美的投资调整为出售时的公允价值。出售和后续重新计量导致的收益被纳入“未纳入联合经营企业收益”这一项目之中 在2023年第二季度的合并利润表中,股份出售和后续重新计量产生的收益包括以下内容: 2023年第二季度的合并利润表中包括股份出售和后续重新计量所产生的收益,具体包括以下内容:

金额

    

(以千计)

所得到的公允价值对等物

$

779

外国所得税预扣

48

携带价值为 15峨眉山佳美高纯金属有限公司的%

(252)

出售金属期货获得的收益 15在峨眉山嘉美高纯金属有限公司的%

$

575

金额

(以千计)

对峨眉山嘉美高纯金属有限公司持有投资的公允价值。

$

551

持有非控股投资的账面价值(10%)

(168)

由于重新计量而获得保留的非控制投资收益(10%)

$

383

对嘉美投资进行其他非暂时性减值检查,每季度进行一次。截至2024年9月30日的三个月和九个月内,我们没有为嘉美投资记录任何其他非暂时性减值损失。

15

目录

2023 年 11 月,我们的 46东海县东方高纯电子材料有限公司(“东方”)的股权百分比已出售给第三方,对价约为美元0.6 百万,包括原材料、设备和车辆。结果,我们对东方股权的持股权益从 46% 到 0%。出售造成的亏损作为 “未合并合资企业的收益权益” 的一部分纳入了2023年第四季度的合并经营报表。销售损失包括以下内容:

金额

    

(以千计)

收到的对价的公允价值

$

585

账面价值为 46东海县东方高纯电子材料有限公司的百分比

(1,710)

出售物品时确认的损失 46东海县东方高纯电子材料有限公司的百分比

$

(1,125)

尽管我们在每家私营原材料公司的董事会中都有代表,但这些公司的日常运营都由当地管理层而不是我们管理。有关各自的短期战略和运营、正常业务资本支出和成品销售的决策由当地管理层在我们定期的指导和意见下做出。

对于未合并的AXT少数投资实体,投资余额包含在我们的简明合并资产负债表中的 “其他资产” 中,总额为美元13.5 百万和美元12.5 截至 2024 年 9 月 30 日和 2023 年 12 月 31 日,分别为百万人。截至2024年9月30日,我们在朝阳凯美、吉亚、孝义兴安镓有限公司(“小义兴安”)和佳美的所有权为 40%, 39%, 25%,以及 10分别为%。这些少数股权投资实体不被视为可变权益实体,因为:

所有少数投资实体都有自己的可持续业务;

我们的投票权与我们的所有权利益成正比;

我们仅在公司产生的损失和/或剩余回报中确认我们各自的份额;以及

我们对这些公司没有控股权,不维持对这些公司的运营或管理控制权,不控制董事会,也不需要向这些公司提供额外的投资或财务支持。

2022年6月,我们收到了一美元1.3 来自BoYu的百万股息。2022年7月,我们收到了一美元1.5 来自我们的股权投资实体之一小义兴安的百万股息。2022年8月,我们收到了一美元125,000 来自我们的股权投资实体之一JiYa的股息。2023 年 4 月和 2023 年 11 月,小易兴安派发了美元的股息1.8 百万,JiYa派发的股息为美元2.0 百万和美元0.5 分别为百万。2024 年 5 月,小易兴安分发了 $2.1 向我们分发百万股息。我们目前无意向投资者分配公司结构下的收益。所有这些分配都支付给了中国公司和少数股东。

16

目录

AXT的少数投资实体未进行合并,并按权益法计量。截至2024年9月30日和2023年的三个月和九个月,权益投资实体的经营摘要信息如下(单位:千美元):

截至三个月

截至九个月

9月30日,

9月30日

    

2024

    

2023

    

2024

    

2023

 

净收入

$

10,473

$

8,834

$

27,915

$

24,486

毛利润

$

4,876

$

2,620

$

12,966

$

8,174

营业收入

$

4,135

$

1,962

$

11,541

$

7,134

净利润

$

3,443

$

1,449

$

8,624

$

6,307

我们从这些未合并且按股权法计量的少数投资实体中获得的收入份额分别为$1.0 百万美元和$0.4 百万,截至2024年和2023年9月30日结束的三个月。我们从这些未合并且按股权法计量的少数投资实体中获得的收入份额分别为$2.5 百万和$1.4 2024年和2023年截至9月30日的九个月分别为XX百万美元。在简明合并利润表中,“未纳入合并联营企业收入中的股权”包括从嘉美销售中获得的收益,金额为$958,000 ,导致净收入为$2.3 百万美元。

17

目录

注8.股东权益

股东权益的简化合并报表

(以千计)

2024年9月30日结束的三个月和九个月的股东权益变动如下:

 

 

 

 

 

 

 

 

 

累积

其他

AXt, Inc.

 

 

 

总计

 

优先的

 

Common

 

额外的

 

累积

 

全面的

股东的

 

非控制权益

 

股东的

  

股票

  

股票

  

实收资本

  

赤字

  

收益(损失)

  

Equity

  

利益

  

Equity

 

截至2023年12月31日的余额

 

$

3,532

 

$

44

 

$

238,452

 

$

(32,040)

 

$

(5,999)

$

203,989

 

$

23,494

 

$

227,483

普通股期权行使

20

20

20

同梅股份股权激励的非控股权益部分

(24)

(24)

13

(11)

股票补偿

614

614

614

童美股票期权薪酬

195

195

195

净亏损

(2,083)

(2,083)

106

(1,977)

其他综合损失

(1,627)

(1,627)

(187)

(1,814)

2024年3月31日的余额

$

3,532

$

44

$

239,257

$

(34,123)

$

(7,626)

$

201,084

$

23,426

$

224,510

普通股期权行使

5

5

5

统盟股票酬劳的非控制权益部分

(15)

(15)

7

(8)

股票补偿

621

621

621

同美股票期权酬劳

94

94

94

净亏损

(1,516)

(1,516)

316

(1,200)

其他综合损失

(601)

(601)

(69)

(670)

截至2024年6月30日的余额

 

$

3,532

$

44

$

239,962

$

(35,639)

$

(8,227)

$

199,672

$

23,680

$

223,352

普通股期权已行使

1

2

3

3

通美股份的非控股权利益部分股权补偿

(14)

(14)

7

(7)

股票补偿

723

723

723

同美股权报酬

97

97

97

净亏损

(2,937)

(2,937)

190

(2,747)

其他综合收益

3,189

3,189

372

3,561

2024年9月30日的余额

 

$

3,532

$

45

$

240,770

$

(38,576)

$

(5,038)

$

200,733

$

24,249

$

224,982

净利润(损失)和其他全面收入(损失)应归可赎回的非控股权益所有者(净损失140,000和$376,0002024年9月30日结束的三个月分别为($)210,000和$118,0002024年9月30日结束的九个月分别为($),不存在于上表中。

18

目录

2023年9月30日结束的三个月和九个月的股东权益变动如下:

 

 

 

 

 

 

 

 

 

累积

其他

AXt, Inc.

 

 

 

总计

 

优先的

 

Common

 

额外的

 

累积

 

全面的

股东的

 

非控制权益

 

股东的

  

股票

  

股票

  

实收资本

  

赤字

  

收益(损失)

  

Equity

  

利益

  

Equity

截至2022年12月31日的余额

 

$

3,532

 

$

44

 

$

235,308

 

$

(14,159)

 

$

(3,118)

$

221,607

 

$

23,293

 

$

244,900

常见股票期权行使

8

8

8

对附属公司的投资,包括非控股权益

(36)

(36)

239

203

投资于具有可赎回非控制权益的子公司

(36)

(36)

(36)

Noncontrolling interest portion of Tongmei stock-based compensation

33

33

(16)

17

股票补偿

717

717

717

同美股票期权薪酬

198

198

198

净亏损

(3,348)

(3,348)

(169)

(3,517)

其他综合收益

858

858

70

928

2023年3月31日余额

$

3,532

$

44

$

236,192

$

(17,507)

$

(2,260)

$

220,001

$

23,417

$

243,418

行使普通股期权

2

2

2

投资于附属公司,有非控股利益

(74)

(74)

380

306

对可赎回非控制权益的子公司投资

(75)

(75)

(75)

同煤公司股权激励中的非控制权益部分

31

31

(14)

17

股票补偿

720

720

720

同煤股票期权激励

192

192

192

净利润(损失)

(5,089)

(5,089)

38

(5,051)

其他全面收益(亏损)

(5,915)

(5,915)

(623)

(6,538)

截至2023年6月30日的余额

 

$

3,532

$

44

$

236,988

$

(22,596)

$

(8,175)

$

209,793

$

23,198

$

232,991

普通股期权行权

投资拥有非控股权益的子公司

(43)

(43)

242

199

对可赎回的非控股权投资

(44)

(44)

(44)

统美股份股份报酬中的非控股权益部分

(139)

(139)

68

(71)

股票补偿

703

703

703

同煤股票期权激励

188

188

188

净亏损

(5,823)

(5,823)

(236)

(6,059)

其他全面收益(亏损)

(406)

(406)

(54)

(460)

截至2023年9月30日的余额

 

$

3,532

$

44

$

237,653

$

(28,419)

$

(8,581)

$

204,229

$

23,218

$

227,447

净亏损和其他全面收入归可赎回非控股权益人为$356,000 和$55,000截至2023年9月30日的三个月分别为$807,000 和$615,000截至2023年9月30日的九个月分别为$,未列入上表。

19

目录

截至2023年7月31日,续借贷款协议下未偿还的借款额为没有 重新分类调整从累积其他全面收益(损失)中 截至2024年和2023年9月30日的三个和九个月.

股票回购计划

2014年10月27日,我们的董事会批准了一个股票回购计划,根据该计划,我们可以回购高达 $5.0 我们可以不时地在开放市场上回购这些股票,并且这些回购是使用我们现有的现金余额和营业收入产生的现金资金支持的。 在2015年,我们以约908,000美元的平均价格回购了大约2.52美元每股,总购买价格约为2.3百万美元,在股票回购计划下。 没有 在2016年至今回购了股份 2023在2024年9月30日结束的三个月和九个月内,我们没有回购任何股份 没有在2024年9月30日,根据已批准的回购计划,尚有大约$2.7 万美元可用于未来的回购。目前,我们不计划回购其它股份。

注9. 股权激励

我们根据ASC 718规定来计算股权补偿。 Stock Compensation-补偿 股权补偿成本是在每个授予日期根据奖励的公允价值来衡量,并在员工必要服务期内确认为费用。我们所有的股权补偿均作为权益工具进行核算。

2015年5月,我们的股东批准了我们的2015年股权激励计划(“2015计划”)。2015计划取代了2007计划。2007计划的股份储备成为2015计划的储备,连同2015计划下批准发行的额外股份。 399,562 在2019年5月,我们的股东批准了2015计划下的发行的额外股份。 3,000,000 在2021年5月,我们的股东批准 1,600,000 进行了额外股份的发行。 3,600,000 根据2015年计划,董事会于2024年5月批准了对发行额外股份的修正案,增加了用于发行的股份数量。 3,600,000 可以在2015年计划下进行的奖励包括股票期权、股票增值权、限制性股票、限制性股票单位、绩效股票、绩效单位、延期薪酬奖励和其他基于股票的奖励。未经股东批准,不得对2015年计划下授予的股票期权和股票增值权重新定价。股票期权和股票增值权不得低于公允市场价授予。一般而言,股票期权或股票增值权的完全归属期不得少于授予日起的期限,且不得超过授予后 公司使用资产和负债的会计方法来计算所得税。根据这种方法,根据资产和负债的金融报表及税基之间的暂时区别,使用实施税率来决定递延税资产和递延税负债,该税率适用于预期差异将反转的年份。税法的任何修改对递延税资产和负债的影响将于生效日期在财务报告期内确认在汇总的综合收益报表上。 从授予日起超过的期限内不得行使。 10年 限制性股票、限制性股票单位和绩效奖励一般不得超过 三年 期内变得归属(或者 十二个月 基于绩效指标的权益奖励通常具有分期解禁的特性。然而,授予顾问的期权和授予独立董事会成员的限制性股票奖励通常在分期解禁 一年 2015计划确实允许员工享有类似的分期解禁。

以下表格总结了与我们的股权奖励相关的薪酬成本(以千为单位,每股数据除外):

截至三个月

截至九个月

9月30日

9月30日

    

2024

    

2023

    

2024

    

2023

 

营运成本

$

73

$

102

$

246

$

310

销售、一般和管理费用

 

623

 

639

 

1,702

 

1,926

研发费用

 

124

 

150

 

396

 

482

净损失的净影响

$

820

$

891

$

2,344

$

2,718

截至2024年9月30日,未摊销的与向员工授予的未行权股票期权相关的补偿成本是 $0我们 截至2024年9月30日,由于所涉金额微不足道,未对任何基于股票的补偿进行资本化。 由于所涉金额微不足道,截至2024年9月30日和2023年12月31日,未将任何基于股票的补偿计入存货。

20

目录

我们使用与ASC 718规定一致的Black-Scholes期权定价模型估算股票期权的公允价值。 no 2024年和2023年截至9月30日的三个月和九个月中,授予了期权。

以下表格总结了2024年9月30日截至九个月内的股票期权交易(以千为单位,每股数据除外):

Weighted-

    

    

    

价格

    

 

Weighted-

剩余

 

数量的

平均

加权

总计

 

Options

行权

寿命

截至2023年7月29日的余额

 

期权未行使/未投资的限制性股票,截至2023年10月1日

    

未偿还金额

    

价格

    

(以年为单位)

    

价值

 

2024年1月1日的余额

1,198

$

5.10

 

4.09

$

14

Granted

 

 

已行使

 

(12)

2.24

已取消和已过期

 

2024年9月30日的余额

 

1,186

$

5.13

 

3.38

$

13

2024年9月30日解锁的期权以及预计会解锁的未解锁期权,扣除被放弃的部分

 

1,186

$

5.13

 

3.38

$

13

截至2024年9月30日可行使的期权

 

1,186

$

5.13

 

3.38

$

13

上表中的总体内在价值表示总税前内在价值,基于我们收盘价为$2.42 于2024年9月30日,如果所有期权持有人在该日期行使其期权,持有人将获得的总内在价值。

限制性股票奖励

2024年9月30日结束的为期九个月的限制性股票奖励相关活动摘要如下(以千为单位,每股数据除外):

    

    

平均

 

授予日期

 

股份奖励

    

分享

    

分享价值

 

截至2024年1月1日未归属

1,220

$

3.75

授予

 

204

$

3.08

34,105

 

(166)

$

5.04

被取消

(4)

$

3.29

截至2024年9月30日尚未归属

 

1,254

$

3.47

截至2024年9月30日,未摊销的与未归属限制性股票奖励相关的补偿成本约为$3.0 百万,将按加权平均期限直线摊销。 1.1 年。

风险,绩效股份

在2023年3月和2024年2月,公司发行了分类为股权奖励的风险,绩效股份。根据所需服务期间,根据实现指定财务绩效指标的概率,按照直线法每季度确认费用,预期变化被认可为调整于变动发生的期间。对于未获得归属权的风险,绩效股份,因为服务或绩效条件未得到满足,并且之前已确认的补偿成本将被撤销,不会确认补偿成本。风险,绩效股份有资格根据公司的2015年股权激励计划(“计划”)获得股息相当价值,由董事会确定。公司将在出现弃权时确认弃权。

公司的风险,绩效股份被分类为股权,包含必须满足的绩效和服务条件,员工才能获得股份。2022年2月发行的风险,绩效股份的财务绩效指标是基于2021年年底实际结果与公司2022年年底实际结果的比较。2022年3月发行的风险,绩效股份的财务绩效指标是基于2021年年底实际结果与公司2022年年底实际结果的比较。

21

目录

2023年基于公司2023年的年终实际业绩。2024年2月发行的风险高绩效股票的财务业绩指标基于公司2024年的年终实际业绩。所有绩效股份,如果获得,仍需按年度归属 四年 时期,除了 股票将在一周年之际归属,因为业绩衡量标准分别基于2023年和2024年的年终业绩。

风险高绩效股票的公允价值是根据公司最近一个财季的财报公开发行后的第一天公司普通股的收盘价确定的,此前经薪酬委员会和董事会批准,该批准被视为授予日期。2024年2月和2023年3月被归类为股票奖励的风险高绩效股票的每股公允价值为 $2.28 和 $3.71,分别地。

2022年2月15日,薪酬委员会建议向莫里斯·杨博士提供补助金,董事会批准了该补助金 114,320 本计划下存在风险的绩效股份。2022年2月15日,薪酬委员会批准了对加里·菲舍尔的补助金 32,100 本计划下存在风险的绩效股份。如果绩效财务指标小于 50已实现的百分比这些股份将被没收。如果绩效财务指标介于 50% 和 200已达到%,则相应的按比例分配 114,320 发行给杨博士的股票将有资格归属,相应的按比例分配 32,100 向菲舍尔先生发行的股票将有资格归属。任何没有资格归属的股份都将被没收。如果目标财务指标超过 200%,则有资格归属的风险绩效股票的最大数量为 114,320 送给杨博士和 32,100 送给菲舍尔先生2023年2月14日,薪酬委员会开会并认证,2022财年实现的年收入同比增长率(以百分比表示)为 2.7%。因此, 的风险绩效股票有资格归属。

2023 年 3 月 15 日,薪酬委员会建议向莫里斯·杨博士提供补助金,董事会批准了该补助金 223,590 本计划下存在风险的绩效股份。2023 年 3 月 15 日,薪酬委员会批准了向加里·菲舍尔提供的补助金 77,600 本计划下存在风险的绩效股份。如果达到了2023财年的最低财务指标,则根据绩效公式,相应的部分 223,590 发行给杨博士的股票将有资格归属,相应部分的股份 77,600 向菲舍尔先生发行的股票将有资格归属。如果超过目标财务指标并实现了2023财年的额外财务指标,则根据该绩效公式,将获得超过目标股票数量的额外股份,获得的最大额外股票数量上限为 100目标的百分比。如果未达到2023财年的最低财务指标,则这些奖励将被没收。2024年2月20日,薪酬委员会开会并认证未达到2023财年的最低收入指标。因此, 的风险绩效股票有资格归属。

2024 年 2 月 20 日,薪酬委员会建议向莫里斯·杨博士提供补助金,董事会批准了该补助金 223,590 本计划下存在风险的绩效股份。2024 年 2 月 20 日,薪酬委员会批准了向加里·菲舍尔提供的补助金 77,600 本计划下存在风险的绩效股份。如果实现了2024财年的最低财务指标,则根据绩效公式,相应的部分财务指标 223,590 发行给杨博士的股票将有资格归属,相应部分的股份 77,600 向菲舍尔先生发行的股票将有资格归属。如果超过目标财务指标,则将根据该绩效公式获得超过目标股数的额外股份,获得的最大额外股票数量上限为 100目标的百分比。如果未达到2024财年的最低财务指标,则这些奖励将被没收。

22

目录

2024年9月30日,我们未投资的高风险绩效股份状况摘要如下(以千为单位,每股数据除外):

    

    

平均

授予日期

股份奖励

    

分享

    

分享价值

截至2024年1月1日未归属

38

$

15.37

授予(1)

 

226

$

2.28

34,105

 

$

被取消

$

截至2024年9月30日尚未归属

 

264

$

4.16

(1)呈现的股份数量是基于实现 150% 目标财务绩效指标,如在风险、绩效股协议中定义。

截至2024年9月30日,未确认的股权报酬支出为$0.3 百万未承认的与未归属人员、绩效股相关的补偿费用,预计将在加权平均期内确认。 1.3 年。

注10 每股净亏损

基本每股净利润(亏损)是根据期内流通在外的普通股加权平均数量计算的,减去尚待回购和未实现的股票奖励的普通股数。每股摊薄净利润(亏损)是根据期间内流通的普通股加权平均数量和潜在摊薄普通股数量计算的。未行使的股票期权和受限制股票奖励的摊薄效应通过库存法体现在摊薄每股收益中。潜在摊薄普通股包括可通过行使股票期权和解禁受限制股票奖励而发行的普通股。在净损失年度中,潜在摊薄普通股被排除在计算普通股加权平均数的计算之外,因为其效应对计算产生增稀效应。

基本和摊薄每股净亏损的分子和分母调节如下(以千为单位,每股数据除外):

截至三个月

截至九个月

9月30日

九月三十日

    

2024

    

2023

    

2024

    

2023

 

分子:

归属于AXt,Inc.的净损失

$

(2,937)

$

(5,823)

$

(6,536)

$

(14,260)

Less:优先股股利

 

(44)

 

(44)

 

(132)

 

(132)

可归属于普通股股东的净亏损

$

(2,981)

$

(5,867)

$

(6,668)

$

(14,392)

分母:

基本每股净亏损的分母-加权平均普通股份

 

43,157

 

42,638

 

43,079

 

42,574

摊薄效应:

普通股期权

 

 

 

 

限制性股票奖励

 

 

 

 

每普通股摊薄后净亏损的分母

 

43,157

 

42,638

 

43,079

 

42,574

AXt,Inc.归属于普通股的净损失每股:

基本

$

(0.07)

$

(0.14)

$

(0.15)

$

(0.34)

摊薄

$

(0.07)

$

(0.14)

$

(0.15)

$

(0.34)

期权被排除在每股稀释净亏损之外,因为其影响是不利于稀释的

 

1,186

 

1,200

 

1,186

 

1,200

受限股票不包括在摊薄每股亏损中,因为影响是抗稀释的

 

1,518

 

1,006

 

1,518

 

1,006

股市 883,000$,总股数0.001 2024年9月30日和2023年12月31日,价值为$的带有面值的A系列优先股已发行并流通3,532,000,不是可投票也不可转换的优先股

23

目录

配合 5.0% 累积年度股息率,在董事会宣布时支付,以及每股 $4 每股优先股权,优先于普通股,必须在向普通股股东分配任何收益之前支付。这些优先股是在1999年5月28日完成我们对Lyte Optronics, Inc.的收购时发行给Lyte Optronics, Inc.股东的。

注11.地域板块信息和外国业务

分段信息

我们经营消费和调味品两个业务板块。消费板块在全球范围内生产、销售和分销香料、草药、调味料混合物、调味品等美味佳肴。我们的消费板块销售规模包括零售渠道(如杂货店、大型量贩店、仓储俱乐部、折扣店和药店)和电子商务,使用“McCormick”品牌以及“French's”、 “Frank's RedHot”、“OLD BAY”、“Lawry's”、“Zatarain's”、“Simply Asia”、“Thai Kitchen”、“Ducros”、“Vahine”、“Cholula”、“Schwartz”、“Club House”、“Kamis”、“DaQiao”、“La Drogheria”、“Stubb's”和“Gourmet Garden”等世界各地品牌。我们的调味品解决方案板块面向食品制造商和餐饮行业销售,通过分销商直接或间接销售,我们在中国的业务除外,中国的餐饮销售由我们的消费板块管理并报告。之一 设计、开发、制造和分销高性能复合和单元半导体衬底,并销售与这些衬底密切相关的原材料。根据ASC 280,分部报告,我们的首席经营决策者已确定为首席执行官,他审查经营结果以做出关于资源分配和评估公司表现的决策。由于我们在进行操作 之一 部门,所有财务部门和产品线信息均可在简明综合财务报表中找到。

产品信息

以下表格显示不同产品类型的营业收入金额(以千为单位):

截至三个月

截至九个月

9月30日

9月30日

    

2024

    

2023

    

2024

    

2023

 

 

产品类型:

底物

$

15,007

$

10,385

$

51,655

$

34,901

原材料和其他

 

8,638

 

6,981

 

22,601

 

20,465

总计

$

23,645

$

17,366

$

74,256

$

55,366

地理信息

以下表格显示了针对运往对应地理区域客户的产品报告的营业收入金额(以千为单位):

截至三个月

截至九个月

9月30日

9月30日

    

2024

    

2023

    

2024

    

2023

 

 

地域板块:

中国

$

13,807

$

10,307

$

42,271

$

28,698

台湾。

2,140

2,491

10,142

6,369

日本

 

1,623

 

558

 

3,409

 

3,489

亚太地区(不包括中国、台湾和日本)

797

894

2,307

2,722

欧洲(主要是德国)

2,720

2,407

11,134

8,992

北美洲(主要是美国)

 

2,558

 

709

4,993

5,096

总计

$

23,645

$

17,366

$

74,256

$

55,366

24

目录

长期资产主要包括房地产、厂房及设备和经营租赁权使用资产,并归属于其所在地的地理位置。按地域板块划分的长期资产净值(减值后)如下(单位:千元):

截至

九月三十日

运营租赁负债:

    

2024

    

2023

 

各地域板块的长期资产,减去折旧:

北美洲

$

1,423

$

1,631

中国

 

167,487

 

167,516

$

168,910

$

169,147

重要客户

没有 顾客在截至2024年9月30日和2023年的三个月的营业收入中占了10%。我们的前十 五个营运部门:猎鹰创意集团、PDP、Sierra Parima、目的地运营和Falcon's Beyond Brands,所有这些板块均为可报告板块。公司的首席营运决策者是执行主席和首席执行官,他们评估财务信息以做出营运决策、评估财务表现和分配资源。营运板块基于产品线组织,对于我们的基于位置的娱乐板块,根据地理位置组织。营运板块的结果包括直接归属于板块的成本,包括项目成本、工资和与工资有关的开支以及与业务板块运营直接相关的间接费用。未分配的企业费用,包括高管、会计、财务、市场营销、人力资源、法律和信息技术支持服务、审计、税收企业法律开支的工资和相关福利,作为未分配的企业开销呈现,成为报告板块的总收入(亏损)和公司未经审计的汇总财务报表结果之间的调节项。 客户,虽然不相同 五个营运部门:猎鹰创意集团、PDP、Sierra Parima、目的地运营和Falcon's Beyond Brands,所有这些板块均为可报告板块。公司的首席营运决策者是执行主席和首席执行官,他们评估财务信息以做出营运决策、评估财务表现和分配资源。营运板块基于产品线组织,对于我们的基于位置的娱乐板块,根据地理位置组织。营运板块的结果包括直接归属于板块的成本,包括项目成本、工资和与工资有关的开支以及与业务板块运营直接相关的间接费用。未分配的企业费用,包括高管、会计、财务、市场营销、人力资源、法律和信息技术支持服务、审计、税收企业法律开支的工资和相关福利,作为未分配的企业开销呈现,成为报告板块的总收入(亏损)和公司未经审计的汇总财务报表结果之间的调节项。 每个时期的客户,代表 29%和 312024年9月30日和2023年分别代表我们营业收入的%。

没有 客户代表我们2024年9月30日和2023年结束的九个月内营业收入的10%。我们的头部 五个营运部门:猎鹰创意集团、PDP、Sierra Parima、目的地运营和Falcon's Beyond Brands,所有这些板块均为可报告板块。公司的首席营运决策者是执行主席和首席执行官,他们评估财务信息以做出营运决策、评估财务表现和分配资源。营运板块基于产品线组织,对于我们的基于位置的娱乐板块,根据地理位置组织。营运板块的结果包括直接归属于板块的成本,包括项目成本、工资和与工资有关的开支以及与业务板块运营直接相关的间接费用。未分配的企业费用,包括高管、会计、财务、市场营销、人力资源、法律和信息技术支持服务、审计、税收企业法律开支的工资和相关福利,作为未分配的企业开销呈现,成为报告板块的总收入(亏损)和公司未经审计的汇总财务报表结果之间的调节项。 尽管客户不尽相同, 五个营运部门:猎鹰创意集团、PDP、Sierra Parima、目的地运营和Falcon's Beyond Brands,所有这些板块均为可报告板块。公司的首席营运决策者是执行主席和首席执行官,他们评估财务信息以做出营运决策、评估财务表现和分配资源。营运板块基于产品线组织,对于我们的基于位置的娱乐板块,根据地理位置组织。营运板块的结果包括直接归属于板块的成本,包括项目成本、工资和与工资有关的开支以及与业务板块运营直接相关的间接费用。未分配的企业费用,包括高管、会计、财务、市场营销、人力资源、法律和信息技术支持服务、审计、税收企业法律开支的工资和相关福利,作为未分配的企业开销呈现,成为报告板块的总收入(亏损)和公司未经审计的汇总财务报表结果之间的调节项。 各个时期的客户,分别代表 30%和 252024年和2023年截至9月30日的九个月的营业收入的%。

我们对客户的财务状况进行持续信用评估,并在认为必要时限制授信金额,但通常不要求提供抵押物。 Ginkgo 客户占超开多 10截至2024年9月30日,我们应收账款余额占比,no 客户占超开多 10截至2023年12月31日,我们应收账款余额占比。

附注12. 承诺和事项

保护协议

我们已经与董事和高管签订了赔偿协议,要求我们赔偿董事和高管由于其作为董事或高管的身份或服务而可能产生的责任(除了因故意不当行为导致的责任),为他们提前支付因任何可能获得赔偿的诉讼而产生的费用,并在合理条件下获得董事和高管保险,我们目前已经具备该保险。

产品保修

我们为产品提供特定时间范围的保修服务,一般来说, 十二个月防止材料缺陷。当相关营业收入确认时,我们在销售成本中提供预计未来保修义务的费用。应计的保修费用代表我们在销售时期能合理预计的,预计要为在保修期内失效的产品部件维修或更换所需的全部费用。应计的预估保修费用金额主要基于产品故障的历史经验以及当前维修成本信息。每季度,我们会审查已计提的余额并更新历史保修费用趋势。

25

目录

以下表格反映了截至2024年和2023年9月30日三个月和九个月内包含在压缩综合资产负债表中“应计负债”中的保修准备金的变动情况(以千为单位):

截至三个月

截至九个月

 

九月三十日

九月30日,

 

    

2024

    

2023

    

2024

    

2023

 

开始计提产品保修

$

421

$

852

$

703

$

669

已发出的保修金的应计

 

94

 

104

 

282

 

762

与预先存在的保修相关的调整,包括到期和估计变更

 

9

 

21

 

(251)

 

(18)

保修维修成本

 

(132)

 

(101)

 

(342)

 

(537)

Ending accrued product warranty

$

392

$

876

$

392

$

876

合同义务

在2020年,我们与一家竞争对手签订了一项交叉许可和盟约协议("交叉许可协议"),该协议于2020年1月1日开始,到2029年12月31日到期。交叉许可协议是一项固定成本的交叉许可协议,而不是基于营业收入或单位的变量成本交叉许可协议。根据交叉许可协议,我们有义务每年进行支付 10年 期内行权。

土地购买与投资协议

2017年,保定通美在中国定兴建立了硅片加工生产线。除了与一家私人房地产开发公司签订的土地权和建筑购买协议以收购我们的新制造业-半导体设施外,保定通美还与定兴当地政府签订了合作协议。定兴当地政府除了承诺全力支持和合作,还将根据保定通美达到一定里程碑而发放一定的信用额度或折扣。保定通美则同意随着时间雇佣当地工人,按时支付税款,并最终展示价值、资产、资金总额约为1000万美元的投资。该投资将包括用于购买土地和建筑的现金,存在于本地银行以我们名义存放的现金,新旧设备的总价值(包括将来可能用于硒化铟和锗基片生产的设备),客户清单或我们基片最终用户的视为价值,例如,三维传感VCSEL(垂直腔面发射激光器)的最终用户,当地公民就业的视为价值,我们专有工艺技术的视为价值,其他知识产权,其他无形资产以及其他价值附加项目。没有必须在特定时间完成的时间表或截止日期,而是一项保定通美与定兴当地政府达成的善意契约。此外,如果任何一方违反协议,协议中并未规定具体处罚。然而,协议规定双方各自有权要求对方赔偿损失。在特定条件下,定兴当地政府可按评估价购买土地和建筑。我们认为这类合作协议在中国是正常的、惯例的和普遍的,未来的估值是灵活的。朝阳通美在中国卡佐市也与当地政府签订了类似的协议,尽管规模较小。朝阳通美在卡佐市的目标总投资约为90 百万美元15 价值不超过百万美元的资产和资本。此外,博宇与和和市也达成了类似协议。博宇在和和市的目标投资总额约为$8 价值不超过百万美元的资产和资本。

具有违约罚款的购买义务

在正常业务过程中,我们向各种供应商发出购买订单。在某些情况下,如果我们取消购买订单,我们可能会支付罚款。 截至2024年9月30日,公司没有任何未履行的购买订单会导致罚款。

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目录

法律诉讼

我们可能不时涉及司法或行政诉讼,涉及业务常规事务。我们预计这些事项中的任何一个,无论是个别的还是总体的,都不会对我们的业务、财务状况、现金流或运营结果产生重大不利影响。

2024年5月6日,在美国纽约东区地方法院代表购买或获取我们公开交易证券的个人或实体提起了股东集体诉讼诉讼。被告包括我们、首席执行官Morris S. Young和首席财务官Gary L. Fischer。法院将案件转至位于我们总部所在地加利福尼亚北区地方法院。已指定首席原告,并提交了修正诉状。修正诉状声称一个假定的诉讼期间为2021年3月24日至2024年4月3日(“诉讼期”)。修正诉状声称被告违反了1934年修正案《证券交易法》第10(b)条和20(a)条,以及被告制定并颁布的规则1005,要求未指定的经济赔偿、利息和律师费。2014年11月8日截止提交驳回动议。

2024年8月22日,在加利福尼亚北区地方法院,一位股东对首席执行官Morris S. Young、首席财务官Gary L. Fischer、现任董事David C. Chang、Jesse Chen和Christine Russell,以及前董事Leonard J. LeBlanc提起了一起衍生诉讼,公司被指定为名义被告。诉状声称被告基于假定的股东集体诉讼原告方诉状中所陈述的指控,违反了对公司的受托责任。驳回动议截止日期为2024年11月15日。

目前无法合理评估这些诉讼的最终结果,也无法合理估计这些诉讼可能的损失或损失范围。管理层认为这些索赔毫无根据,并打算积极进行辩护。

注意13。其他收益(费用),净额

2024年9月30日和2023年,其他收益(费用),净额,包括分别来自政府机构的技术创新和就业创造奖的$0.5 百万和$0.1 百万,其他收益(费用),净额,分别为截至2024年9月30日和2023年的九个月,包括一笔$1.9 百万和$1.9 分别获得了分别来自政府机构的数百万美元作为技术创新和就业创造奖。

此外,我们分别在2024年和2023年截至9月30日的三个月期间,分别获得了外币交易所得$800 和$146,000 分别在2024年和2023年截至9月30日的九个月期间,我们分别获得了外币交易所得$101,000 $的收益和$的损失分别在2024年6月30日结束的三个月和六个月内产生,在2023年6月30日结束的三个月和六个月内产生的亏损为$的外汇合规之外的其他费用。57,000 ,分别为2024年和2023年截至9月30日的九个月期间。

附注14. 所得税

我们按照ASC主题740的规定进行所得税核算,所得税(“ASC 740”)要求使用实施税率来确认递延税资产和负债,以反映已记录资产和负债的账面与税基之间的暂时差异。ASC 740还要求若递延税资产可能不会实现的部分超过实现的概率,递延税资产须减记减值准备。

我们根据全球收入的地理构成和每个地域的税法规定(尤其是中国)提供所得税准备。计算税务责任涉及对估计复杂税法应用中不确定性影响的重要判断,尤其是在中国等外国国家。

我们将与不确定税务立场相关的利息和罚款识别在所得税费用中。2024 年 9 月 30 日结束的三个月和九个月的所得税费用包括 no 利息和罚款。截至2024年9月30日,我们已经计提了与不确定税务立场相关的利息和罚款。我们报送所得税 no

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returns in the U.S. federal, various states and foreign jurisdictions. Currently, there is no tax audit in any of the jurisdictions and we do not expect there will be any significant change to this. 

Provision for income taxes for the three and nine months ended September 30, 2024 was mostly related to our wholly owned China subsidiaries and our partially owned subsidiaries in China. Income taxes and certain state taxes, have been provided for our U.S. operations as most of the income in the U.S. had been fully offset by utilization of federal and state net operating loss carryforwards.

Under the 2017 Tax Cuts and Jobs Act, research and experimental (“R&E”), expenditures incurred or paid for tax years beginning after December 31, 2021 will no longer be immediately deductible for tax purposes. Instead, businesses are now required to capitalize and amortize R&E expenditures over a period of five years for research conducted within the U.S. or 15 years for research conducted in a foreign jurisdiction. We capitalize the R&E expense incurred by our China subsidiaries and amortize it over 15 years.

California Senate Bill 167 was signed into law by the acting governor on June 27, 2024. The bill makes several tax changes designed to alleviate the 2024-2025 budget. For tax years beginning on or after January 1, 2024, and before January 1, 2027, net operating losses (NOLs) are suspended for both corporate and personal income taxes. The suspension will not apply to any taxpayer with net business income or modified adjusted income of less than $1 million. Another provision in Senate Bill 167 limits the use of credits for tax years beginning on or after January 1, 2024, and before January 1, 2027. During this period, a business (including all taxpayers that are members of a combined report) may claim a total of only $5 million in credits under both the Corporation and Personal Income Tax laws (including the carryover of any business credit). Since the Company’s profit level is below $1 million, Bill 167 has no impact on the Company.

Note 15. Revenue

Revenue Recognition

We manufacture and sell high-performance compound semiconductor substrates including indium phosphide, gallium arsenide and germanium wafers, and our consolidated subsidiaries sell certain raw materials, including high purity gallium (7N Ga), pyrolytic boron nitride (pBN) crucibles and boron oxide (B2O3). After we ship our products, there are no remaining obligations or customer acceptance requirements that would preclude revenue recognition. Our products are typically sold pursuant to purchase orders placed by our customers, and our terms and conditions of sale do not require customer acceptance. We account for a contract with a customer when there is a legally enforceable contract, which could be the customer’s purchase order, the rights of the parties are identified, the contract has commercial terms, and collectibility of the contract consideration is probable. The majority of our contracts have a single performance obligation to transfer products and are short term in nature, usually less than six months. Our revenue is measured based on the consideration specified in the contract with each customer in exchange for transferring products that are generally based upon a negotiated formula, list or fixed price. Revenue is recognized when control of the promised goods is transferred to our customer, which is either upon shipment from our dock, receipt at the customer’s dock, or removal from consignment inventory at the customer’s location, in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods.

We have elected to account for shipping and handling as activities to fulfill the promise to transfer the goods. Shipping and handling fees billed to customers in a sales transaction are recorded as an offset to shipping and handling expenses. Sales taxes and value added taxes in foreign jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and, therefore, are excluded from revenue.

We do not provide training, installation or commissioning services. We provide for future returns based on historical data, prior experience, current economic trends and changes in customer demand at the time revenue is recognized. We do not recognize any asset associated with the incremental cost of obtaining revenue generating customer contracts. As such, sales commissions are expensed as incurred, given that the expected period of benefit is less than one year.

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Contract Balances

Contract assets are recorded when we have a conditional right to consideration for our completed performance under the contracts. Accounts receivables are recorded when the right to this consideration becomes unconditional. We believe the fair value of our accounts receivable approximates its carrying value due to its short maturities and nominal credit risk. We do not have any material contract assets as of September 30, 2024. In some contracts we require payment in advance of shipment, per a billing schedule reflected in our customer contracts, and the payment is recorded as a contract liability. The following table reflects the contract liabilities balance, which is included in “Accrued liabilities” on the condensed consolidated balance sheets, as of September 30, 2024 and December 31, 2023 (in thousands):

September 30, 

December 31,

2024

2023

Contract liabilities

$

367

$

305

During the three and nine months ended September 30, 2024, the Company recognized $9,000 and $163,000, respectively, of revenue that was included in the contract balances as of December 31, 2023. During the three and nine months ended September 30, 2023, the Company recognized $1,000 and $278,000, respectively, of revenue that was included in the contract balances as of December 31, 2022.

Disaggregated Revenue

In general, revenue disaggregated by product types and geography (see Note 11) is aligned according to the nature and economic characteristics of our business and provides meaningful disaggregation of our results of operations. Since we operate in one segment, all financial segment and product line information can be found in the condensed consolidated financial statements.

Note 16. Loans and Line of Credit

Our bank loans and credit facilities typically have a term of 12 months or less and are included in “Short-term loans” in our condensed consolidated balance sheets. The following table represents short-term bank loans as of September 30, 2024 and December 31, 2023 (in thousands, except interest rate data):

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Table of Contents

Loan

Interest

December 31, 

September 30, 

Subsidiary

Bank

Detail

Rate

Start Date

Due Date

2023

2024

Tongmei

Bank of China (1)

$

1,848

3.5

%  

January-23

January-24

$

1,795

$

-

2,184

2.8

%  

March-23

March-24

2,118

-

376

2.7

%  

September-23

September-24

386

-

876

3.5

%  

November-23

November-24

876

884

1,003

3.5

%  

November-23

November-24

1,003

1,012

Bank of China (2)

2,911

3.5

%  

January-23

January-24

2,825

-

2,770

3.0

%  

January-24

January-25

-

2,851

Bank of China (5)

1,426

2.4

%  

September-24

September-25

-

1,426

Bank of Communications (1)

1,455

3.3

%  

January-23

January-24

1,414

-

1,380

3.8

%  

May-23

May-24

1,414

-

1,373

3.8

%  

July-23

May-24

1,414

-

1,376

3.0

%  

May-24

May-25

-

1,426

2,480

3.0

%  

June-24

May-25

-

2,566

China Merchants Bank (1)

4,367

3.7

%  

January-23

January-24

4,235

-

1,386

3.5

%  

January-24

January-25

-

1,426

692

3.5

%  

February-24

February-25

-

713

692

3.5

%  

April-24

April-25

-

713

Bank of Beijing (3)

2,290

4.2

%  

January-23

January-24

2,220

-

3,541

3.2

%  

June-23

May-24

3,626

-

1,380

3.2

%  

June-23

February-24

1,414

-

1,414

3.0

%  

December-23

December-24

1,414

1,426

3,600

3.0

%  

March-24

February-25

-

3,706

1,386

3.0

%  

March-24

December-24

-

1,426

3,580

3.0

%  

June-24

June-25

-

3,706

Industrial Bank (1)

2,757

4.3

%  

June-23

June-24

2,825

-

2,744

4.3

%  

July-23

July-24

2,825

-

2,744

4.3

%  

September-23

September-24

2,825

-

2,851

3.9

%  

September-24

September-25

-

2,851

NingBo Bank (1)

2,744

4.2

%  

August-23

September-24

2,820

-

1,271

4.3

%  

November-23

November-24

1,271

1,284

2,825

4.3

%  

December-23

December-24

2,825

2,851

1,647

4.3

%  

January-24

January-25

-

1,700

1,258

4.3

%  

May-24

March-25

-

1,303

Industrial and Commercial Bank of China (1)

2,744

3.3

%  

September-23

September-24

2,825

-

2,851

3.3

%  

September-24

September-25

-

2,851

NanJing Bank (1)

2,752

3.8

%  

October-23

October-24

2,752

2,779

China Citic Bank (1)

2,752

3.0

%  

June-24

June-25

-

2,851

2,851

2.9

%  

July-24

July-25

-

2,851

1,426

2.9

%  

September-24

September-25

-

1,426

BoYu

Industrial and Commercial Bank of China (4)

1,414

2.7

%  

December-23

December-24

1,414

-

Industrial and Commercial Bank of China (1)

1,426

2.8

%  

September-24

September-25

-

1,426

Bank of China (1)

1,204

2.4

%  

January-23

January-24

849

-

1,145

2.3

%  

September-24

September-25

-

1,145

NingBo Bank (1)

1,414

3.3

%  

November-23

May-24

1,414

-

1,376

3.0

%  

May-24

November-24

-

1,426

1,145

3.2

%  

July-24

October-24

-

1,140

Industrial Bank (1)

688

3.6

%  

September-23

September-24

708

-

Bank of Communications (1)

1,414

3.0

%  

November-23

May-24

1,414

-

275

3.0

%  

May-24

May-25

-

285

NanJing Bank (1)

1,386

3.5

%  

January-24

January-25

-

1,426

Loan Balance

$

52,921

$

52,876

Collateral for the above bank loans and line of credit

(1)Not collateralized.
(2)ChaoYang LiMei time deposit.
(3)AXT time deposit.
(4)BoYu’s land use rights and its building located at its facility in Tianjin, China. In addition, the December 2023 loan attracts a guarantee fee amounting to 0.7% of the loan amount.
(5)Baoding Tongmei’s land use rights and its building located at its facility in Dingxing, China. In addition, the loan attracts a guarantee fee amounting to 1.0% of the loan amount.

Long-term Loans

On January 30, 2024, the Company secured a new line of credit amounting to $9.7 million, structured as a five-year bank loan. The credit facility bears interest at a rate of 6.5% per annum on the amount drawn from the line of credit.

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Table of Contents

The credit facility is collateralized by the real estate properties owned by ChaoYang Tongmei. In January 2024, the Company borrowed $5.8 million against the credit facility. The intended use of the credit facility is for construction projects. As of September 30, 2024, $5.4 million is included in “Other long-term liabilities” and $428,000 is included in “Short-term loans” in our consolidated balance sheets.

In December 2023, one of our consolidated subsidiaries, ChaoYang XinMei secured a loan of approximately $2.1 million from an unrelated financing company. According to the agreement, ChaoYang XinMei temporarily transferred ownership of its production line and related equipment to the financing company, while retaining the right to use the property for production. At the end of the 30-month contractual period, ChaoYang XinMei holds the option to repurchase the production line and related equipment for $14.00. As of September 30, 2024, $965,000 associated with this financing arrangement is included in “Other long-term liabilities” and $748,000 is included in “Short-term loans” in our consolidated balance sheets.

As of September 30, 2024, the maturities of our long-term loan liabilities in five years (excluding short-term loans) are as follows (in thousands):

Maturity of long-term loans

    

2025

$

321

2026

1,354

2027

998

2028

1,283

2029

2,442

In summary, short-term loans of $54.1 million included under “Short-term loans” in our condensed consolidated balance sheet at September 30, 2024, consisted of $52.9 million of short-term bank loans and $1.2 million of the current portion of long-term debt. Long-term loans of $6.4 million included under “Other long-term liabilities” in our condensed consolidated balance sheet at September 30, 2024 consisted of $5.4 million in a five-year bank loan and $1.0 million in a loan secured by ChaoYang XinMei.

Note 17. Leases

We lease certain equipment, office space, warehouse and facilities under long-term operating leases expiring at various dates through July 2029. The majority of our lease obligations relate to our lease agreement for our facility in Fremont, California with approximately 19,467 square feet, which was scheduled to expire in 2020. Under the terms of the facility lease agreement, in May 2020, we were granted an extension to the term of the lease for an additional three years. Furthermore, in September 2023, we entered into another agreement to extend the lease for an additional five years, commencing December 2023. There are no variable lease payments, residual value guarantees or any restrictions or covenants imposed by the facility lease. The remaining lease obligations relate to a nitrogen system to be used during the manufacturing process for our facility in Dingxing, China. The equipment lease became effective in August 2019 and will expire in July 2029. There are no variable lease payments, residual value guarantees or any restrictions or covenants imposed by the equipment lease. All other operating leases have a term of 12 months or less.

Leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset or the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any one of these criteria. All of our leases are classified as operating leases and substantially all of our operating leases are comprised of equipment and office space leases. None of our leases are classified as finance leases.

For all leases at the lease commencement date, a right-of-use asset and a lease liability are recognized. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease.

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The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All right-of-use assets are reviewed for impairment. The lease liability is initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, our secured incremental borrowing rate for the same term as the underlying lease.

Lease payments included in the measurement of the lease liability comprise the following: the fixed noncancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early.

Lease expense for operating leases consists of the lease payments plus any initial direct costs, primarily brokerage commissions, and is recognized on a straight-line basis over the lease term.

We have elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less. The effect of short-term leases on our right-of-use asset and lease liability was not material.

As of September 30, 2024, the maturities of our operating lease liabilities (excluding short-term leases) are as follows (in thousands):

Maturity of Lease Liabilities

    

2024

$

149

2025

607

2026

621

2027

635

2028

617

Thereafter

156

Total minimum lease payments

2,785

Less: Interest

(304)

Present value of lease obligations

2,481

Less: Current portion, included in accrued liabilities

(488)

Long-term portion of lease obligations

$

1,993

The weighted-average remaining lease term and the weighted-average discount rate for our operating leases as of each date is as follows:

September 30, 

December 31, 

2024

2023

Weighted-average remaining lease term (years)

4.47

5.22

Weighted-average discount rate

5.13

%

5.14

%

Supplemental cash flow information related to leases where we are the lessee is as follows (in thousands):

Nine Months Ended

September 30, 

2024

2023

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

$

441

$

432

The components of lease expense are as follows (in thousands) within our condensed consolidated statements of operations:

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Table of Contents

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2024

2023

2024

2023

Operating lease

$

153

$

136

$

459

$

393

Short-term lease expense

46

36

129

107

Total

$

199

$

172

$

588

$

500

Note 18. Redeemable Noncontrolling Interests

As discussed in Note 1, during the quarter ended December 31, 2020, Tongmei entered into the Capital Investment Agreements with Investors that invested approximately $48.1 million in the form of redeemable noncontrolling interests representing 7.06% of the outstanding shares of Tongmei. An additional investment of approximately $1.5 million of new capital was funded in early 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 entire approximately $49 million investment on January 25, 2021, at which time the Investors owned a redeemable noncontrolling interest in Tongmei of 7.28%. The initial carrying amount of the redeemable noncontrolling interest was recorded at fair value on the date of issuance of Tongmei’s common stock, net of issuance costs and presented in temporary equity on the condensed consolidated balance sheets. This classification is due to the existence of certain contingencies that could result in potential redemption at the fixed purchase price as described below. We currently do not believe that this is probable thus no amortization of the issuance costs has been recorded.

Pursuant to the Capital Investment Agreements with the Investors, each Investor has the right to require AXT to redeem any or all Tongmei shares held by such Investor at the original purchase price paid by such Investor, without interest, in the event the IPO fails to pass the audit of the Shanghai Stock Exchange, is not approved by the Chinese Securities Regulatory Commission (“CSRC”) or Tongmei cancels the IPO application. The aggregate redemption amount is approximately $49 million, subject to the foreign exchange rate variable at time of redemption.

Tongmei submitted its IPO application to the Shanghai Stock Exchange in December 2021 and it was formally accepted for review on January 10, 2022. The Shanghai Stock Exchange approved the IPO application on July 12, 2022. On August 1, 2022, the CSRC accepted for review Tongmei’s IPO application. The STAR Market IPO remains subject to review and approval by the CSRC and other authorities. The process of going public on the STAR Market includes several periods of review and, therefore, is a lengthy process. Subject to review and approval by the CSRC and other authorities, Tongmei hopes to accomplish this goal in the coming months. The listing of Tongmei on the STAR Market will not change the status of AXT as a U.S. public company.

The components of the change in redeemable noncontrolling interests for the nine months ended September 30, 2024 are presented in the following table (in thousands):

Balance as of January 1, 2024

$

41,663

Equity issuance costs incurred

(843)

Stock-based compensation attributable to redeemable noncontrolling interests

29

Net loss attributable to redeemable noncontrolling interests

(210)

Effect of foreign currency translation on redeemable noncontrolling interests

480

Effect of foreign currency translation attributable to redeemable noncontrolling interests

118

Balance as of September 30, 2024

$

41,237

33

目录

注意19. 最近的会计公告

在2023年11月,金融会计准则委员会("FASB")发布了ASU 2023-07——部门报告(主题280):可报告部门披露的改进,旨在增强财务报表中提供的部门信息的透明度和相关性。本次更新的修订要求公共实体披露重要的部门费用、利润或损失及资产等信息,针对每个可报告的部门,按年度和期间披露。该更新适用于2023年12月15日后开始的财年及2024年12月15日后财年内的期间。新标准的采用不会对我们的合并基本报表产生重大影响。

在2023年12月,FASB发布了ASU 2023-09——所得税(主题740):所得税披露的改进,旨在帮助投资者更好地理解实体在管辖税收立法潜在变化下的风险和机会。此外,该更新改善了评估影响现金流预测和资本分配决策的所得税信息的方式。该更新自2024年12月15日后开始的年度期间适用于公共业务实体,按前瞻性方式实施。新标准的采用对我们的合并基本报表将产生不重要的影响。

在2024年3月,FASB发布了ASU 2024-01—— Compensation——股票补偿(主题718)。该更新增加了一个示例,旨在澄清根据主题718适用利润权益奖励的范围。该更新适用于2024年12月15日后开始的年度期间以及这些年度期间内的中期期间。新标准的采用对我们的简明合并基本报表将产生微不足道的影响。

注释20。后续事件

在2024年10月和11月,公司获得了总计$5.7 百万的新资金 一年后将继续自动延长 银行贷款的利率范围从 2.4% 到 3.9%. 其中有$5.7 百万,$3.6 百万为无担保贷款,而剩余的$2.1 百万是由保定通煤的房地产业担保的。在2024年10月和11月,公司偿还了$6.1 百万的现有贷款。贷款偿还还导致受限现金减少$1.4 百万美元。

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第 2 项。管理层的讨论N 以及财务状况和经营业绩分析

本特拉华州公司AxT, Inc.(“AXT”、“公司”、“我们” 和 “我们的” 指AxT, Inc.及其合并子公司)的10-Q表季度报告包含经修订的1933年《证券法》第27A条和经修订的1934年《证券交易法》(“交易法”)第21E条所指的前瞻性陈述。有关我们对经营业绩、市场和客户对我们产品的需求、我们产品的客户资格、我们扩大市场或增加销售的能力、使用在我们基板上制造的芯片或设备的新兴应用,包括在人工智能(“AI”)应用中使用InP晶圆基板、新产品、应用、增强或技术的开发和采用、我们产品和支出应用的生命周期、产品收益和毛利率的声明,级别,通过某些会计公告的影响、我们在资本项目上的投资、增加新工厂的产量、因裁员而产生的潜在遣散费、我们吸引新客户来自中国新制造基地的合格基材的能力、我们利用或提高制造能力的能力,以及我们认为我们有足够的现金和投资来满足未来12个月的需求的信念都是前瞻性陈述。此外,关于完成与我方晶圆制造公司北京通美芯泰科技股份有限公司(“通美”)在上海证券交易所科技创新板(“STAR市场”)的拟议上市相关的步骤、获准在科创板上市的同美股份的声明,通美在科创板上市的时间和完成均为前瞻性陈述。诸如 “期望”、“预期”、“打算”、“计划”、“相信”、“寻求”、“估计”、“目标”、“应该”、“继续”、“将”、“可能” 之类的词语以及此类词语的类似表述或变体旨在识别前瞻性陈述,但不是本10-Q表季度报告中识别前瞻性陈述的唯一手段。此外,有关未来事项的声明均为前瞻性陈述,例如我们的战略和计划、行业趋势和趋势的影响、关税和贸易战、地缘政治紧张局势、中国的出口限制、COVID-19 疫情对我们业务的潜在或预期影响、经营业绩和财务状况、中国的强制性工厂关闭、中国政策法规的变化以及经济周期对我们业务的影响。

我们的前瞻性陈述基于假设,这些假设受与公司运营和业务环境相关的不确定性和因素的影响,这可能导致实际业绩与本10-Q表季度报告中表达或暗示的前瞻性陈述中明示或暗示的业绩存在重大差异。这些不确定性和因素包括但不限于:中国私募股权基金撤回、取消或要求赎回其在同煤的投资,在满足中国各政府机构对同煤投资和通煤股份在科创板上市的要求方面面临的行政挑战,继续开放公司在科创板上市的渠道,投资者对在科创板上市股票的热情以及地缘投资中国之间的政治紧张局势和美国。其他不确定性和因素包括但不限于:重要订单的时间和接收;取消订单和退回产品;使用在我们基板上制造的芯片或设备的新兴应用;最终用户对包含在我们基板上制造的芯片或设备的产品的接受程度;我们向市场推出新产品的能力;竞争对手的产品公告;控制成本和提高效率的能力;利用我们的制造能力的能力;产品产量及其对毛利率的影响;生产线的搬迁和产量的增加;中国可能因空气污染而关闭工厂;COVID-19 或其他传染病疫情;当前 COVID-19 疫苗的供应;关税和其他贸易战问题;中国的出口限制;我们部分控股供应链公司的财务业绩;中国的政策法规;以及本10-Q表季度报告中列出的其他因素,包括标题为 “” 的章节中列出的因素 “风险因素” 见下文第二部分第 1A 项。所有前瞻性陈述均基于管理层截至本10-Q表季度报告发布之日的观点,并存在风险和不确定性,这些风险和不确定性可能导致实际业绩与历史业绩或此类前瞻性陈述中的预期业绩存在重大差异。此类风险和不确定性包括下文第二部分第1A项中标题为 “风险因素” 的部分中列出的风险和不确定性,以及本10-Q表季度报告中其他地方讨论的风险和不确定性,这些风险和不确定性确定了可能干扰或损害我们的业务或导致实际业绩与任何此类前瞻性陈述中的预测存在重大差异的重要因素。

这些前瞻性陈述并不能保证未来的表现。提醒读者不要过分依赖这些前瞻性陈述,这些陈述仅代表截至本文发布之日。我们敦促读者仔细阅读和考虑本10-Q表季度报告中作出的各种披露,这些披露旨在向利益相关方提供可能影响我们的业务、财务状况、经营业绩和前景的风险和因素建议。我们没有义务修改或更新任何前瞻性陈述,以反映本10-Q表季度报告发布之日后可能出现的任何事态发展、事件或情况。 本讨论应与我们的管理层对财务状况和经营业绩的讨论和分析一起阅读

35

目录

2023年度报告(“2023年度报告”)以及本季度报告中包含的简明综合财务报表(表格10-Q)

概述

AXt是一家全球性的材料科学公司,致力于开发和生产高性能复合和单元半导体衬底,也称为晶片。我们的两家子公司生产和出售某些原材料,其中一些用于我们的衬底制造过程,另一些则出售给其他公司。

在典型的硅衬底无法满足半导体或光电子器件的性能要求时,我们的衬底晶片便得以使用。用于生产半导体芯片和其他电子电路的主要衬底是硅制成的。然而,如果以硅作为基础材料,某些芯片可能会过热或执行功能过慢。此外,光电子应用(如LED照明和芯片激光器等)不使用硅衬底,因为它们需要无法使用硅实现的波形频率。在这些情况下,会使用替代材料或特种材料来替代硅作为首选基材。我们的晶片提供这些替代或特种材料。我们不设计或制造芯片,通过研究、开发和生产特种材料晶片,为其增值。我们有两个产品线:特种材料衬底和与这些衬底密切相关的原材料。我们的复合衬底将铟与磷(铟磷化物:InP)或镓与砷(砷化镓:GaAs)结合。我们的单元素衬底是由锗(Ge)制成的。

InP是一种高性能半导体晶片基板,用于宽带和光纤应用、5g概念基础设施和数据中心连接。数据中心使用InP器件进行高速光学数据传输。我们相信人工智能应用的增长将增加对高速数据传输的需求,这可能导致这些数据中心对InP基板的需求增加。目前,InP基板正被用于某些消费产品中,包括移动设备中的接近传感器、生物识别可穿戴设备和其他健康监测应用。近年来,InP需求增加。半绝缘GaAs基板用于创建各种高速微波元件,包括用于手机、卫星通信和广播电视应用的功率放大器芯片。半导GaAs基板用于创建光电产品,如用于各种应用的发光二极管(LED),包括汽车照明、园艺、标识、显示、传感器和机器视觉。半导GaAs基板也用于制造工业激光器。GaAs晶片还可用于制造面向提高屏幕技术的人脸识别和微型LED的垂直腔面发射激光器(VCSELs)。Ge基板用于各种应用,例如用于空间和陆地光伏应用的太阳能电池片。

我们的供应链策略包括几家整合的原材料公司。其中一家整合公司生产用于单晶体生长过程中的高温(通常在500摄氏度到1500摄氏度范围内)生长过程的热解硼氮(pBN)坩埚,生长OLED(有机发光二极管)工具时的扩散环,在MOCVD(金属有机化学气相沉积)反应器和MBE(分子束外延)反应器中的外延层生长。我们在自己的晶体生长过程中使用这些pBN坩埚,它们也在开放市场上向其他公司销售。第二家整合公司将原始镓转化为纯化镓。我们使用纯化镓来生产我们的GaAs基板,它也在开放市场上向其他公司销售,用于生产磁性材料、高温温度计、单晶体生长过程,包括砷化镓、氮化镓、胆砷化镓和磷化镓晶体等材料和合金。除了纯化镓,第二家整合公司还生产InP基础材料,然后我们用来生长单晶体晶体。我们的基板产品组在2023年、2022年和2021年分别产生了我们综合营业收入的63%、79%和75%,而我们的原材料产品组分别为37%、21%和25%。

36

目录

以下图表显示了我们的基板产品及其材料、直径和示例应用,并显示了我们的原材料组主要产品及其示例用途和应用。

产品

  

基板组和晶圆直径

应用样本

磷化铟

• 使用光/激光进行数据中心连接

(磷化铟)

• 在数据中心内实现高速数据传输,以支持人工智能应用

2”, 3”, 4”

• 5g通信

• 光纤激光器和检测器

• 消费设备

• 被动光网络(PONs)

• 硅光子学

• 光子集成电路(PICs)

• 热光伏(TPV)

• 射频放大器和开关(军事无线电 & 5g概念)

• 红外发光二极管(LED)运动控制

• 激光雷达用于机器人和自动驾驶车辆

• 红外热成像

• 砷化镓

• Wi-Fi设备

(氮化镓 - 半绝缘体)

• 物联网设备

1”, 2”, 3”, 4”, 5”, 6”

• 高性能晶体管

• 电视直播

• 无线设备的功率放大器

• 卫星通信

• 用于无人机和汽车的高效率太阳能电池

• 太阳能电池

• 砷化镓

• 高亮度LEDs

(氮化镓 - 半导体)

• 使用微型LED的屏幕显示

1”, 2”, 3”, 4”, 5”, 6”, 8”

• 打印头激光和LED

• 使用VCSEL进行3D感应

• 使用VCSEL进行idc概念通信

• 工业机器人/近红外传感器

• 激光加工、切割和钻孔

• 光耦合器

• 用于无人机和汽车的高效太阳能电池

• 其他激光器

• 夜视镜

• 用于机器人和自主车辆的激光雷达

• 电池片

• 多结构电池片用于卫星

(锗)

• 光学传感器和探测器

2”, 4”, 6”

• 陆地集中光伏(CPV)电池

• 红外探测器

• LED的载体晶圆

原材料组

6N+和7N+纯化的氮化镓

• 用于单晶棒的关键材料,如:

- 砷化镓 (GaAs)

- 氮化镓 (GaN)

- 锑化镓 (GaSb)

- 磷化镓 (GaP)

三氧化二硼 (B2O3)

• III-V化合物半导体晶锭生长的封装材料

镓镁合金

• 用于在半导体晶圆的外延生长中合成有机镓化合物

热解硼氮化物(pBN)坩埚

• 用于生长单晶复合半导体晶体棒时使用

• 用作生长OLED工具时的浸渗环

pBN绝缘零部件

• 用于MOCVD反应器

• 用于在分子束外延(MBE)反应器中生长外延层时使用

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All of our substrate products and raw material products are manufactured in the People’s Republic of China (PRC or China) by our PRC subsidiaries and PRC joint ventures. The PRC generally has favorable costs for facilities and labor compared with comparable facilities in the United States, Europe or Japan. Our supply chain includes partial ownership of raw material companies in China (subsidiaries/joint ventures). We believe this supply chain arrangement provides us with pricing advantages, reliable supply, market trend visibility and better sourcing lead-times for key raw materials central to manufacturing our substrates. In the event of industry-wide supply shortages we believe our vertically integrated supply chain strategy will be even more advantageous. Our raw material companies produce materials, including raw gallium (4N Ga), high purity gallium (6N and 7N Ga), starting material for InP, arsenic, germanium, germanium dioxide, pyrolytic boron nitride (pBN) crucibles and boron oxide (B2O3). We have board representation in all of these raw material companies. We consolidate the companies in which we have either a controlling financial interest, or majority financial interest combined with the ability to exercise substantive control over the operations, or financial decisions, of such companies. We use the equity method to account for companies in which we have noncontrolling financial interest and have the ability to exercise significant influence, but not control, over such companies. We purchase portions of the materials produced by these companies for our own use and they sell the remainder of their production to third parties.

In 2015, the Beijing city government announced its decision to move most of its offices to the Tongzhou district where our original manufacturing facility is currently located. The Beijing city government has moved thousands of government employees into this district. The government has constructed showcase tower buildings and overseen the establishment of new apartment complexes, retail stores and restaurants. A large park, named Green Heart City Park, was built across the street from our facility and Universal Studios has developed an amusement park within a few miles of our facility. To create room and upgrade the district, the city instructed virtually all existing manufacturing companies, including Tongmei, to relocate all or some of their manufacturing lines. We were instructed to relocate our gallium arsenide manufacturing lines. For reasons of manufacturing efficiency, we elected to also move part of our germanium manufacturing line. Our indium phosphide manufacturing line, as well as various administrative and sales functions, remain primarily at our original site.

Begun in 2017, the relocation of our gallium arsenide production lines is now completed. Our PRC subsidiary, Baoding Tongmei Xtal Technology Co., Ltd. (“Baoding Tongmei”), entered into volume production in 2020. To mitigate our risks and maintain our production schedule, we moved our gallium arsenide equipment in stages. By December 31, 2019, we had ceased all crystal growth for gallium arsenide in our original manufacturing facility in Beijing and transferred 100% of our ingot production to the new manufacturing facility of our PRC subsidiary, ChaoYang Tongmei Xtal Technology Co., Ltd., (“ChaoYang Tongmei”), in Kazuo, a city approximately 250 miles from Beijing. We transferred our wafer processing equipment for gallium arsenide to Baoding Tongmei’s new manufacturing facility in Dingxing, a city approximately 75 miles from Beijing. These new facilities enabled us to expand capacity and upgrade some of the equipment. In 2021 and 2022, we added additional equipment, including certain more advanced equipment. We have also invested in additional buildings to complement the initial construction and add capacity as needed. Our PRC subsidiaries also acquired sufficient land to enable them to add facilities, if needed in the future. We believe our success in the relocation and our ability to add capacity in the future gives us competitive advantages. In addition, a new level of technological sophistication in our manufacturing capabilities is enabling us to support the major trends that we believe are likely to drive demand for our products in the years ahead.

New customer qualifications and expanding capacity as needed require us to continue to diligently address the many details that arise at each of our sites. A failure to properly accomplish this could result in disruption to our production and have a material adverse impact on our revenue, our results of operations and our financial condition. If we fail to meet the product qualification and volume requirements of a customer, we may lose sales to that customer. Our reputation may also be damaged. Any loss of sales could have a material adverse effect on our revenue, our results of operations and our financial condition.

On November 16, 2020, we announced a strategic initiative to access China’s capital markets by beginning a process to list shares of Tongmei in an initial public offering (the “IPO”) on the STAR Market, an exchange intended to support innovative companies in China. We formed and founded Tongmei in 1998 and believe Tongmei has grown into a company that will be an attractive offering on the STAR Market. To qualify for a STAR Market listing, the first major step in the process was to engage private equity firms in China (“Investors”) to invest funds in Tongmei. By December 31,

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2020, Investors, which consist of 10 private equity funds, had 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 Tongmei for a total investment of approximately $48.1 million. The currency used in the investment transactions was the Chinese renminbi, which has been converted to approximate U.S. dollars for this Quarterly Report on Form 10-Q. The remaining investment of approximately $1.5 million of new capital was funded in January 2021. The government approved the approximately $49 million investment in its entirety on January 25, 2021. In exchange for an investment of approximately $49 million, the Investors received a 7.28% redeemable noncontrolling interest in Tongmei.

Pursuant to the Capital Investment Agreements with the Investors, each Investor has the right to require AXT to redeem any or all Tongmei shares held by such Investor at the original purchase price paid by such Investor, without interest, in the event the IPO fails to pass the audit of the Shanghai Stock Exchange, is not approved by the Chinese Securities Regulatory Commission (“CSRC”) or Tongmei cancels the IPO application. The aggregate redemption amount is approximately $49 million, subject to the foreign exchange rate variable at time of redemption.

Tongmei submitted its IPO application to the Shanghai Stock Exchange in December 2021 and it was formally accepted for review on January 10, 2022. The Shanghai Stock Exchange approved the IPO application on July 12, 2022. On August 1, 2022, the CSRC accepted for review Tongmei’s IPO application. The STAR Market IPO remains subject to review and approval by the CSRC and other authorities. The process of going public on the STAR Market includes several periods of review and, therefore, is a lengthy process. Subject to review and approval by the CSRC and other authorities, Tongmei hopes to accomplish this goal in the coming months. The listing of Tongmei on the STAR Market will not change the status of AXT as a U.S. public company.

An early step in the STAR Market IPO process involved certain entity reorganizations and alignment of assets under Tongmei. In this regard our two consolidated raw material companies, Nanjing JinMei Gallium Co., Ltd. (“JinMei”) and Beijing BoYu Semiconductor Vessel Craftwork Technology Co., Ltd. (“BoYu”) and their subsidiaries were assigned to Tongmei in December 2020. As of June 30, 2021, AXT-Tongmei, Inc., a wholly owned subsidiary of AXT, was assigned to Tongmei. The assignment to Tongmei of JinMei, BoYu and their subsidiaries, and AXT-Tongmei, Inc. increased the number of customers and employees attributable to Tongmei as well as increased Tongmei’s consolidated revenue.

We are neither a PRC operating company nor do we conduct our operations in China through the use of variable interest entities (“VIEs”). Recent statements and regulatory actions by China’s government on the use of VIEs and data security or anti-monopoly concerns have not impacted our ability to conduct our business or continue to list our common stock on the Nasdaq Global Select Market.

The following organization chart depicts the consolidated structure as of September 30, 2024;

Graphic

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The businesses of our PRC subsidiaries and PRC joint ventures are subject to complex and rapidly evolving laws and regulations in the PRC, which can change quickly with little advance notice. The PRC government is a single party form of government with virtually unlimited authority and power to intervene in or influence commercial operations in China. In the past, we have experienced such intervention or influence by the PRC government and a change in the rules and regulations in China when we were instructed by the Beijing municipal government to relocate part of our manufacturing facility in Beijing and expect that such intervention or influence or change in the rules and regulations in China could occur in the future.

In the ordinary course of business, our PRC subsidiaries and PRC joint ventures require permits and licenses to operate in the PRC. Such permits and licenses include permits to use hazardous materials in manufacturing operations. From time to time, the PRC government issues new regulations, which may require additional actions on the part of our PRC subsidiaries and PRC joint ventures to comply. For example, on February 27, 2015, the China State Administration of Work Safety updated its list of hazardous substances. The previous list, which was published in 2002, did not restrict the materials that we use in our wafers. The new list added gallium arsenide. As a result of the newly published list, we were required to seek additional permits. In the ordinary course of business, our PRC subsidiaries and PRC joint ventures apply for permits as required. Any such intervention or influence or change in the rules and regulations in China could result in a material change in our PRC operations and/or the value of our common stock or cause the value of such securities to significantly decline or be worthless.

In September 2018, the Trump Administration announced a list of thousands of categories of goods that became subject to tariffs when imported into the United States. This pronouncement imposed tariffs on the wafer substrates we imported into the United States. The initial tariff rate was 10% and subsequently was increased to 25%. Approximately 6% of our revenue derives from importing our wafers into the United States and we expect the volume to increase. For the nine months ended September 30, 2024 and 2023, we paid approximately $569,000 and $768,000, respectively, in tariffs. The future impact of tariffs and trade wars is uncertain.

Effective as of August 1, 2023, the PRC government instituted a requirement for export licenses for gallium and germanium-related materials and the derivative products using these materials. Tongmei is required to apply for export licenses for gallium arsenide and germanium wafer substrates and each application must state the end use of the product exported. These regulations have required a new level of administration by Tongmei. In some cases, the PRC government has not issued the requisite licenses and our shipments have been delayed.

We have created a vertically integrated supply chain and transfer cash through our corporate structure in three ways. First, we capitalize our investments in our PRC subsidiaries. We licensed to our PRC subsidiaries intellectual property and received from our PRC subsidiaries royalty payments or one-time fees. Second, we use transfer pricing arrangements to buy from our PRC subsidiaries and PRC joint ventures wafers and raw materials. We review the terms of the transfer pricing arrangements annually with our independent registered public accounting firm. In the past, we sold to our PRC subsidiaries capital equipment that we purchased at the request of our PRC subsidiaries and for which we were reimbursed by the applicable PRC subsidiary. In recent years, Tongmei purchases capital equipment from suppliers in Taiwan, Japan, China, Europe or South Korea. Third, our PRC subsidiaries and PRC joint ventures pay dividends to entities within the Company’s corporate structure. For the nine months ended September 30, 2024, the aggregate dividends paid to the Company, directly or to an intermediate entity within our corporate structure, by our PRC subsidiaries and PRC raw material joint ventures were $2.1 million. For the year ended December 31, 2023, the aggregate dividends paid to the Company, directly or to an intermediate entity within our corporate structure, by our PRC subsidiaries and PRC raw material joint ventures were approximately $4.3 million. For the year ended December 31, 2023, the aggregate dividends paid to minority shareholders by our PRC subsidiaries and PRC raw material joint ventures were approximately $0. All of these distributions were paid to our PRC subsidiaries and the minority shareholders. For the nine months ended September 30, 2024 and the year ended December 31, 2023, no transfers, dividends, or distributions were made between the Company and its PRC subsidiaries, or to investors, except for the settlement of amounts owed under our transfer pricing arrangements in the ordinary course of business. We have no current intentions to distribute earnings to our investors under our corporate structure.

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来自一个中国子公司的现金并未用于资助另一个中国子公司的运营。我们的任何中国子公司都未遇到现金在子公司之间转移的困难或限制。我们有现金管理政策,规定了此类资金的金额。

我们面临与企业结构相关的一系列独特法律和运营风险,这些风险均可能导致我们运营的重大变化和/或我们普通股的价值变化,或导致该等证券的价值显著下降或变得一文不值。请仔细阅读以下第二部分第1A项中标题为“风险因素”的部分。特别是,以下风险因素涉及与我们企业结构相关的问题:

尽管我们是特拉华州公司,并且既不是中国运营公司,也不通过VIEs在中国开展业务,但如果我们不小心得出结论认为我们不需要从中国证券监督管理委员会或其他中国中央政府机构获得任何许可或批准来完成在美国的证券公开发行,或者适用的法律、法规或财报解读发生变化,我们可能需要获得此类许可或批准才能完成此类证券的公开发行。
中国中央政府可能随时干预或影响我们的中国业务,而中国的法律法规可能会迅速变化且没有预先通知。
中国中央政府也可能对境外发行和/或对中国发行人的外资投资施加更多控制,这可能导致我们的业务和/或我们的普通股价值发生重大变化。
中国的政治、社会、监管或经济环境的变化可能会影响我们的财务表现。
在中国的合资原材料公司具有一定风险。
在有效利用我们的新砷化镓制造厂时存在风险。
中国中央政府对空气污染和其他形式的环保母基污染越来越关注,他们的改革努力可能会影响我们的制造业,包括间歇性强制停产。
停产或未充分利用我们的制造设施可能导致我们的毛利率下降。
增强的贸易关税、进口限制、出口限制、中国的法规或其他贸易壁垒可能对我们的业务造成实质性损害。
如果中国对货运和运输路线以及进出港口实施限制,这可能会导致运输延误或增加运输成本。
我们的国际业务面临在中国可能产生的不利税务后果。
我们从国际销售中获得了大量的营业收入,我们维持和增加国际销售的能力涉及重大风险。
在中国筹集的股权投资的条款作为在科创板上市的第一步,给予每位投资者在铜煤未能实现IPO时的赎回权。
我们会受到汇率期货的影响,这可能会对我们的营业收入报表产生重大影响。
尽管审计报告由一家独立注册公共会计公司准备,该公司目前正受到公共公司会计监管委员会(“PCAOB”)的全面检查,但无法保证未来的审计报告将由完全受PCAOB检查的独立注册公共会计公司准备。

我们的独立注册公共会计公司是BPm LLP(“BPM”),该公司已在PCAOB注册。《控股境外公司问责法》(“HFCA法案”)要求PCAOB判断是否因该司法管辖区内一个或多个当局采取的立场,无法对位于非美国辖区的注册公共会计公司进行全面检查或调查。2021年12月16日,PCAOB发布了一份报告,确定PCAOB无法对在中国和香港总部设立的注册公共会计公司进行全面检查或调查,因为中国当局在这些司法辖区中采取的立场。BPm总部位于美国,而不在中国或香港。因此,BPm受到PCAOB宣布的判断的影响。因此,公司不期望HFCA法案、加速控股境外公司问责法案及相关法规对公司产生影响,也不期望被证券交易委员会(SEC)根据HFCA法案识别。2022年12月15日,PCAOB撤销了其

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2021年确认,中国和香港当局采取的立场阻止其完全检查和调查在这些司法管辖区注册的公共会计公司。有关我们外国业务及其依赖性风险的更多信息,请参阅以下第II部分,第1A项中名为“风险因素”的部分中的“尽管审计报告由一家独立的注册公共会计公司准备,该公司目前已被PCAOb完全检查,但未来的审计报告未必能由完全被PCAOB检查的独立注册公共会计公司准备”这句话。

关键会计政策、估算及会计估算的变更

我们按照美国公认会计原则(“U.S. GAAP”)编制我们的简明合并基本报表。因此,我们进行影响我们简明合并基本报表所报告金额的估算、假设和判断。这些关于未来事件及其对我们结果影响的估算、假设和判断不能确定,并且是基于我们的历史经验和在该情况下被认为合理的其他假设进行的。这些估算可能会随着新事件的发生或获取额外信息而改变,我们可能会定期面临不确定性,其结果不在我们的控制之中,且可能在较长时间内不会被知晓。

我们已将以下政策确定为对我们的业务运营及财务状况和经营结果理解至关重要的关键政策。关键会计政策对于我们简明合并基本报表的呈现是重要的,并要求我们做出可能对我们的财务报告和经营结果产生重大影响的困难、主观或复杂的判断。它们可能要求我们对在估算时高度不确定的事项做出假设。我们可能用过的不同估算,或者合理可能发生的估算变更,可能对我们的财务状况或经营结果产生重大影响。

收入确认

我们制造和销售高性能复合半导体衬底,包括磷化铟、砷化镓和锗晶圆,我们的合并子公司出售某些原材料,包括高纯度镓(6N和7N Ga)、热解氮化硼(pBN)坩埚和氧化硼(B2O3)。在我们发运产品后,没有剩余的义务或客户接受要求会阻止营业收入的确认。我们的产品通常是根据客户下的采购订单进行销售的,我们的销售条款和条件不要求客户接受。我们在客户与我们之间存在法律可强制执行的合同时,会将其视为合同,这可以是客户的采购订单,合同各方的权利被确立,合同有商业条款,并且合同对价的可收回性是 probable。我们大多数合同具有单一的履行义务,即转让产品,并且通常是短期的,通常少于六个月。我们的营业收入是根据与每位客户的合同中指定的对价来衡量的,该对价通常基于协商、公式、列表或固定价格。营业收入在承诺商品的控制权转移给客户时确认,转移发生在从我们仓库发货时、客户仓库接收时或客户地点的寄售库存中移除时,以反映我们预计将有权获得的对价金额。

应收账款和坏账准备

应收账款按发票金额记录,不计利息。我们至少每季度查看一次,或者在出现信用风险变化时,评估应收账款余额的可收回性,并提供信用损失准备金。当存在类似的逾期状态时,我们按集体(池)方式衡量预期信用损失。我们优先评估美国客户的应收账款,特别关注超过90天的余额,对于位于美国以外的客户应收账款,特别关注超过120天的余额,并在必要时在应收账款余额上建立准备金。外国客户和美国客户在应收账款评估上的差异原因是,美国客户历史上在更短的时间内进行支付,而外国客户的付款周期通常较长。外国的商业惯例通常要求我们给予客户比美国接受的更长的付款期限。

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In accordance with ASC 326-20’s current expected credit loss impairment model, we exercise judgment when determining the adequacy of our reserves as we evaluate historical bad debt trends, general economic conditions in the United States and internationally, and reasonable and supportable forecasts of future economic conditions. Uncollectible receivables are recorded as provision for credit losses when a credit loss is expected through the establishment of an allowance, which would then be written off when all efforts to collect have been exhausted and recoveries are recognized when they are received. As of September 30, 2024 and December 31, 2023, our accounts receivable, net balance was $28.0 million and $19.3 million, respectively, which was net of an allowance of $263,000 and $579,000, respectively. If actual uncollectible accounts differ substantially from our estimates, revisions to the estimated allowance for credit losses would be required, which could have a material impact on our financial results for the future periods.

Warranty Reserve

We maintain a product warranty based upon our claims experience during the prior twelve months and any pending claims and returns of which we are aware. Warranty costs are accrued at the time revenue is recognized. As of September 30, 2024 and December 31, 2023, accrued product warranties totaled $392,000 and $703,000, respectively. The decrease in accrued product warranties is primarily attributable to decreased claims for quality issues experienced by customers. If actual warranty costs or pending new claims differ substantially from our estimates, revisions to the estimated warranty liability would be required, which could have a material impact on our financial condition and results of operations for future periods.

Inventory Valuation

Inventories are stated at the lower of cost (approximated by standard cost) or net realizable value. Cost is determined using the weighted-average cost method. Our inventory consists of raw materials as well as finished goods and work in process that include material, labor and manufacturing overhead costs. We routinely evaluate the levels of our inventory in light of current market conditions in order to identify excess and obsolete inventory, and we provide a valuation allowance for certain inventories based upon the age and quality of the product and the projections for sale of the completed products. As of September 30, 2024 and December 31, 2023, we had an inventory reserve of $23.2 million and $21.9 million, respectively, for excess and obsolete inventory and $68,000 and $78,000, respectively, for lower of cost or net realizable value reserves. If actual demand for our products were to be substantially lower than estimated, additional inventory adjustments for excess or obsolete inventory might be required, which could have a material impact on our business, financial condition and results of operations.

Impairment of Investments

We classify marketable investments in debt securities as available-for-sale debt securities in accordance with Accounting Standards Codification (“ASC”) Topic 320, Investments - Debt Securities. All available-for-sale debt securities with a quoted market value below cost (or adjusted cost) are reviewed in order to determine whether the decline is other-than-temporary. 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. We also 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 expected credit losses or impairment would be necessary.

We also invest in equity instruments of privately-held companies in China for business and strategic purposes. Investments in our unconsolidated PRC joint venture companies are classified as other assets and accounted for under either the equity or fair value method, depending on whether we have the ability to exercise significant influence over the joint venture company’s operations or financial decisions. We monitor our investments for impairment and record reductions in carrying value when events or changes in circumstances indicate that the carrying value may not be recoverable. Determination of impairment is highly subjective and is based on a number of factors, including an assessment of the strength of each company’s management, the length of time and extent to which the fair value has been less than our cost basis, the financial condition and near-term prospects of the company, fundamental changes to the

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business prospects of the company, share prices of subsequent offerings, and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in our carrying value.

For the year ended December 31, 2023, one of our PRC joint venture raw material companies assessed one of its equity investments was fully impaired. We also divested our equity investment in a PRC joint venture. The impairment and divesture resulted in a total of $1.9 million in impairment charges in our financial results for the year ended December 31, 2023. Except as mentioned above, there were no impairment charges for the remainder of these investments during the three and nine months ended September 30, 2024 and 2023.

Fair Value of Investments

ASC 820, establishes three levels of inputs that may be used to measure fair value.

Level 1 instruments represent quoted prices in active markets. Therefore, determining fair value for Level 1 instruments does not require significant management judgment, and the estimation is not difficult.

Level 2 instruments include observable inputs other than Level 1 prices, such as quoted prices for identical instruments in markets with insufficient volume or infrequent transactions (less active markets), issuer bank statements, credit ratings, non-binding market consensus prices that can be corroborated with observable market data, model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities, or quoted prices for similar assets or liabilities. These Level 2 instruments require more management judgment and subjectivity compared to Level 1 instruments, including:

Determining which instruments are most comparable to the instrument being priced requires management to identify a sample of similar securities based on the coupon rates, maturity, issuer, credit rating, and instrument type, and subjectively select an individual security or multiple securities that are deemed most similar to the security being priced.
Determining which model-derived valuations to use in determining fair value requires management judgment. When observable market prices for similar securities or similar securities are not available, we price our marketable debt instruments using non-binding market consensus prices that are corroborated with observable market data or pricing models, such as discounted cash flow models, with all significant inputs derived from or corroborated with observable market data.

Level 3 instruments include unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities. The determination of fair value for Level 3 instruments requires the most management judgment and subjectivity.

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” in the condensed consolidated balance sheets and classified as Level 3 assets and liabilities. As of September 30, 2024, 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 to the condensed consolidated results.

There have been no transfers between fair value measurement levels during the three and nine months ended September 30, 2024 and 2023.

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Impairment of Long-Lived Assets

We evaluate the recoverability of property, equipment and intangible assets in accordance with ASC Topic 360, Property, Plant and Equipment. When events and circumstances indicate that long-lived assets may be impaired, we compare the carrying value of the long-lived assets to the projection of future undiscounted cash flows attributable to these assets. In the event that the carrying value exceeds the future undiscounted cash flows, we record an impairment charge against income equal to the excess of the carrying value over the assets’ fair value. Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable. Assets held for sale are carried at the lower of carrying value or estimated net realizable value.  We had no “Assets held for sale” or any impairment of long-lived assets in the condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023.

Stock-based Compensation

We account for stock-based compensation in accordance with ASC Topic 718, Stock-based Compensation. Share-based awards granted include stock options and restricted stock awards. We utilize the Black-Scholes option pricing model to estimate the grant date fair value of stock options, which requires the input of highly subjective assumptions, including estimating stock price volatility and expected term. Historical volatility of our stock price was used while the expected term for our options was estimated based on historical option exercise behavior and post-vesting forfeitures of options, and the contractual term, the vesting period and the expected term of the outstanding options. Further, we apply an expected forfeiture rate in determining the amount of share-based compensation. We use historical forfeitures to estimate the rate of future forfeitures. Changes in these inputs and assumptions can materially affect the measure of estimated fair value of our stock compensation. The cost of restricted stock awards is determined using the fair value of our common stock on the date of grant.

The award of performance Restricted Stock covering Shares (the “Performance Award”) will be subject to vesting requirements relating to both the recipient of the Performance Award (the “Participant”) continuously remaining a Service Provider through specified dates and achievement of specified performance-based criteria (“Performance Criteria”). Any capitalized term not defined herein will have the meaning ascribed to such term in the 2015 Equity Incentive Plan.

The financial Performance Criteria are metrics based upon prior year-end actual results as compared to the Company’s 2023 year-end actual results with respect to the 2023 Performance Awards or based upon the 2024 year-end actual results with respect to the 2024 Performance Awards. All performance shares, if earned, are still subject to annual vesting over a four-year period except that no shares are vested on the first anniversary because the performance measurement is based on year-end results for the entire year.

We recognize the compensation costs net of an estimated forfeiture rate over the requisite service period of the options award, which is generally the vesting term of four years. Compensation expense for restricted stock awards is recognized over the vesting period, which is generally one, three or four years. Stock-based compensation expense is recorded in cost of revenue, research and development, and selling, general and administrative expenses.

Income Taxes

We account for income taxes in accordance with ASC Topic 740, Income Taxes (“ASC 740”), which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that a portion of the deferred tax asset will not be realized. Our deferred tax assets have been reduced to zero by valuation allowance.

We provide for income taxes based upon the geographic composition of worldwide earnings and tax regulations governing each region, particularly China. The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws, particularly in foreign countries such as China.

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See Note 14—“Income Taxes” in the notes to condensed consolidated financial statements for additional information.

Impact of the COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of COVID-19 to be a pandemic, which continues to be an ongoing pandemic. In March 2020, the President of the United States declared the COVID-19 outbreak a national emergency. For much of the three months ended March 31, 2020, our manufacturing facilities in China were operating at reduced staffing levels to limit the risk of COVID-19 exposure for our employees. In addition, the Chinese government authorities took a number of actions, which included, among others, lockdowns in China which reduced availability of air transport, port closures, and increased border controls or closures, travel restrictions between China and the U.S. to contain the spread of COVID-19. As of 2023, China has lifted all COVID-19 restrictions, allowing us to return to full staffing levels at all three manufacturing locations in China. On May 5, 2023, the World Health Organization declared that COVID-19 no longer constitutes a public health emergency of international concern. However, the extent of the impact of COVID-19 on our results of operations in the future will be dependent on future developments such as, among others, the potential resurgence of COVID-19, the frequency, duration and extent of outbreaks of COVID-19, future actions we or the authorities may take in response to these developments, all of which remain highly uncertain and unpredictable. There is no assurance that we will be able to adjust our business operations to adapt to such developments in the future.

Results of Operations

Revenue

Three Months Ended

Nine Months Ended

September 30, 

Increase

September 30, 

Increase

2024

    

2023

(Decrease)

    

% Change

 

2024

    

2023

    

(Decrease)

    

% Change

 

Product Type:

($ in thousands)

($ in thousands)

Substrates

$

15,007

$

10,385

$

4,622

 

44.5

%

$

51,655

$

34,901

$

16,754

 

48.0

%

Raw materials and other

8,638

6,981

1,657

 

23.7

%

22,601

20,465

2,136

 

10.4

%

Total revenue

$

23,645

$

17,366

$

6,279

36.2

%

$

74,256

$

55,366

$

18,890

34.1

%

Revenue increased $6.3 million, or 36.2%, to $23.6 million for the three months ended September 30, 2024 from $17.4 million for the three months ended September 30, 2023. The substrate revenue increase for the three months ended September 30, 2024 as compared to the same period in 2023 was primarily the result of higher demand for GaAs wafer substrates due to increased demand across a number of applications and higher demand for InP wafer substrates reflecting strong growth from data center applications and continued improvement in passive optical networks and higher demand for Ge wafer substrates in China. Raw materials sales increased $1.7 million, or 23.7%, to $8.6 million for the three months ended September 30, 2024 as compared to the same period in 2023. The increase in raw materials revenue for the three months ended September 30, 2024 as compared to the same period in 2023 was primarily the result of an increase in sales of refined gallium and pBN crucibles resulting from stronger market demand and from the sale of recycled materials.

Revenue increased $18.9 million, or 34.1%, to $74.3 million for the nine months ended September 30, 2024 from $55.4 million for the nine months ended September 30, 2023. The substrate revenue increase for the nine months ended September 30, 2024 as compared to the same period in 2023 was primarily the result of higher demand for GaAs wafer substrates due to increased demand across a number of applications and higher demand for InP wafer substrates reflecting strong growth from data center applications and continued improvement in passive optical networks and higher demand for Ge wafer substrates in China. Raw materials sales increased $2.1 million, or 10.4%, to $22.6 million for the nine months ended September 30, 2024 as compared to the same period in 2023. The increase in raw materials revenue for the nine months ended September 30, 2024 as compared to the same period in 2023 was primarily the result of an increase in sales of refined gallium and pBN crucibles resulting from stronger market demand.

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Table of Contents

Revenue by Geographic Region

Three Months Ended

2023 to 2024

September 30, 

Increase

    

2024

    

2023

    

(Decrease)

    

% Change

 

($ in thousands)

China

$

13,807

$

10,307

$

3,500

 

34.0

%

% of total revenue

 

58

%  

 

60

%  

Taiwan

 

2,140

 

2,491

(351)

(14.1)

%

% of total revenue

 

9

%  

 

14

%  

Japan

1,623

558

 

1,065

 

190.9

%

% of total revenue

 

7

%  

 

3

%  

Asia Pacific (excluding China, Taiwan and Japan)

 

797

 

894

 

(97)

 

(10.9)

%

% of total revenue

 

3

%  

 

5

%  

Europe (primarily Germany)

 

2,720

 

2,407

 

313

 

13.0

%

% of total revenue

 

12

%  

 

14

%  

North America (primarily the United States)

2,558

709

1,849

260.8

%

% of total revenue

11

%  

4

%  

Total revenue

$

23,645

$

17,366

$

6,279

 

36.2

%

Revenue in China increased $3.5 million for the three months ended September 30, 2024, primarily due to higher demand for our InP, GaAs and Ge wafer substrates and refined gallium and pBN crucibles sold by two of our consolidated subsidiaries. Revenue in Taiwan decreased $0.4 million, primarily due to lower demand for our InP and Ge wafer substrates, partially offset by higher demand for our GaAs wafer substrates. Revenue in Japan increased $1.1 million, primarily due to higher demand for our InP and GaAs wafer substrates and pBN crucibles sold by one of our consolidated subsidiaries. Revenue in Asia Pacific decreased $97,000, primarily due to decreased demand for pBN crucibles sold by one of our consolidated subsidiaries. Revenue in Europe increased $0.3 million, primarily due to increased demand for our GaAs, partially offset by lower demand for our Ge and InP wafer substrates. Revenue in North America increased $1.8 million, primarily due to higher demand for our InP wafer substrates and pBN crucibles sold by one of our consolidated subsidiaries, partially offset by lower demand for our GaAs and Ge wafer substrates.

Nine Months Ended

September 30, 

Increase

    

2024

    

2023

    

(Decrease)

    

% Change

 

($ in thousands)

China

$

42,271

$

28,698

$

13,573

 

47.3

%

% of total revenue

 

57

%  

 

52

%  

Taiwan

 

10,142

 

6,369

 

3,773

 

59.2

%

% of total revenue

 

14

%  

 

12

%  

Japan

 

3,409

 

3,489

 

(80)

 

(2.3)

%

% of total revenue

 

4

%  

 

6

%  

Asia Pacific (excluding China, Taiwan and Japan)

 

2,307

 

2,722

 

(415)

 

(15.2)

%  

% of total revenue

 

3

%  

 

5

%  

Europe (primarily Germany)

11,134

8,992

2,142

23.8

%  

% of total revenue

15

%  

16

%  

North America (primarily the United States)

 

4,993

 

5,096

 

(103)

 

(2.0)

%  

% of total revenue

 

7

%  

 

9

%  

Total revenue

$

74,256

$

55,366

$

18,890

 

34.1

%  

Revenue in China increased $13.6 million for the nine months ended September 30, 2024, primarily due to higher demand for our GaAs, InP and Ge wafer substrates and refined gallium and pBN crucibles sold by two of our consolidated subsidiaries. Revenue in Taiwan increased $3.8 million, primarily due to higher demand for our GaAs and InP wafer substrates, partially offset by lower demand for our Ge wafer substrates. Revenue in Japan decreased $80,000 primarily due to lower demand for our GaAs wafer substrates and refined gallium sold by one of our consolidated

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subsidiaries, partially offset by higher demand for pBN crucibles sold by one of our consolidated subsidiaries and for our InP wafer substrates. Revenue in Asia Pacific decreased by $0.4 million, primarily due to decreased demand for our InP, Ge and GaAs wafer substrates and pBN crucibles sold by one of our consolidated subsidiaries, partially offset by higher demand for refined gallium sold by one of our consolidated subsidiaries. Revenue in Europe increased by $2.1 million primarily due to higher demand for our GaAs and InP wafer substrates and pBN crucibles sold by one of our consolidated subsidiaries, partially offset by lower demand for our Ge wafer substrates and for raw gallium sold by one of our consolidated subsidiaries. Revenue in North America decreased by $0.1 million primarily due to lower demand for our GaAs and Ge wafer substrates and pBN crucibles sold by one of our consolidated subsidiaries, partially offset by higher demand for our InP wafer substrates.

Gross Profit

Three Months Ended

Nine Months Ended

September 30, 

Increase

September 30, 

Increase

2024

    

2023

    

(Decrease)

    

% Change

2024

    

2023

    

(Decrease)

    

% Change

($ in thousands)

($ in thousands)

Gross profit

$

5,682

$

1,866

$

3,816

 

204.5

%  

$

19,428

$

8,691

$

10,737

 

123.5

%  

Gross Profit %

 

24.0

%  

 

10.7

%  

 

26.2

%  

 

15.7

%  

Gross profit increased $3.8 million, or 204.5%, to $5.7 million for the three months ended September 30, 2024 from $1.9 million for the three months ended September 30, 2023. The increase in gross profit is the result of higher revenue for our wafer substrates. Gross margin as a percentage of revenue increased due to higher unit volume across all wafer substrate and a favorable shift in product mix.

Gross profit increased $10.7 million, or 123.5%, to $19.4 million for the nine months ended September 30, 2024 from $8.7 million for the nine months ended September 30, 2023. The increase in gross profit is the result of higher revenue across all product lines. Gross margin as a percentage of revenue increased due to higher unit volume across all product lines, and a shift in product mix had a positive impact on gross margin.

Selling, General and Administrative Expenses

Three Months Ended

Nine Months Ended

September 30, 

Increase

September 30, 

Increase

2024

    

2023

    

(Decrease)

    

% Change

2024

    

2023

    

(Decrease)

    

% Change

($ in thousands)

($ in thousands)

Selling, general and administrative expenses

$

5,650

$

5,667

$

(17)

 

(0.3)

%

$

17,656

$

17,439

$

217

 

1.2

%

% of total revenue

 

23.9

%  

 

32.6

%  

 

23.8

%  

 

31.5

%  

Selling, general and administrative expenses decreased $17,000, or 0.3%, to $5.7 million for the three months ended September 30, 2024 from $5.7 million for the three months ended September 30, 2023. The lower selling, general and administrative expenses were primarily from a decrease in compensation related expenses and bad debt expense, partially offset by higher legal and professional service expenses.

Selling, general and administrative expenses increased $217,000, or 1.2%, to $17.7 million for the nine months ended September 30, 2024 from $17.4 million for the nine months ended September 30, 2023. The higher selling, general and administrative expenses were primarily from an increase in legal and professional service expenses, partially offset by a decrease in compensation related expenses.

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Table of Contents

Research and Development

Three Months Ended

Nine Months Ended

September 30, 

Increase

September 30, 

Increase

2024

    

2023

    

(Decrease)

    

% Change

2024

    

2023

    

(Decrease)

    

% Change

($ in thousands)

($ in thousands)

Research and development

$

3,438

$

2,926

$

512

 

17.5

%

$

10,410

$

9,261

$

1,149

 

12.4

%

% of total revenue

 

14.5

%  

 

16.8

%  

 

14.0

%  

 

16.7

%  

 

Research and development expenses increased $0.5 million, or 17.5%, to $3.4 million for the three months ended September 30, 2024 from $2.9 million for the three months ended September 30, 2023. The increase in research and development expenses for the three months ended September 30, 2024 was primarily due to higher development expenses for crystal ingot processing.

Research and development expenses increased $1.1 million, or 12.4%, to $10.4 million for the nine months ended September 30, 2024 from $9.3 million for the nine months ended September 30, 2023. The increase in research and development expenses for the nine months ended September 30, 2024 was primarily due to higher development expenses for crystal ingot processing.

Interest Expense, Net

Three Months Ended

Nine Months Ended

September 30, 

Increase

September 30, 

Increase

2024

    

2023

    

(Decrease)

    

% Change

2024

    

2023

    

(Decrease)

    

% Change

($ in thousands)

($ in thousands)

Interest expense, net

$

391

$

381

$

10

 

2.6

%

$

1,022

$

1,143

$

(121)

 

(10.6)

%

% of total revenue

 

1.7

%  

 

2.2

%  

 

1.4

%  

 

2.1

%  

Interest expense, net increased $10,000, or 2.6%, to $391,000 for the three months ended September 30, 2024 from $381,000 for the three months ended September 30, 2023. Interest expense, net increased primarily due to lower interest income during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

Interest expense, net decreased $121,000, or 10.6%, to $1.0 million for the nine months ended September 30, 2024 from $1.1 million for the nine months ended September 30, 2023. Interest expense, net decreased primarily due to increased interest income during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

Equity in Income of Unconsolidated Joint Ventures

Three Months Ended

Nine Months Ended

September 30, 

Equity in Income

September 30, 

Equity in Income

2024

    

2023

    

Change

    

% Change

2024

    

2023

    

Change

    

% Change

($ in thousands)

($ in thousands)

Equity in income of unconsolidated joint ventures

$

1,007

$

369

$

638

 

172.9

%

$

2,495

$

2,344

$

151

 

6.4

%

% of total revenue

 

4.3

%  

 

2.1

%  

 

3.4

%  

 

4.2

%  

The equity in income of unconsolidated joint venture companies was income of $1.0 million for the three months ended September 30, 2024 as compared to income of $0.4 million for the three months ended September 30, 2023. The increase in income of $0.6 million is primarily due to strong performance in unconsolidated joint ventures.

The equity in income of unconsolidated joint venture companies was income of $2.5 million for the nine months ended September 30, 2024 as compared to income of $2.3 million for the nine months ended

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Table of Contents

September 30, 2023. The increase in income of $0.2 million is primarily due to strong performance in unconsolidated joint ventures.

Other Income, Net

Three Months Ended

Nine Months Ended

September 30, 

Other Income

September 30, 

Other Income

2024

    

2023

    

Change

    

% Change

2024

    

2023

    

Change

    

% Change

($ in thousands)

($ in thousands)

Other income, net

$

529

$

223

$

306

137.2

%

$

2,052

$

1,282

$

770

 

60.1

%

% of total revenue

 

2.2

%  

 

1.3

%  

 

2.8

%  

 

2.3

%  

Other income, net increased $306,000, or 137.2%, to an income of $529,000 for the three months ended September 30, 2024 from an income of $223,000 for the three months ended September 30, 2023. Other income, net increased primarily due to an increase in government grants.

Other income, net increased $770,000, or 60.1%, to an income of $2.1 million for the nine months ended September 30, 2024 from an income of $1.3 million for the nine months ended September 30, 2023. Other income, net increased primarily due to an increase in government grants.

Provision (benefit) for Income Taxes

Three Months Ended

Nine Months Ended

September 30, 

Increase

September 30, 

Increase

2024

    

2023

    

(Decrease)

    

% Change

    

2024

    

2023

    

(Decrease)

    

% Change

($ in thousands)

($ in thousands)

Provision (benefit) for income taxes

$

626

$

(101)

$

727

 

719.8

%

$

1,021

$

(92)

$

1,113

 

1,209.8

%

% of total revenue

 

2.6

%  

 

(0.6)

%  

 

1.4

%  

 

(0.2)

%  

Provision (benefit) for income taxes increased $727,000, or 719.8%, to a provision of $626,000 for the three months ended September 30, 2024 as compared to a benefit of $101,000 for the three months ended September 30, 2023. The tax expense recorded for the three months ended September 30, 2024 is the result of both foreign taxes and domestic taxes. Provision for income taxes increased $1,113,000, or 1,209.8%, to $1,021,000 for the nine months ended September 30, 2024 as compared to a benefit of $92,000 for the nine months ended September 30, 2023. Additionally, there is uncertainty of generating future profit in the U.S., which has resulted in our deferred tax assets being fully reserved. Our estimated tax rate can vary greatly from year to year because of the change or benefit in the mix of taxable income between our U.S. and China-based operations.

Under the 2017 Tax Cuts and Jobs Act, research and experimental (“R&E”) expenditures incurred or paid for tax years beginning after December 31, 2021 will no longer be immediately deductible for tax purposes. Instead, businesses are now required to capitalize and amortize R&E expenditures over a period of five years for research conducted within the U.S. or 15 years for research conducted in a foreign jurisdiction. We capitalize the R&E expense in our China subsidiaries and amortize it over 15 years.

On August 16, 2022, President Biden signed the Inflation Reduction Act (the “Inflation Reduction Act”) into law finalizing a legislation intended to address inflation by paying down the national debt, lower consumer energy costs, providing incentives for the production of clean energy, and reducing healthcare costs. The Inflation Reduction Act imposes a 1% exercise tax on stock buy backs and a 15% minimum tax on corporations with over $1 billion in profit. The Inflation Reduction Act has no impact on us, since we have no plan to buy back additional shares of our common stock and our profit is not over $1 billion.

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Table of Contents

Net (Income) loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests

Three Months Ended

Net (income) loss attributable to

Nine Months Ended

Net (income) loss attributable to

noncontrolling interests and

noncontrolling interests and

September 30, 

    

redeemable noncontrolling interests

September 30, 

    

redeemable noncontrolling interests

2024

2023

Change

% Change

2024

2023

Change

% Change

($ in thousands)

($ in thousands)

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

$

(50)

$

592

$

(642)

 

(108.4)

%

$

(402)

$

1,174

$

(1,576)

 

(134.2)

%

% of total revenue

 

(0.2)

%  

 

3.4

%  

 

(0.5)

%  

 

2.1

%  

Net (income) loss attributable to noncontrolling interests and redeemable noncontrolling interests increased $642,000 or 108.4% to a gain of $50,000 for the three months ended September 30, 2024, from a loss of $592,000 for the three months ended September 30, 2023, primarily due to higher profitability from our PRC subsidiaries as sales increased.

Net (income) loss attributable to noncontrolling interests and redeemable noncontrolling interests increased $1.6 million, or 134.2%, to an income of $402,000 for the nine months ended September 30, 2024, from a loss of $1.2 million for the nine months ended September 30, 2023, primarily due to higher profitability from our PRC subsidiaries as sales increased.

Liquidity and Capital Resources

We consider cash and short-term investments as liquid and available for use within one year in our current operations. Short-term investments are comprised of U.S. government securities, certificates of deposit and investment-grade corporate notes and bonds.

As of September 30, 2024, our principal source of liquidity was $38.8 million, which consisted of cash of $24.9 million and restricted cash of $13.9 million. In the nine months ended September 30, 2024, cash and restricted cash decreased by $11.3 million and investments decreased by $2.1 million. The decrease in cash and restricted cash of $11.3 million in the nine months ended September 30, 2024 was primarily due to net cash used in operating activities of $13.4 million and net cash used in investing activities of $4.0 million, partially offset by net cash provided by financing activities of $4.5 million and the effect of exchange rate changes of $1.6 million. As of September 30, 2024, we and our PRC subsidiaries held approximately $33.8 million in cash and investments in foreign bank accounts.

As of September 30, 2023, our principal source of liquidity was $43.6 million, which consisted of cash, restricted cash and cash equivalents of $39.3 million and investments of $4.3 million. In the nine months ended September 30, 2023, cash, restricted cash and cash equivalents decreased by $2.0 million and investments decreased by $7.2 million. The decrease in cash, restricted cash and cash equivalents of $2.0 million in the nine months ended September 30, 2023 was primarily due to net cash used in investing activities of $4.8 million and the effect of exchange rate changes of $1.4 million, partially offset by cash provided by financing activities of $2.2 million and net cash provided by operating activities of $2.0 million. As of September 30, 2023, we and our consolidated joint ventures in China held approximately $30.2 million in cash and investments in foreign bank accounts.

Net cash used in operating activities of $13.4 million for the nine months ended September 30, 2024 was primarily comprised of a net change of $15.9 million in operating assets and liabilities, a net loss before income

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Table of Contents

attributable to noncontrolling interest and redeemable noncontrolling interests of $6.1 million, and income from equity method investments of $2.5 million, partially offset by the adjustment for non-cash items of depreciation and amortization of $6.7 million, stock-based compensation of $2.3 million and return of equity method investments as dividends of $2.1 million.

Net cash provided by operating activities of $2.0 million for the nine months ended September 30, 2023 was primarily comprised of a net change of $6.8 million in operating assets and liabilities, the adjustment for non-cash items of depreciation and amortization of $6.4 million, return of equity method investments (dividends) of $3.7 million, stock-based compensation of $2.7 million and deferred tax assets of $0.1 million, partially offset by net loss before income attributable to noncontrolling interest and redeemable noncontrolling interests of $15.4 million and income from equity method investments of $2.3 million.

Net cash used in investing activities of $4.0 million for the nine months ended September 30, 2024 was primarily from the purchase of property, plant and equipment of $5.6 million, and investment in non-marketable equity investments of $0.6 million, partially offset by proceeds from sales and maturities of available-for-sale debt securities of $2.2 million.

Net cash used in investing activities of $4.8 million for the nine months ended September 30, 2023 was primarily from the purchase of property, plant and equipment of $11.2 million and investments in non-marketable equity investments of $1.9 million, partially offset by proceeds from sales and maturities of available-for-sale debt securities of $7.4 million and proceeds from sale of equity securities of $0.8 million.

Net cash provided by financing activities was $4.5 million for the nine months ended September 30, 2024, which consisted of proceeds from short-term loans of $41.6 million, long-term loan of $5.8 million and common stock options exercised of $28,000, partially offset by repayment of short-term loans of $42.3 million and repayment of long-term loan of $0.6 million.

Net cash provided by financing activities was $2.2 million for the nine months ended September 30, 2023, which consisted of proceeds from short-term loans of $42.2 million, a capital increase in subsidiary shares from noncontrolling interests of $0.7 million and common stock options exercised of $10,000, partially offset by repayment of short-term loans of $40.7 million.

On October 27, 2014, our Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $5.0 million of our outstanding common stock. These repurchases could be made from time to time in the open market and could be funded from our existing cash balances and cash generated from operations. During 2015, we repurchased approximately 908,000 shares at an average price of $2.52 per share for a total purchase price of approximately $2.3 million under the stock repurchase program. Since 2015, no shares were repurchased under this program. During the nine months ended September 30, 2024, we did not repurchase any shares under the approved stock repurchase program. As of September 30, 2024, approximately $2.7 million remained available for future repurchases under this program. Currently, we do not plan to repurchase additional shares.

Dividends accrue on our outstanding Series A preferred stock, and are payable as and when declared by our Board of Directors. We have never declared or paid any dividends on the Series A preferred stock.  By the terms of the Series A preferred stock, so long as any shares of Series A preferred stock are outstanding, neither the Company nor any subsidiary of the Company shall redeem, repurchase or otherwise acquire any shares of common stock, unless all accrued dividends on the Series A preferred stock have been paid. During 2013 and 2015, we repurchased shares of our outstanding common stock. As of December 31, 2015, the Series A preferred stock had cumulative dividends of $2.9 million and we include such cumulative dividends in “Accrued liabilities” in our condensed consolidated balance sheets. At the time we pay this accrued liability, our cash will be reduced. We account for the cumulative year to date dividends on the Series A preferred stock when calculating our earnings per share. 

Occasionally, one of our PRC subsidiaries or PRC raw material joint ventures declares and pays a dividend. These dividends generally occur when the PRC joint venture declares a dividend for all of its shareholders. Dividends paid to the Company are subject to a 10% PRC withholding tax. The Company is required to obtain approval from the

52

Table of Contents

State Administration of Foreign Exchange (“SAFE”) to transfer funds in or out of the PRC. SAFE requires a valid agreement to approve the transfers, which are processed through a bank. Other than PRC foreign exchange restrictions, the Company is not subject to any PRC restrictions and limitations on its ability to distribute earnings from its businesses, including its PRC subsidiaries and PRC joint ventures, to the Company and its investors as well as the ability to settle amounts owed by the Company to its PRC subsidiaries and PRC joint ventures. If SAFE approval is denied the dividend payable to the Company would be owed but would not be paid.

For the nine months ended September 30, 2024 and 2023, the aggregate dividends paid to us, directly or to an intermediate entity within our corporate structure, by our PRC subsidiaries and PRC raw material joint ventures were $2.1 million and $3.7 million, respectively. For the nine months ended September 30, 2024 and 2023, there were no dividends paid to minority shareholders by our PRC subsidiaries or PRC raw material joint ventures. For the nine months ended September 30, 2024, no transfers, dividends, or distributions have been made to date between the Company and its PRC subsidiaries, or to investors, except for the settlement of amounts owed under our transfer pricing arrangements in the ordinary course of business.

We have no current intentions to distribute to our investors earnings under our corporate structure. We settle amounts owed under our transfer pricing arrangements in the ordinary course of business.

The cash generated from one PRC subsidiary is not used to fund another PRC subsidiary’s operations. None of our PRC subsidiaries has faced difficulties or limitations on its ability to transfer cash between our subsidiaries. AXT has cash management policies that dictate the amount of such funding.

As one of the first steps in the process of listing Tongmei on the STAR Market and going public, we sold approximately 7.28% of Tongmei to private equity investors for approximately $49 million in the aggregate. Pursuant to the Capital Investment Agreements with the Investors, each Investor has the right to require AXT to redeem any or all Tongmei shares held by such Investor at the original purchase price paid by such Investor, without interest, in the event the IPO fails to pass the audit of the Shanghai Stock Exchange, is not approved by the CSRC or Tongmei cancels the IPO application. The aggregate redemption amount is approximately $49 million.

Tongmei submitted its IPO application to the Shanghai Stock Exchange, and it was formally accepted for review on January 10, 2022. The Shanghai Stock Exchange approved the IPO application on July 12, 2022. On August 1, 2022, the CSRC accepted for review Tongmei’s IPO application. The STAR Market IPO remains subject to review and approval by the CSRC and other authorities. The process of going public on the STAR Market includes several periods of review and, therefore, is a lengthy process. Subject to review and approval by the CSRC and other authorities, Tongmei expects to accomplish this goal in the coming months. The listing of Tongmei on the STAR Market will not change the status of AXT as a U.S. public company.  

Our bank loans and credit facilities typically have a term of 12 months or less and are included in “Short-term loans” in our condensed consolidated balance sheets. The following table represents short-term bank loans as of September 30, 2024 and December 31, 2023 (in thousands, except interest rate data):

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Table of Contents

Loan

Interest

December 31, 

September 30, 

Subsidiary

Bank

Detail

Rate

Start Date

Due Date

2023

2024

Tongmei

Bank of China (1)

$

1,848

3.5

%  

January-23

January-24

$

1,795

$

-

2,184

2.8

%  

March-23

March-24

2,118

-

376

2.7

%  

September-23

September-24

386

-

876

3.5

%  

November-23

November-24

876

884

1,003

3.5

%  

November-23

November-24

1,003

1,012

Bank of China (2)

2,911

3.5

%  

January-23

January-24

2,825

-

2,770

3.0

%  

January-24

January-25

-

2,851

Bank of China (5)

1,426

2.4

%  

September-24

September-25

-

1,426

Bank of Communications (1)

1,455

3.3

%  

January-23

January-24

1,414

-

1,380

3.8

%  

May-23

May-24

1,414

-

1,373

3.8

%  

July-23

May-24

1,414

-

1,376

3.0

%  

May-24

May-25

-

1,426

2,480

3.0

%  

June-24

May-25

-

2,566

China Merchants Bank (1)

4,367

3.7

%  

January-23

January-24

4,235

-

1,386

3.5

%  

January-24

January-25

-

1,426

692

3.5

%  

February-24

February-25

-

713

692

3.5

%  

April-24

April-25

-

713

Bank of Beijing (3)

2,290

4.2

%  

January-23

January-24

2,220

-

3,541

3.2

%  

June-23

May-24

3,626

-

1,380

3.2

%  

June-23

February-24

1,414

-

1,414

3.0

%  

December-23

December-24

1,414

1,426

3,600

3.0

%  

March-24

February-25

-

3,706

1,386

3.0

%  

March-24

December-24

-

1,426

3,580

3.0

%  

June-24

June-25

-

3,706

Industrial Bank (1)

2,757

4.3

%  

June-23

June-24

2,825

-

2,744

4.3

%  

July-23

July-24

2,825

-

2,744

4.3

%  

September-23

September-24

2,825

-

2,851

3.9

%  

September-24

September-25

-

2,851

NingBo Bank (1)

2,744

4.2

%  

August-23

September-24

2,820

-

1,271

4.3

%  

November-23

November-24

1,271

1,284

2,825

4.3

%  

December-23

December-24

2,825

2,851

1,647

4.3

%  

January-24

January-25

-

1,700

1,258

4.3

%  

May-24

March-25

-

1,303

Industrial and Commercial Bank of China (1)

2,744

3.3

%  

September-23

September-24

2,825

-

2,851

3.3

%  

September-24

September-25

-

2,851

NanJing Bank (1)

2,752

3.8

%  

October-23

October-24

2,752

2,779

China Citic Bank (1)

2,752

3.0

%  

June-24

June-25

-

2,851

2,851

2.9

%  

July-24

July-25

-

2,851

1,426

2.9

%  

September-24

September-25

-

1,426

BoYu

Industrial and Commercial Bank of China (4)

1,414

2.7

%  

December-23

December-24

1,414

-

Industrial and Commercial Bank of China (1)

1,426

2.8

%  

September-24

September-25

-

1,426

Bank of China (1)

1,204

2.4

%  

January-23

January-24

849

-

1,145

2.3

%  

September-24

September-25

-

1,145

NingBo Bank (1)

1,414

3.3

%  

November-23

May-24

1,414

-

1,376

3.0

%  

May-24

November-24

-

1,426

1,145

3.2

%  

July-24

October-24

-

1,140

Industrial Bank (1)

688

3.6

%  

September-23

September-24

708

-

Bank of Communications (1)

1,414

3.0

%  

November-23

May-24

1,414

-

275

3.0

%  

May-24

May-25

-

285

NanJing Bank (1)

1,386

3.5

%  

January-24

January-25

-

1,426

Loan Balance

$

52,921

$

52,876

Collateral for the above bank loans and line of credit

(1)Not collateralized.
(2)ChaoYang LiMei time deposit.
(3)AXT time deposit.
(4)BoYu’s land use rights and its building located at its facility in Tianjin, China. In addition, the December 2023 loan attracts a guarantee fee amounting to 0.7% of the loan amount.
(5)Baoding Tongmei’s land use rights and its building located at its facility in Dingxing, China. In addition, the loan attracts a guarantee fee amounting to 1.0% of the loan amount.

On January 30, 2024, the Company secured a new line of credit amounting to $9.7 million, structured as a five-year bank loan. The credit facility bears interest at a rate of 6.5% per annum on the amount drawn from the line of credit. The credit facility is collateralized by the real estate properties owned by ChaoYang Tongmei. In January 2024, the Company borrowed $5.8 million against the credit facility. The intended use of the credit facility is for construction of

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fixed assets. As of September 30, 2024, $5.4 million is included in “Other long-term liabilities” and $428,000 is included in “Short-term loans” in our consolidated balance sheets.

In December 2023, one of our consolidated subsidiaries, ChaoYang XinMei secured a loan of approximately $2.1 million from an unrelated financing company. According to the agreement, ChaoYang XinMei temporarily transferred ownership of its production line and related equipment to the financing company, while retaining the right to use the property for production. At the end of the 30-month contractual period, ChaoYang XinMei holds the option to repurchase the production line and related equipment for $14.00. As of September 30, 2024, $965,000 is included in “Other long-term liabilities” and $748,000 is included in “Short-term loans” in our consolidated balance sheets.

On July 27, 2021, we filed with the SEC a registration statement on Form S-3 (as amended, the “Shelf Registration Statement”), pursuant to which we may offer up to $60 million of common stock, preferred stock, debt securities, depositary shares, warrants, subscription rights, purchase contracts and/or units in one or more offerings and in any combination. A prospectus supplement, which we will provide each time we offer securities, will describe the specific amounts, prices and terms of the securities we determine to offer. We currently expect to use the net proceeds from the sale of securities under the Shelf Registration Statement for working capital, capital expenditures and other general corporate purposes. We may also use a portion of the net proceeds to acquire, license or invest in complementary products, technologies or businesses. On May 17, 2022, the SEC declared the Shelf Registration Statement effective.

We believe that we have adequate cash and investments to meet our operating needs and capital expenditures over the next 12 months. If our sales decrease, however, our ability to generate cash from operations will be adversely affected which could adversely affect our future liquidity, require us to use cash at a more rapid rate than expected, and require us to seek additional capital.

Cash from operations could be affected by various risks and uncertainties, including, but not limited to those set forth below under the section entitled “Risk Factors” in Part II, Item 1A below.

Contract to Purchase Goods and Services

Purchase orders or contracts for the purchase of certain goods and services are not considered to be part of our contractual obligations. We cannot determine the aggregate amount of such purchase orders that represent contractual obligations because purchase orders may represent authorizations to purchase rather than binding agreements. For the purposes of this disclosure, contractual obligations for purchase of goods or services are defined as agreements that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. Our purchase orders are based on our current needs and are fulfilled by our vendors within short time horizons. We also enter into contracts for outsourced services; however, the obligations under these contracts were not significant and the contracts generally contain clauses allowing for cancellation without significant penalty. Contractual obligations that are contingent upon the achievement of certain milestones would also not be included.

Land Purchase and Investment Agreement

 

In 2017, Baoding Tongmei established a wafer processing production line in Dingxing, China. In addition to a land rights and building purchase agreement that Baoding Tongmei entered into with a private real estate development company to acquire our new manufacturing facility, Baoding Tongmei also entered into a cooperation agreement with the Dingxing local government. In addition to pledging its full support and cooperation, the Dingxing local government will issue certain tax credits to Baoding Tongmei as Baoding Tongmei achieves certain milestones. Baoding Tongmei, in turn, agreed to hire local workers over time, pay taxes when due and eventually demonstrate a total investment of approximately $90 million in value, assets and capital. The investment will include cash paid for the land and buildings, cash on deposit in our name at local banks, the gross value of new and used equipment (including future equipment that might be used for indium phosphide and germanium substrates production), the deemed value for our customer list or the end user of our substrates (for example, the end users of the 3-D sensing VCSELs), a deemed value for employment of local citizens, a deemed value for our proprietary process technology, other intellectual property, other intangibles and additional items of value. There is no timeline or deadline by which this must be accomplished, rather it is a good faith

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covenant entered into between Baoding Tongmei and the Dingxing local government. Further, there is no specific penalty contemplated if either party breaches the agreement, however the agreement does state that each party has a right to seek from the other party compensation for losses. Under certain conditions, the Dingxing local government may purchase the land and building at the appraised value. We believe that such cooperation agreements are normal, customary and usual in China and that the future valuation is flexible. Chaoyang Tongmei has a similar agreement with the city of Kazuo, China, although on a smaller scale. The total investment targeted by Chaoyang Tongmei in Kazuo is approximately $15 million in value, assets and capital. In addition, BoYu has a similar agreement with the city of Kazuo. The total investment targeted by BoYu in Kazuo is approximately $8 million in value, assets and capital.

Off-Balance Sheet Arrangements

As of September 30, 2024, we did not have any off-balance sheet financing arrangements and have never established any special purpose entities as defined under SEC Regulation S-K Item 303(a)(4)(ii).

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk

A significant portion of our business is conducted in currencies other than the U.S. dollar. Foreign exchange losses have had a material adverse effect on our operating results and cash flows in the past and could have a material adverse effect on our operating results and cash flows in the future. If we do not effectively manage the risks associated with this currency risk, our revenue, cash flows and financial condition could be adversely affected. During 2023 and 2022, we recorded a foreign exchange gain of $0.2 million and $1.6 million, respectively, and during 2021 we recorded a net foreign exchange loss of $0.4 million, included as part of “Other income, net” in our condensed consolidated statements of operations. We incur foreign currency transaction exchange gains and losses due to operations in general. In the future we may experience foreign exchange losses on our non-functional currency denominated receivables and payables to the extent that we have not mitigated our exposure. Foreign exchange losses could have a materially adverse effect on our operating results and cash flows.

Our product sales to Japanese customers are typically invoiced in Japanese yen. As such, we have foreign exchange exposure on our accounts receivable and on any Japanese yen denominated cash deposits. To partially protect us against fluctuations in foreign currency resulting from accounts receivable in Japanese yen, starting in 2015, we instituted a foreign currency hedging program. We place short term 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 hedges at each month end and quarter end using current exchange rates and in accordance with U.S. GAAP. At quarter end and year end any foreign currency hedges not settled are netted on the condensed consolidated balance sheet and consolidated balance sheet, respectively, and classified as Level 3 assets and liabilities. As September 30, 2024 and December 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 to the condensed consolidated results.

The functional currency for our foreign operations is the renminbi, the local currency of China, and in the future we may establish short term hedges covering renminbi. Most of our operations are conducted in China and most of our costs are incurred in Chinese renminbi, which subjects us to fluctuations in the exchange rates between the U.S. dollar and the Chinese renminbi. We incur transaction gains or losses resulting from consolidation of expenses incurred in local currencies for our Chinese subsidiaries, as well as in translation of the assets and liabilities at each balance sheet date. Our financial results could be adversely affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets, including the revaluation by China of the renminbi, and any future adjustments that China may make to its currency such as any move it might make to a managed float system with opportunistic interventions. We may also experience foreign exchange losses on our non-functional currency denominated receivables and payables.

We currently are using a hedging program to minimize the effects of currency fluctuations relating to the Japanese yen. While we may apply this program to other currencies, such as the Chinese renminbi, our hedging position is partial and may not exist at all in the future. It may not succeed in minimizing our foreign currency fluctuation risks.

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Our primary objective in holding these instruments is to reduce the volatility of earnings and cash flows associated with changes in foreign currency. The program is not designated for trading or speculative purposes. The company may choose not to hedge certain foreign exchange exposures for a variety of reasons, including but not limited to accounting considerations and the prohibitive economic cost of hedging particular exposures. However, even with our hedging program, we still experience losses on foreign exchange from time to time.

Interest Rate Risk

Cash and restricted cash earning interest and certain variable rate debt instruments are subject to interest rate fluctuations. The following table sets forth the probable impact of a 10% change in interest rates (in thousands):

    

    

    

    

Proforma 10%

    

Proforma 10%

 

Balance as of

Current

Projected Annual

Interest Rate

Interest Rate

 

September 30, 

Interest

Interest

Decline

Increase

 

Instrument

2024

Rate

Income

Income

Income

 

Cash and restricted cash

$

38,791

 

0.90

%  

$

349

$

314

$

384

Investments in marketable debt securities

 

 

%  

 

 

 

$

349

$

314

$

384

The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. Financial instruments that potentially subject us to concentration of credit risk consist primarily of cash, short-term investments, and accounts receivable. We invest primarily in money market accounts, certificates of deposits, corporate bonds and notes, and government securities. We are exposed to credit risks in the event of default by the issuers to the extent of the amount recorded on the condensed consolidated balance sheets. These securities are generally classified as available-for-sale and consequently are recorded on the balance sheet at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive income (loss), net of estimated tax, further reduced by a valuation allowance for expected credit losses, if any. Our cash and short-term investments and long-term investments are in high-quality instruments placed with major banks and financial institutions and commercial paper. We have no investments in auction rate securities.

Credit Risk

We perform ongoing credit evaluations of our customers’ financial condition, and limit the amount of credit extended when deemed necessary, but generally do not require collateral. The credit risk in our accounts receivable is mitigated by our credit evaluation process and the broad dispersion of sales transactions. One customer accounted for more than 10% of our accounts receivable balance as of September 30, 2024, and no customer accounted for more than 10% of our accounts receivable balance as of December 31, 2023. 

Impairment of Equity Investment Risk

As part of our supply chain strategy, we maintain minority investments in privately-held raw material companies located in China either invested directly by us or by one of our supply chain companies in China. These minority investments are reviewed for other than-temporary declines in value on a quarterly basis. These investments are classified as other assets in the condensed consolidated balance sheets and accounted for under either the equity or fair value method, depending on whether we have the ability to exercise significant influence over the raw material company’s operations or financial decisions. We monitor our investments for impairment and record reductions in carrying value when events or changes in circumstances indicate that the carrying value may not be recoverable. Reasons for other-than-temporary declines in value include whether the related company would have insufficient cash flow to operate for the next twelve months, significant changes in the operating performance and changes in market conditions. Our minority investments under the equity method as of September 30, 2024 and December 31, 2023 totaled $13.5 million and $12.5 million, respectively. Our minority investment under the fair value method as of September 30, 2024 and December 31, 2023 totaled $0.6 million and $0.6 million, respectively. See Note 7 for a discussion on the new fair value method investment.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as defined under Exchange Act Rules 13a-15(e) and 15d-15(e) were effective at the reasonable assurance level to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission and is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Our disclosure controls and procedures include components of our internal control over financial reporting. Management’s assessment of the effectiveness of our internal control over financial reporting is expressed at the level of reasonable assurance because a control system, no matter how well designed and operated, can provide only reasonable assurance that the control system’s objectives will be met.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a or 15(d) of the Exchange Act that occurred during the three months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time we may be involved in judicial or administrative proceedings concerning matters arising in the ordinary course of business. We do not expect that any of these matters, individually or in the aggregate, will have a material adverse effect on our business, financial condition, cash flows or results of operation.

Shareholder Class Action

On May 6, 2024, a shareholder class action complaint was filed in the U.S. District Court for the Eastern District of New York on behalf of persons or entities who purchased or acquired our publicly traded securities, against us, Morris S. Young, our Chief Executive Officer, and Gary L. Fischer, our Chief Financial Officer. The court transferred the case to the Northern District of California, where our headquarters is located. A lead plaintiff has been appointed and an amended complaint was filed. The amended complaint asserts a putative class period from March 24, 2021 and April 3, 2024, inclusive (the “Class Period”). The amended complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated thereunder by the defendants, and seeks unspecified monetary relief, interest, and attorneys’ fees. The motion to dismiss is due on November 8, 2024.

Derivative Action

On August 22, 2024, a derivative lawsuit was filed in the Northern District of California by a shareholder against Morris S. Young, our Chief Executive Officer, Gary L. Fischer, our Chief Financial Officer, current directors David C. Chang, Jesse Chen, and Christine Russell, and former director Leonard J. LeBlanc, with the Company named as a nominal defendant. The complaint asserts that the defendants breached their fiduciary duties to the Company based on the allegations asserted in the original complaint in the putative shareholder class action. The motion to dismiss is due on November 15, 2024.

It is not possible at this time to reasonably assess the final outcomes of these litigations or reasonably to estimate the possible loss or range of loss with respect to these litigations. Management believes these claims to be meritless and intends to vigorously defend against them.

Item 1A. Risk Factors

For ease of reference, we have divided these risks and uncertainties into the following general categories:

I.Summary Risk Factors;
II.Risks Related to Our Business and Operations;
III.Risks Related to International Aspects of Our Business;
IV.Risks Related to Our Financial Results and Capital Structure;
V.Risks Related to Our Intellectual Property; and
VI.Risks Related to Compliance, Environmental Regulations and Other Legal Matters.
I.Summary Risk Factors
We are subject to a number of unique legal and operational risks associated with our corporate structure.
The PRC central government may intervene in or influence our PRC operations at any time and the rules and regulations in China can change quickly with little advance notice.

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Although the audit report included in our 2023 Annual Report was prepared by an independent registered public accounting firm who is currently inspected fully by the Public Company Accounting Oversight Board (the “PCAOB”), there is no guarantee that future audit reports will be prepared by an independent registered public accounting firm that is completely inspected by the PCAOB.
Our NASDAQ stock price is volatile and our stock price could decline. Unpredictable fluctuations in our operating results, changes and events in our end markets and global trends cause volatility in our stock price.
COVID-19 or other contagious diseases may affect our business operations and financial performance. Lack of supply of current vaccines and resistance by some to be vaccinated could prolong COVID-19.
We face litigation and legal proceedings which could adversely affect our business, financial condition, results of operations or cash flows.
Global economic and political conditions, including trade tariffs, import-export restrictions, and other restrictions, may have a negative impact on our business and financial results.
Changes in China’s political, social, regulatory or economic environments may affect our financial performance.
The Chinese central government is increasingly aware of air pollution and other forms of environmental pollution and their reform efforts can impact our manufacturing, including intermittent mandatory shutdowns. Shutdowns or underutilizing our manufacturing facilities may result in declines in our gross margins.
Enhanced trade tariffs, import restrictions, export restrictions, Chinese regulations or other trade barriers may materially harm our business.
If China places restrictions on freight and transportation routes and on ports of entry and departure this could result in shipping delays or increased costs for shipping.
Our international operations are exposed to potential adverse tax consequence in China.
Our gross margin has fluctuated historically and may decline or increase due to several factors. Factors such as product mix, unit volume, yields and other manufacturing efficiencies can cause our gross margin to decrease or increase from quarter to quarter.
The proposed Tongmei IPO on the STAR Market in China could fail to be completed. This could result in investor disappointment and in failure to secure sufficient capital needed to take advantage of market opportunities for our products. Our stock price could decline.
The terms of the private equity raised by Tongmei in China grant each investor a right of redemption if the IPO fails to pass the audit of the Shanghai Stock Exchange, is not approved by the CSRC or Tongmei cancels the IPO application. This could result in disgorging the cash that we raised from the Investors.
Defects in our products could diminish demand for our products. Our ability to receive orders from tier one customers is contingent on producing wafer substrates of very high quality and deploying best practices in manufacturing. We may not always be able to meet these requirements and we could then lose revenue.
Difficulties in accurately estimating market demand could result in over-investing in inventory, equipment and capacity expansion or losing market share if we do not invest sufficiently.
Attracting and retaining tier one customers requires that we succeed in our research and development programs. Customers establish difficult to meet product specifications regarding defect densities, surface flatness, diameter size and other specifications pushing the boundaries of material science. We may not achieve these specifications.
We are subject to foreign exchange gains and losses that materially impact our condensed consolidated statements of operations. Because we are a global company we are exposed to changes and swings in foreign exchange, particularly when currencies experience periods of volatility.
Joint venture raw material companies in China bring certain risks.
We derive a significant portion of our revenue from international sales, and our ability to sustain and increase our international sales involves significant risks.

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II.Risks Related to Our Business and Operations

Silicon substrates (wafers) are significantly lower in cost compared to substrates made from specialty materials, such as those that we produce, and new silicon-based technologies could enable silicon-based substrates to replace specialty material-based substrates for certain applications.

Historically silicon wafers or substrates are less expensive than specialty material substrates, such as those that we produce. Electronic circuit designers will generally consider silicon first and only turn to alternative materials if silicon cannot provide the required functionality in terms of power consumption, speed, wave lengths or other specifications. Beginning in 2011, certain applications that had previously used GaAs substrates, specifically the RF chip in mobile phones, adopted a new silicon-based technology called silicon on insulator, or SOI. SOI technology uses a silicon-insulator-silicon layered substrate in place of conventional silicon substrates in semiconductor manufacturing. SOI substrates cost less than GaAs substrates and, although their performance is not as robust as GaAs substrates in terms of power consumption, heat generation and speed, they became acceptable in mobile phones and other applications that were previously dominated by GaAs substrates. The adoption of SOI resulted in decreased GaAs wafer demand, and decreased revenue. If SOI or new silicon-based technologies gain more widespread market acceptance, or are used in more applications, our sales of specialty material-based substrates could be reduced and our business and operating results could be significantly and adversely affected.

Our gross margin has fluctuated historically and may decline due to several factors.

Our gross margin has fluctuated from period to period as a result of increases or decreases in total revenue, unit volume, shifts in product mix, shifts in the cost of raw materials, costs related to the relocation of our gallium arsenide and germanium production lines, including costs related to hiring additional manufacturing employees at our new locations, tariffs imposed by the U.S. government, the introduction of new products, decreases in average selling prices for products, utilization of our manufacturing capacity, fluctuations in manufacturing yields and our ability to reduce product costs. These factors and other variables change from period to period and these fluctuations are expected to continue in the future. For example, in the third quarter of 2022 our gross margin was 42.0% but it dropped to 10.7% in the third quarter of 2023 as a result of several of these factors.

Our raw material companies experience selling price volatility and purchase price volatility in acquiring base materials. We consolidate the results of two of these raw material companies, and any reduction in their gross margins could have a significant, adverse impact on our overall gross margins. One or more of our companies has in the past sold, and may in the future sell, raw materials at significantly reduced prices in order to gain volume sales or sales to new customers. In addition, the market price of gallium dropped below our per unit inventory cost and we incurred an inventory write down under the lower of cost or net realizable value accounting rules.

Shutdowns or underutilizing our manufacturing facilities may result in declines in our gross margins.

An important factor in our success is the extent to which we are able to utilize the available capacity in our manufacturing facilities. A number of factors and circumstances may reduce utilization rates, including periods of industry overcapacity, low levels of customer orders, operating inefficiencies, mechanical failures and disruption of operations due to expansion, power interruptions, fire, flood, other natural disasters or calamities or government-ordered mandatory factory shutdowns, including as a result of the COVID-19 pandemic. Severe air pollution in Beijing can trigger mandatory factory shutdowns. For example, in the first quarter of 2018, over 300 manufacturing companies, including Tongmei, were intermittently shut down by the local government for a total of ten days from February 27 to March 31, due to severe air pollution. Further, we have increased capacity by adding two new sites and this could reduce our utilization rate and increase our depreciation charges. Because many portions of our manufacturing costs are relatively fixed, high utilization rates are critical to our gross margins and operating results. If we fail to achieve acceptable manufacturing volumes or experience product shipment delays, our results of operations will be negatively affected. During periods of decreased demand, we have underutilized our manufacturing lines. If we are unable to improve utilization levels at our facilities during periods of decreased demand and correctly manage capacity, the fixed

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expense levels will have an adverse effect on our business, financial condition and results of operations. For example, in the three months ended September 30, 2023, our revenue dropped to $17.4 million and our gross margin was only 10.7%.

If we are unable to utilize the available capacity in our manufacturing facilities, we may need to implement a restructuring plan, which could have a material adverse effect on our revenue, our results of operations and our financial condition. For example, in 2013, we concluded that incoming orders were insufficient and that we were significantly underutilizing our factory capacity. As a result, in February 2014, we announced a restructuring plan with respect to our China company, Tongmei, in order to better align manufacturing capacity with demand. Under the restructuring plan, we recorded a charge of approximately $907,000 in the first quarter of 2014.

If we receive fewer customer orders than forecasted or if our customers delay or cancel orders, we may not be able to reduce our manufacturing costs in the short-term and our gross margins would be negatively affected. In addition, lead times required by our customers are shrinking, which reduces our ability to forecast orders and properly balance our capacity utilization.

Global economic and political conditions, including trade tariffs, import-export restrictions, and other restrictions, may have a negative impact on our business and financial results.

In September 2018, the Trump Administration announced a list of thousands of categories of goods that became subject to tariffs when imported into the United States from China. This pronouncement imposed tariffs on wafer substrates we imported into the United States. The initial tariff rate was 10% and subsequently was increased to 25%. Approximately 6% of our revenue derives from importing our wafers into the United States. In the first three quarters of 2024 we paid approximately $569,000 in tariffs. In the years ended December 31, 2023, 2022 and 2021 we paid approximately $1.0 million, $3.3 million and $1.3 million, respectively, in tariffs. The future impact of tariffs and trade wars is uncertain.

The economic and political conditions between China and the United States, in our view, create an unstable business environment. The United States has restricted access by certain Chinese technology companies to items produced domestically and abroad from U.S. technology and software, which may impact our ability to grow our revenue. Trade restrictions against China have resulted in a greater determination within China to be self-sufficient and produce more goods domestically. Government agencies in China may be encouraging and supporting the founding of new companies, the addition of new products in existing companies and more vertical integration within companies. These factors could negatively impact our sales in China.

Our operations and financial results depend on worldwide economic and political conditions and their impact on levels of business spending, which has deteriorated significantly in many countries and regions. Uncertainties in the political, financial and credit markets and U.S. financial system may cause our customers to postpone deliveries. The COVID-19 virus remains an additional cause of uncertainty. Additionally, U.S. bank failures may affect our customers. Delays in the placement of new orders and extended uncertainties may reduce future sales of our products and services. The revenue growth and profitability of our business depends on the overall demand for our substrates. Because the end users of our products are primarily large companies whose businesses fluctuate with general economic and business conditions, a softening of demand for products that use our substrates, caused by a weakening economy, may result in decreased revenue. Customers may find themselves facing excess inventory from earlier purchases and may defer or reconsider purchasing products due to the downturn in their business and in the general economy. For example, global business conditions deteriorated in the second half of 2022. In the second quarter of 2022, our revenue totaled $39.5 million. In the fourth quarter of 2022, our revenue declined to $26.8 million and in the third quarter of 2023, our revenue further declined to $17.4 million. If market conditions deteriorate, we may experience increased collection times and greater write-offs, either of which could have a material adverse effect on our profitability and our cash flow.

Future tightening of credit markets and concerns regarding the availability of credit may make it more difficult for our customers to raise capital, whether debt or equity, to finance their purchases of capital equipment or of the products we sell. Delays in our customers’ ability to obtain such financing, or the unavailability of such financing, would adversely affect our product sales and revenue and, therefore, harm our business and operating results. We cannot predict

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the timing, duration of or effect on our business of any future economic downturn or the timing or strength of any subsequent recovery.

COVID-19 or other contagious diseases may affect our business operations and financial performance.

The spread of COVID-19 impacted our operations and financial performance. The outbreak of COVID has triggered references to the SARS outbreak, which occurred in 2003 and affected our business operations. Any severe occurrence of an outbreak of a contagious disease such as COVID-19, SARS, Avian Flu or Ebola may cause us or the government to temporarily close our manufacturing operations in China. In January 2020, virtually all companies in China were ordered to remain closed after the traditional Lunar New Year holiday ended, including our subsidiaries in China. In December 2022, the PRC government ended its zero-COVID policy. If there is a renewed surge of the COVID-19 pandemic in cities in which our PRC subsidiaries and PRC joint ventures are located, the Chinese government may require these companies to close again. If one or more of our key suppliers is required to close for an extended period, we might not have enough raw material inventories to continue manufacturing operations. In addition, travel restrictions between China and the U.S. were disrupted and this impacted our efficiency. In the future, if our manufacturing operations were closed for a significant period or we experience difficulty in shipping our products, we could lose revenue and market share, which would depress our financial performance and could be difficult to recapture. If one of our key customers is required to close for an extended period, this may delay the placement of new orders. As a result, our revenue would decline.

If we have low product yields, the shipment of our products may be delayed and our product cost and operating results may be adversely impacted.

A critical factor in our product cost is yield. Our products are manufactured using complex crystal growth and wafer processing technologies, and the number of usable wafer substrates we produce can fluctuate as a result of many factors, including:

poor control of furnace temperature and pressure;
impurities in the materials used;
contamination of the manufacturing environment;
quality control and inconsistency in quality levels;
lack of automation and inconsistent processing requiring manual manufacturing steps;
substrate breakage during the manufacturing process; and
equipment failure, power outages or variations in the manufacturing process.

An example where yield is of special concern is for our six-inch semi-conducting gallium arsenide substrates, which can be used for manufacturing industrial lasers and LED lighting. These applications require very low defect densities, also called EPD, and our yields will be lower than the yields achieved for the same substrate when it will be used in other applications. If we are unable to achieve the targeted quantity of low defect density substrates, then our manufacturing costs would increase and our gross margins would be negatively impacted.

In addition, we may modify our process to meet a customer specification, but this can impact our yields. If our yields decrease, our revenue could decline if we are unable to produce products to our customers’ requirements. At the same time, our manufacturing costs could remain fixed, or could increase. Lower yields negatively impact our gross margin. We have experienced product shipment delays and difficulties in achieving acceptable yields on both new and older products, and such delays and poor yields have adversely affected our operating results. We may experience similar problems in the future and we cannot predict when they may occur, their duration or severity.

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If our manufacturing processes result in defects in our products making them unfit for use by our customers, our products would be rejected, resulting in compensation costs paid to our customers, and possible disqualification. This could lead to revenue loss and market share loss.

Problems incurred in our raw material companies or our investment partners could result in a material adverse impact on our financial condition or results of operations.

We have invested in raw material companies in China that produce materials, including 99.99% pure gallium (4N Ga), high purity gallium (6N and 7N Ga), arsenic, germanium, germanium dioxide, pyrolytic boron nitride (pBN) crucibles and boron oxide (B2O3). We purchase a portion of the materials produced by these companies for our use and they sell the remainder of their production to third parties. We consolidate the companies in which we have a majority or controlling financial interest and employ equity accounting for the companies in which we have a smaller ownership interest. Several of these companies occupy space within larger facilities owned and/or operated by one of the other investment partners. Several of these partners are engaged in other manufacturing activities at or near the same facility. In some facilities, we share access to certain functions, including water, hazardous waste treatment or air quality treatment. If a partner in any of these ventures experiences problems with its operations, or deliberately withholds or disrupts services, disruptions in the operations of our companies could occur, having a material adverse effect on the financial condition and results of operation in these companies, and correspondingly on our financial condition or results of operations. For example, since gallium is a by-product of aluminum, our raw gallium company in China, which is housed in and receives services from an affiliated aluminum plant, could generate lower production and shipments of gallium as a result of reduced services provided by the aluminum plant. Accordingly, in order to meet customer supply obligations, our supply chain may have to source materials from another independent third-party supplier, resulting in higher costs and reduced gross margin.

The China central government has tightened control over hazardous chemicals and other hazardous materials. Further, the central government encourages employees to report to the appropriate regulatory agencies possible safety or environmental violations, but there may not be actual violations. Regular use in the normal course of business of hazardous chemicals or hazardous materials or a company’s failure to meet the ever-tightening standards for control of hazardous chemicals or hazardous materials could result in orders to shut down permanently, fines or other severe measures. Any such orders directed at one of our raw material companies could result in impairment charges if the company is forced to close its business, cease operations or incurs fines or operating losses, which would have a material adverse effect on our financial results.

Further, some of our raw material companies share facilities with our raw material investment partners. If either company is deemed to have violated applicable laws, rules or regulations governing the use, storage, discharge or disposal of hazardous chemicals, their operations could be adversely affected and we could be subject to substantial liability for clean-up efforts, personal injury, fines or suspension or termination of operations. Employees working for these companies could bring litigation against us even though we are not directly controlling those operations. While we would expect to defend ourselves vigorously in any litigation that is brought against us, litigation is inherently uncertain and it is possible that our business, financial condition, results of operations or cash flows could be affected. Even if we are not deemed responsible for the actions of the raw material companies or investment partners, litigation could be costly, time consuming to defend and divert management attention; in addition, if we are deemed to be the most financially viable of the partners, plaintiffs may decide to pursue us for damages.

Unforeseen manufacturing issues and restrictions at the new manufacturing sites could occur.

In 2015, the Beijing city government announced its decision to move most of its offices to the Tongzhou district where our original manufacturing facility is currently located. The Beijing city government has moved thousands of government employees into this district. To create room and upgrade the district, the government instructed virtually all existing manufacturing companies, including Tongmei, to relocate all or some of their manufacturing lines. We were instructed to move our gallium arsenide manufacturing lines out of the area.

Although the relocation is completed and we are in volume production at the new sites, unforeseen manufacturing issues and restrictions at the new sites could occur. Problems could occur as we add capacity or comply

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with strict guidelines as customers perform their qualifications. All of this will require us to continue to diligently address the many details that arise at each of our new sites. A failure to properly accomplish this could result in disruption to our production and have a material adverse impact on our revenue, our results of operations and our financial condition. If we fail to meet the product qualification and volume requirements of a customer, we may lose sales to that customer. Our reputation may also be damaged. Any loss of sales could have a material adverse effect on our revenue, our results of operations and our financial condition.

The Chinese government has in the past imposed temporary restrictions on manufacturing facilities, such as the restrictions imposed on polluting factories for the 2008 Olympics and the 2014 Asian Pacific Economic Cooperation event. These restrictions included a shutdown of the transportation of materials and power plants to reduce air pollution. To reduce air pollution in Beijing, the Chinese government has sometimes limited the construction of new, or expansion of existing, facilities by manufacturing companies in the Beijing area or required mandatory factory shutdowns. For example, in the first quarter of 2018, over 300 manufacturing companies, including Tongmei, were intermittently shut down by the local government for a total of ten days from February 27 to March 31 due to severe air pollution. If the government applies restrictions to us or requires mandatory factory shutdowns in the future, then such restrictions or shutdowns could have an adverse impact on our results of operations and our financial condition. Our ability to supply current or new orders could be significantly impacted. Customers could then be required to purchase products from our competitors, causing our competitors to take market share from us.

In addition, from time to time, the Chinese government issues new regulations, which may require additional actions on our part to comply. On February 27, 2015, the China State Administration of Work Safety updated its list of hazardous substances. The previous list, which was published in 2002, did not restrict the materials that we use in our wafers. The new list added gallium arsenide. As a result of the newly published list, we were required to seek additional permits.

Demand for our products may decrease if demand for the end-user applications decrease or if manufacturers downstream in our supply chain experience difficulty manufacturing, marketing or selling their products.

Our products are used to produce components for electronic and opto-electronic products. Accordingly, demand for our products is subject to the demand for end-user applications, including certain consumer applications, which utilize our products. For example, we have developed an 8-inch gallium arsenide wafer targeting an application in a consumer product. Our customer recently informed us that its end-user customer has cancelled its project. Production of the intended product was scheduled to begin in 2025. While there may be other end users, this particular cancellation is the loss of a potentially high-volume sales opportunity. Other factors affecting the ability of the manufacturers downstream in our supply chain to introduce and market their products successfully, include:

worldwide economic and political conditions and their impact on levels of business spending;
the competition such manufacturers face in their particular industries;
end of life obsolescence of products containing devices built on our wafers;
the technical, manufacturing, sales, marketing and management capabilities of such manufacturers;
the financial and other resources of such manufacturers; and
the inability of such manufacturers to sell their products if they infringe third-party intellectual property rights.

If demand for the end-user applications for which our products are used decreases, or if manufacturers downstream in our supply chain are unable to develop, market and sell their products, demand for our products will decrease. For example, during 2019 widespread political and economic instability and trade war concerns resulted in a general slowdown and our revenue decreased significantly. Additionally, in the second half of 2016, manufacturers producing and selling passive optical network devices known as EPONs and GPONs experienced a slowdown in demand

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resulting in surplus inventory on hand. The slowdown persisted until late in 2017. This resulted in a slowdown of sales of our InP substrates used in the PON market. More recently, global business conditions deteriorated, beginning in the second half of 2022. In general, many companies purchased more inventory than needed, in part due to fears of shortages resulting from COVID. In the second quarter of 2022, our revenue totaled $39.5 million. In the fourth quarter of 2022 our revenue declined to $26.8 million, in the second quarter of 2023, our revenue declined to $18.6 million and in the third quarter of 2023, our revenue further declined to $17.4 million. We expect similar cycles of strong demand followed by lower demand will occur for various InP, GaAs or Ge substrates in the future.

Our financial performance can be adversely affected if there are unfavorable financial results in any of our raw material companies.

The raw material companies in our vertically integrated supply chain have historically made a positive contribution to our financial performance. However, if there are unfavorable changes in revenue, average selling prices, gross margins or operating expenses in one or more of the consolidated companies, then this can result in a negative impact on our consolidated revenue, gross margin and profitability. If the companies are accounted for under the equity method, then these changes can result in a reduction in Equity in Income of Unconsolidated Joint Venture Companies. In 2023 and 2022, the companies accounted for under the equity method of accounting contributed a gain of $1.9 million and $6.0 million, respectively, to our condensed consolidated financial statements. In 2023, the total includes impairment charges of $1.9 million. The last time the companies accounted for under the equity method of accounting contributed a loss was 2019 with a loss of $1.9 million.

Intense competition in the markets for our products could prevent us from increasing revenue and achieving profitability.

The markets for our products are intensely competitive. We face competition for our wafer substrate products from other manufacturers of substrates, such as Sumitomo, JX, Freiberger, Umicore, Vital and CCTC, and from companies, such as Qorvo and Skyworks, that are actively considering alternative materials to GaAs and marketing semiconductor devices using these alternative materials. Sumitomo and JX also compete with us in the InP market. If we are unable to compete effectively, our revenue may decrease and we may not maintain profitability. We face many competitors that have a number of significant advantages over us, including:

greater name recognition and market share in the business;
more manufacturing experience;
extensive intellectual property; and
significantly greater financial, technical and marketing resources.

Our competitors could develop new or enhanced products that are more effective than our products.

The level and intensity of competition has increased over the past years and we expect competition to continue to increase in the future. Competitive pressures have resulted in reductions in the prices of our products, and continued or increased competition could reduce our market share, require us to further reduce the prices of our products, affect our ability to recover costs and result in reduced gross margins and profitability.

In addition, new competitors have and may continue to emerge, such as a company established by a former employee in China that is supplying semi-conducting GaAs wafers to the LED market. Competition from sources such as this could increase, particularly if these competitors are able to obtain large capital investments. Further, recent trade tensions between China and the United States have resulted in a greater determination within China to be self-sufficient and produce more goods domestically. This could result in the formation of new competitors that would compete against us and adversely affect our financial results.

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Cyber-attacks, system security risks and data protection issues could disrupt our internal operations and cause a reduction in revenue, increase in expenses, negatively impact our results of operation or result in other adverse consequences.

Like most technology companies, we could be targeted in cyber-attacks. We face a risk that experienced computer programmers and hackers may be able to penetrate our network security and misappropriate or compromise our confidential and proprietary information, potentially without being detected. Computer programmers and hackers also may be able to develop and deploy viruses, worms, and other malicious software programs that attack our information technology infrastructure and demand a ransom payment. The costs to us to eliminate or alleviate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and our efforts to address these problems may not be successful and could result in interruptions and delays that may impede our sales, manufacturing, distribution, accounting or other critical functions.

Breaches of our security measures could create system disruptions or cause shutdowns or result in the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential data about us. Cyber-attacks could use fraud, trickery or other forms of deception. A cyber-attack could expose us to a risk of loss or misuse of information, result in litigation and potential liability, damage our reputation or otherwise harm our business. In addition, the cost and operational consequences of implementing further data protection measures could be significant.

Portions of our information technology infrastructure might also experience interruptions, delays or cessations of service or produce errors in connection with systems integration or migration work that takes place from time to time, which may have a material impact on our business. We may not be successful in implementing new systems and transitioning data, which could cause business disruptions and be more expensive, time consuming, disruptive and resource-intensive than originally anticipated. Such disruptions could adversely impact our ability to fulfill orders and interrupt other processes. Delayed sales, lower margins or lost customers could adversely affect our financial results and reputation.

The average selling prices of our substrates may decline over relatively short periods, which may reduce our revenue and gross margins.

Since the market for our products is characterized by declining average selling prices resulting from various factors, such as increased competition, overcapacity, the introduction of new products and decreased sales of products incorporating our products, the average selling prices for our products may decline over relatively short time periods. We have in the past experienced, and in the future may experience, substantial period-to-period fluctuations in operating results due to declining average selling prices. In certain years, we have experienced an average selling price decline of our substrate selling prices of approximately 5% to 10%, depending on the substrate product. It is possible that the pace of the decline of average selling prices could accelerate beyond these levels for certain products in a commoditizing market. We anticipate that average selling prices may decrease in the future in response to the unstable demand environment, price reductions by competitors, or by other factors, including pricing pressures from significant customers. When our average selling prices decline, our revenue and gross profit decline, unless we are able to sell more products or reduce the cost to manufacture our products. We generally attempt to combat an average selling price decline by improving yields and manufacturing efficiencies and working to reduce the costs of our raw materials and of manufacturing our products. We also need to sell our current products in increasing volumes to offset any decline in their average selling prices, and introduce new products, which we may not be able to do, or do on a timely basis.

In order to remain competitive, we must continually improve our processes, work to reduce the cost of manufacturing our products and improve our yields and manufacturing efficiencies. Our efforts may not allow us to keep pace with competitive pricing pressures which could adversely affect our margins. There is no assurance that any changes effected by us will result in sufficient cost reductions to allow us to reduce the price of our products to remain competitive or improve our gross margins.

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The loss of one or more of our tier one substrate customers would significantly hurt our operating results.

From time to time, sales to one or more of our tier one customers individually represent more than 10% of our revenue and if we were to lose a major customer the loss would negatively impact our revenue. Our customers are not obligated to purchase a specified quantity of our products or to provide us with binding forecasts of product purchases. In addition, our customers may reduce, delay or cancel orders. In the past, we have experienced a slowdown in bookings, significant push-outs and cancellation of orders from customers. If we lose a major customer or if a customer cancels, reduces or delays orders, our revenue would decline. In addition, customers that have accounted for significant revenue in the past may not continue to generate revenue for us in any future period. Any loss of customers or any delay in scheduled shipments of our products could cause revenue to fall below our expectations and the expectations of market analysts or investors, causing our stock price to decline.

We have made and may continue to make strategic investments in raw materials suppliers, which may not be successful and may result in the loss of all or part of our investment.

We have made direct investments or investments through our subsidiaries in raw material suppliers in China, which provide us with opportunities to gain supplies of key raw materials that are important to our substrate business. These affiliates each have a market beyond that provided by us. We may not have significant influence over every one of these companies and in some we have made only a strategic, minority investment. We may not be successful in achieving the financial, technological or commercial advantage upon which any given investment is premised, and we could end up losing all or part of our investment which would have a negative impact on our results of operations. In the first quarter of 2019, we incurred an impairment charge of $1.1 million for a germanium materials company in China in which we had a 25% ownership interest, writing down our investment to zero value. During the second quarter of 2023, one of our equity investments assessed one of its equity investments was fully impaired, leading to a $754,000 impairment charge in our financial results for the second quarter of 2023. In the fourth quarter of 2023, we divested another equity investment, incurring a net impairment charge of $1.1 million. A significant decline in the selling prices of raw materials began in 2015 and weakened some of these companies and their losses negatively impacted our financial results for several years. Further, the increasing concern and restrictions in China of hazardous chemicals and other hazardous materials could result in orders to shut down permanently, fines or other severe measures. Any such orders directed at one of our joint venture companies could result in impairment charges if the company is forced to close its business, cease operations or incurs fines, or operating losses, which would have a material adverse effect on our financial results.

If any of our facilities are damaged by occurrences such as fire, explosion, power outage or natural disaster, we might not be able to manufacture our products.

The ongoing operation of our manufacturing and production facilities is critical to our ability to meet demand for our products. If we are not able to use all or a significant portion of our facilities for prolonged periods for any reason, we would not be able to manufacture products for our customers. For example, a fire or explosion caused by our use of combustible chemicals, high furnace temperatures or, in the case of InP, high pressure during our manufacturing processes could render some of our facilities inoperable for an indefinite period of time. Actions outside of our control, such as earthquakes or other natural disasters, could also damage our facilities, rendering them inoperable. If we are unable to operate our facilities and manufacture our products, we would lose customers and revenue and our business would be harmed.

On the evening of March 15, 2017, an electrical short-circuit fire occurred at our Beijing manufacturing facility. The electrical power supply supporting 2-inch, 3-inch and 4-inch gallium arsenide and germanium crystal growth was damaged and production in that area was stopped. In addition, a wastewater pipe was damaged resulting in a halt to wafer processing for four days until the pipe could be repaired. We were able to rotate key furnace hardware and use some of the 6-inch capacity for smaller diameter crystal growth production to mitigate the impact of the fire and resume production. If we are unable to recover from a fire or natural disaster, our business and operating results could be materially and adversely affected.

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Defects in our products could diminish demand for our products.

Our wafer products are complex and may contain defects, including defects resulting from impurities inherent in our raw materials or inconsistencies in our manufacturing processes. We have experienced quality control problems with some of our products, which caused customers to return products to us, reduce orders for our products, or both. If we experience quality control problems, or experience other manufacturing problems, customers may return product for credit, cancel or reduce orders or purchase products from our competitors. We may be unable to maintain or increase sales to our customers and sales of our products could decline. Defects in our products could cause us to incur higher manufacturing costs and suffer product returns and additional service expenses, all of which could adversely impact our operating results. If new products developed by us contain defects when released, our customers may be dissatisfied and we may suffer negative publicity or customer claims against us, lose sales or experience delays in market acceptance of our new products.

Our substrate products have a long qualification cycle that makes it difficult to forecast revenue from new customers or for new products sold to existing customers.

New customers typically place orders with us for our substrate products three months to a year or more after our initial contact with them. The sale of our products is subject to our customers’ lengthy internal evaluation and qualification processes. During this time, we may incur substantial expenses and expend selling, marketing and management efforts while the customers evaluate our products. These expenditures may not result in sales of our products. If we do not achieve anticipated sales in a period as expected, we may experience an unplanned shortfall in our revenue. As a result, our operating results would be adversely affected. In addition, if we fail to meet the product qualification requirements of the customer, we may not have another opportunity to sell that product to that customer for many months or even years. In the current competitive climate, the average qualification and sales cycle for our products has lengthened even further and is expected to continue to make it difficult for us to forecast our future sales accurately. We anticipate that sales of any future substrate products will also have lengthy qualification periods and will, therefore, be subject to risks substantially similar to those inherent in the lengthy sales cycles of our current substrate products.

The cyclical nature of the semiconductor industry may limit our ability to maintain or increase net sales and operating results during industry downturns.

The semiconductor industry is highly cyclical and periodically experiences significant economic downturns characterized by diminished product demand, resulting in production overcapacity and excess inventory in the markets we serve. A downturn can result in lower unit volumes and rapid erosion of average selling prices. The semiconductor industry has experienced significant downturns, often in connection with, or in anticipation of, maturing product cycles of both semiconductor companies’ and their customers’ products or a decline in general economic conditions. This may adversely affect our results of operations and the value of our business.

A recent example of a cyclical downcycle took shape in the second half of 2022 and has continued into 2024. Early in its history, COVID began to impact supply chains resulting in shortages. As a result, in 2021 and into 2022 almost all companies purchased more inventory than they needed as a safety precaution. In the second half of 2022 companies began to realize they were holding too much inventory and entered into the “inventory correction” period. Our consolidated revenue had reached $39.7 million in the first quarter of 2022. In the third quarter of 2023, our revenue had declined to $17.4 million.

Our continuing business depends in significant part upon manufacturers of electronic and opto-electronic compound semiconductor devices, as well as the current and anticipated market demand for these devices and products using these devices. As a supplier to the semiconductor industry, we are subject to the business cycles that characterize the industry. The timing, length and volatility of these cycles are difficult to predict. The compound semiconductor industry has historically been cyclical due to sudden changes in demand, the amount of manufacturing capacity and changes in the technology employed in compound semiconductors. The rate of changes in demand, including end demand, is high, and the effect of these changes upon us occurs quickly, exacerbating the volatility of these cycles. These changes have affected the timing and amounts of customers’ purchases and investments in new technology. These industry cycles create pressure on our revenue, gross margin and net income.

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Our industry has in the past experienced periods of oversupply and that has resulted in significantly reduced prices for compound semiconductor devices and components, including our products, both as a result of general economic changes and overcapacity. Oversupply causes greater price competition and can cause our revenue, gross margins and net income to decline. During periods of weak demand, customers typically reduce purchases, delay delivery of products and/or cancel orders for our products. Order cancellations, reductions in order size or delays in orders could occur and would materially adversely affect our business and results of operations. Actions to reduce our costs may be insufficient to align our structure with prevailing business conditions. We may be required to undertake additional cost-cutting measures, and may be unable to invest in marketing, research and development and engineering at the levels we believe are necessary to maintain our competitive position. Our failure to make these investments could seriously harm our business.

A significant portion of our operating expense and manufacturing costs are relatively fixed. If revenue for a particular quarter is lower than we expect, we likely will be unable to proportionately reduce our operating expenses or fixed manufacturing costs for that quarter, which would harm our operating results.

If we do not successfully develop new product features and improvements and new products that respond to customer requirements, our ability to generate revenue, obtain new customers, and retain existing customers may suffer.

Our success depends on our ability to offer new product features, improved performance characteristics and new products, such as larger diameter substrates, low defect density substrates, thicker or thinner substrates, substrates with extreme surface flatness specifications, substrates that are manufactured with a doped crystal growth process or substrates that incorporate leading technology and other technological advances. This is an ongoing iterative research and development process performed by our China team in collaboration with our manufacturing managers. New products must meet customer needs and compete effectively on quality, price and performance. The markets for our products are characterized by rapid technological change, changing customer needs and evolving industry standards. If our competitors introduce products employing new technologies or performance characteristics, our existing products could become obsolete and unmarketable. Over time, we have seen our competitors selling more substrates manufactured using a crystal growth technology similar to ours, which has eroded our technological differentiation.

The development of new product features, improved performance characteristics and new products can be a highly complex process, and we may experience delays in developing and introducing them. Any significant delay could cause us to fail to timely introduce and gain market acceptance of new products. Further, the costs involved in researching, developing and engineering new products could be greater than anticipated. If we fail to offer new products or product enhancements or fail to achieve higher quality products, we may not generate sufficient revenue to offset our development costs and other expenses or meet our customers’ requirements.

We purchase critical raw materials and parts for our equipment from single or limited sources, and could lose sales if these sources fail to fill our needs.

We depend on a limited number of suppliers for certain raw materials, components and equipment used in manufacturing our products, including key materials such as quartz tubing, and polishing solutions. We generally purchase these materials through standard purchase orders and not pursuant to long-term supply contracts, and no supplier guarantees supply of raw materials or equipment to us. If we lose any of our key suppliers, our manufacturing efforts could be significantly hampered and we could be prevented from timely producing and delivering products to our customers. We have experienced delays obtaining critical raw materials and spare parts, including gallium, and we could experience such delays again in the future due to shortages of materials or for other reasons. Delays in receiving equipment or materials could result in higher costs and cause us to delay or reduce production of our products. If we have to delay or reduce production, we could fail to meet customer delivery schedules and our revenue and operating results could suffer.

We may not be able to identify or form additional complementary raw material joint ventures.

We might invest in additional joint venture companies in order to remain competitive in our marketplace and ensure a supply of critical raw materials. However, we may not be able to identify additional complementary joint

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venture opportunities or, even once opportunities are identified, we may not be able to reach agreement on the terms of the business venture with the other investment partners. Further, geopolitical tensions and trade wars could result in government agencies blocking such new joint ventures. New joint ventures could require cash investments or cause us to incur additional liabilities or other expenses, any of which could adversely affect our financial condition and operating results.

The financial condition of our customers may affect their ability to pay amounts owed to us.

Some of our customers may be undercapitalized and cope with cash flow issues. Because of competitive market conditions, we may grant our customers extended payment terms when selling products to them. Subsequent to our fulfilling an order, some customers have been unable to make payments when due, reducing our cash balances and causing us to incur charges to allow for a possibility that some accounts might not be paid. We observed an increase in our accounts receivable in the first quarter of 2020 and believe this has resulted from work stoppages, shelter-in-place orders and general cautiousness due to the COVID-19 pandemic. In the past, we have had some customers file for bankruptcy. If our customers do not pay amounts owed to us then we will incur charges that would reduce our earnings.

We depend on the continuing efforts of our senior management team and other key personnel. If we lose members of our senior management team or other key personnel, or are unable to successfully recruit and train qualified personnel, our ability to manufacture and sell our products could be harmed.

Our future success depends on the continuing services of members of our senior management team and other key personnel. Our industry is characterized by high demand and intense competition for talent, and the turnover rate can be high. We compete for qualified management and other personnel with other specialty material companies and semiconductor companies. Our employees could leave with little or no prior notice and would be free to work for a competitor. If one or more of our senior executives or other key personnel were unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, and other senior management may be required to divert attention from other aspects of the business. The loss of any of these individuals or our ability to attract or retain qualified personnel could adversely affect our business.

Our results of operations may suffer if we do not effectively manage our inventory.

We must manage our inventory of raw materials, work in process and finished goods effectively to meet changing customer requirements, while keeping inventory costs down and improving gross margins. Although we seek to maintain sufficient inventory levels of certain materials to guard against interruptions in supply and to meet our near term needs, we may experience shortages of certain key materials. Alternatively, a sudden decline in demand could result in holding too much inventory which occurred in the second half of 2022. Some of our products and supplies have in the past, and may in the future, become obsolete while in inventory due to changing customer specifications, or become excess inventory due to decreased demand for our products and an inability to sell the inventory within a foreseeable period. This would result in charges that reduce our gross profit and gross margin. Furthermore, if market prices drop below the prices at which we value inventory, we would need to take a charge for a reduction in inventory values in accordance with the lower of cost or net realizable value valuation rule. We have in the past had to take inventory valuation and impairment charges. Any future unexpected changes in demand or increases in costs of production that cause us to take additional charges for un-saleable, obsolete or excess inventory, or to reduce inventory values, would adversely affect our results of operations.

The effect of terrorist threats and actions on the general economy could decrease our revenue.

Countries such as the United States and China continue to be on alert for terrorist activity. The potential near and long-term impact terrorist activities may have in regards to our suppliers, customers and markets for our products and the economy is uncertain. There may be embargos of ports or products, or destruction of shipments or our facilities, or attacks that affect our personnel. There may be other potentially adverse effects on our operating results due to significant events that we cannot foresee. Since we perform all of our manufacturing operations in China, terrorist activity or threats against U.S. owned enterprises are a particular concern to us.

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III.Risks Related to International Aspects of Our Business

The Chinese central government is increasingly aware of air pollution and other forms of environmental pollution and their reform efforts can impact our manufacturing, including intermittent mandatory shutdowns.

The Chinese central government is demonstrating strong leadership to improve air quality and reduce environmental pollution. These efforts have impacted manufacturing companies through mandatory shutdowns, increased inspections and regulatory reforms. In the fourth quarter of 2017, many manufacturing companies in the greater Beijing area, including Tongmei, were instructed by the local government to cease most manufacturing for several days until the air quality improved. In the first quarter of 2018, from February 27 to March 31 over 300 manufacturing companies, including Tongmei, were again intermittently shut down by the local government for a total of ten days, or 30 percent of the remaining calendar days, due to severe air pollution. Our shipments were delayed and our revenue for the quarter was negatively impacted. We expect that mandatory factory shutdowns may occur in the future. If the frequency of such shutdowns increases, especially at the end of a quarter, or if the total number of days of shutdowns prevents us from producing enough wafers to ship, then these shutdowns will have a material adverse effect on our manufacturing output, revenue and factory utilization. Each of our raw material supply chain companies could also be impacted by environmental related orders from the central government.

Although we are a Delaware corporation and are neither a PRC operating company nor do we conduct our operations in China through the use of VIEs, in the event we inadvertently concluded that we do not require any permissions or approvals from the CSRC or other PRC central government authorities to complete a public offering of securities in the U.S. or applicable laws, regulations, or interpretations change, we may be required to obtain such permissions or approvals to complete such a public offering of securities.

We are a Delaware corporation and are neither a PRC operating company nor do we conduct our operations in China through the use of VIEs. All of our products are manufactured in the PRC by our PRC subsidiaries and PRC joint ventures. We believe that we do not require any permissions or approvals from the CSRC or other PRC central government authorities to complete a public offering of securities in the U.S. because we are a Delaware corporation with our principal corporate office in Fremont, California and the PRC laws and regulations that govern the listing of securities on a U.S. securities exchange apply to PRC companies. However, in the event that we inadvertently concluded that such permission or approvals are not required or applicable laws, regulations, or interpretations change and we are required to obtain such permissions or approvals in the future and we fail to obtain such permissions or approvals, then we may not be able to complete a public offering of securities in the U.S. We may also be pressured to delist our securities, which would force the holders to sell these securities and could result in a material adverse effect on the value of these securities. We may face sanctions by the CSRC or other PRC central government authorities or pressure from the PRC government in various business matters for failure to obtain such permissions or approvals. These sanctions or pressure may include fines and penalties on our operations in China, limitations on our operating privileges in China, delays in or restrictions on the repatriation of the proceeds from a public offering of securities in the U.S. into the PRC, restrictions on or prohibition of the payments or remittance of dividends by our subsidiaries in China, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our common stock.

The PRC central government may intervene in or influence our PRC operations at any time and the rules and regulations in China can change quickly with little advance notice.

The businesses of our PRC subsidiaries and PRC joint ventures are subject to complex and rapidly evolving laws and regulations in the PRC, which can change quickly with little advance notice. The PRC central government is a single party form of government with virtually unlimited authority and power to intervene in or influence commercial operations in China. In the past, we have experienced such intervention or influence by the PRC central government and a change in the rules and regulations in China when we were instructed by the Beijing municipal government to relocate our gallium arsenide manufacturing facility in Beijing and expect that such intervention or influence or change in the rules and regulations in China could occur in the future.

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In the ordinary course of business, our PRC subsidiaries and PRC joint ventures require permits and licenses to operate in the PRC. Such permits and licenses include permits to use hazardous materials in manufacturing operations. From time to time, the PRC government issues new regulations, which may require additional actions on the part of our PRC subsidiaries and PRC joint ventures to comply. For example, on February 27, 2015, the China State Administration of Work Safety updated its list of hazardous substances. The previous list, which was published in 2002, did not restrict the materials that we use in our wafers. The new list added gallium arsenide. As a result of the newly published list, we were required to seek additional permits. Any such intervention or influence or change in the rules and regulations in China could result in a material change in our PRC operations and/or the value of our common stock.

Enhanced trade tariffs, import restrictions, export restrictions, Chinese regulations or other trade barriers may materially harm our business.

On July 3, 2023, China adopted new export control regulations on gallium- and germanium-related materials and the derivative products using these materials, effective as of August 1, 2023, which require Tongmei to proceed to immediately seek permits from the applicable Chinese authorities to export gallium arsenide and germanium substrates. Indium phosphide substrates are not included in the new export control regulations, and, therefore, exports of indium phosphide will not require export approvals as part of these regulations. While Tongmei has received its initial China export permits to resume shipping gallium arsenide and germanium substrates to certain customers, there can be no assurances that Tongmei will continue to receive China export permits to resume shipping gallium arsenide and germanium substrates to other customers or that China will not adopt additional export control regulations that affect our business, financial condition and results of operations.

All of our wafer substrates are manufactured in China and in the years 2023, 2022 and 2021, sales to customers in North America, primarily in the U.S., were approximately 10%, 14% and 10% of our revenue, respectively. In September 2018, the Trump Administration announced a list of thousands of categories of goods that became subject to tariffs when imported into the United States from China. This pronouncement imposed tariffs on wafer substrates we imported into the United States. The initial tariff rate was 10% and subsequently was increased to 25%. In the first three quarters of 2024 we paid approximately $569,000 in tariffs. In the years 2023, 2022 and 2021, we paid approximately $1.0 million, $3.3 million and $1.3 million, respectively, in tariffs. The future impact of tariffs and trade wars is uncertain. We may be required to raise prices, which may result in the loss of customers and our business, financial condition and results of operations may be materially harmed. Additionally, it is possible that our business could be adversely impacted by retaliatory trade measures taken by China or other countries in response to existing or future tariffs, which could cause us to raise prices or make changes to our operations, which could materially harm our business, financial condition and results of operations.

The economic and political conditions between China and the United States, in our view, create an unstable business environment. The United States government has restricted access by certain Chinese technology companies to items produced domestically and abroad from U.S. technology and software, which may impact our ability to maintain or grow our revenue. Trade restrictions against China have resulted in a greater determination within China to be self-sufficient and produce more goods domestically. Government agencies in China may be encouraging and supporting the founding of new companies, the addition of new products in existing companies and more vertical integration within companies. These factors have resulted in lower revenue from sales of our wafer substrates in China. Further, the continued threats of tariffs and other trade restrictions could have a generally disruptive impact on the global economy and, therefore, negatively impact our sales.

In addition, we may incur increases in costs and other adverse business consequences, including losses of customers and revenue or decreased gross margins, due to changes in tariffs, import or export restrictions, further trade barriers, or unexpected changes in regulatory requirements. In addition, in July 2012, we received notice of retroactive value-added taxes (VATs) levied by the tax authorities in China, which applied for the period from July 1, 2011 to June 30, 2012. We expensed the retroactive VATs of approximately $1.3 million in the quarter ended June 30, 2012, which resulted in a decrease in our gross margins. These VATs will continue to negatively impact our gross margins for the future quarters. Given the relatively fluid regulatory environment in China and the United States, there could be

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additional tax or other regulatory changes in the future. Any such changes could directly and materially adversely impact our financial results and general business condition.

COVID-19 or other contagious diseases may affect our business operations and financial performance.

The spread of COVID-19 impacted our operations and financial performance. The outbreak of COVID has triggered references to the SARS outbreak, which occurred in 2003 and affected our business operations. Any severe occurrence of an outbreak of a contagious disease such as COVID-19, SARS, Avian Flu or Ebola may cause us or the government to temporarily close our manufacturing operations in China. In January 2020, virtually all companies in China were ordered to remain closed after the traditional Lunar New Year holiday ended, including our subsidiaries in China. In December 2022, the PRC government ended its zero-COVID policy. If there is a renewed surge of the COVID-19 pandemic in cities in which our PRC subsidiaries and PRC joint ventures are located, the Chinese government may require these companies to close again. If one or more of our key suppliers is required to close for an extended period, we might not have enough raw material inventories to continue manufacturing operations. In addition, travel restrictions between China and the U.S. were disrupted and this impacted our efficiency. In the future, if our manufacturing operations were closed for a significant period or we experience difficulty in shipping our products, we could lose revenue and market share, which would depress our financial performance and could be difficult to recapture. If one of our key customers is required to close for an extended period, this may delay the placement of new orders. As a result, our revenue would decline.

Changes in China’s political, social, regulatory or economic environments may affect our financial performance.

Our financial performance may be affected by changes in China’s political, social, regulatory or economic environments. The role of the Chinese central and local governments in the Chinese economy is significant. The Beijing municipal government’s decision to move to the Tongzhou district, the original location of our China company, resulted in the city instructing virtually all existing manufacturing companies, including AXT, to relocate all or some of their manufacturing lines. We were instructed to move our gallium arsenide manufacturing line out of the area. Chinese policies toward hazardous materials, including arsenic, environmental controls, air pollution, economic liberalization, laws and policies affecting technology companies, foreign investment, currency exchange rates, taxation structure and other matters could change, resulting in greater restrictions on our ability to do business and operate our manufacturing facilities in China. We have observed a growing fluidity and tightening of regulations concerning hazardous materials, other environmental controls and air pollution. The Chinese government could revoke, terminate or suspend our operating licenses for reasons related to environmental control over the use of hazardous materials, air pollution, labor complaints, national security and similar reasons without compensation to us. Further, the central government encourages employees to report to the appropriate regulatory agencies possible safety or environmental violations, but there may not be actual violations. In days of severe air pollution the government has ordered manufacturing companies to stop all production. For example, in the first quarter of 2018, from February 27 to March 31, over 300 manufacturing companies, including us, were again intermittently shut down by the local government for a total of ten days due to severe air pollution. Our shipments were delayed and our revenue for the quarter was negatively impacted. We expect that mandatory factory shutdowns may occur in the future. Any failure on our part to comply with governmental regulations could result in the loss of our ability to manufacture our products. Further, any imposition of surcharges or any increase in Chinese tax rates or reduction or elimination of Chinese tax benefits could hurt our financial results.

Financial market volatility and adverse changes in the domestic, global, political and economic environment could have a significant adverse impact on our business, financial condition and operating results.

We are subject to the risks arising from adverse changes and uncertainty in domestic and global economies. Uncertain global economic and political conditions or low or negative growth in China, Europe or the United States, along with volatility in the financial markets and U.S. financial system, increasing national debt and fiscal concerns in various regions and the adoption and availability of fiscal and monetary stimulus measures to counteract the impact of the COVID-19 pandemic, pose challenges to our industry. Currently China’s economy is slowing and this could impact our financial performance. In addition, tariffs, trade restrictions, trade wars, high levels of inflation, high interest rates, the Russian invasion of Ukraine, the Middle East conflict, the Red Sea shipping disruptions, Brexit, heightened tensions between the U.S. and China, and U.S. bank failures in 2023, among other factors, are creating an unstable environment

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and can disrupt or restrict commerce. Although we remain well-capitalized, the cost and availability of funds may be adversely affected by illiquid credit markets. Volatility in U.S. and international markets and economies may adversely affect our liquidity, financial condition and profitability. Another severe or prolonged economic downturn could result in a variety of risks to our business, including:

inventory corrections;
increased volatility in our stock price;
increased volatility in foreign currency exchange rates;
delays in, or curtailment of, purchasing decisions by our customers or potential customers;
increased credit risk associated with our customers or potential customers, particularly those that may operate in industries most affected by the economic downturn; and
impairment of our tangible or intangible assets.

A recent example of economic volatility took shape in the second half of 2022 and has continued into 2024. Early in its history, COVID began to impact supply chains resulting in shortages. As a result, in 2021 and into 2022 almost all companies purchased more inventory than needed as a safety net. In the second half of 2022 companies began to realize they had too much inventory and entered into the “inventory correction” period. Our consolidated revenue had reached $39.7 million in the first quarter of 2022. In the third quarter of 2023 our revenue had declined to $17.4 million. In the fourth quarter of 2018 and continuing in 2019, we experienced delays in customer purchasing decisions and disruptions in a normal volume of customer orders that we believe were in part due to the uncertainties in the global economy, resulting in an adverse impact on consumer spending. During challenging and uncertain economic times and in tight credit markets, many customers delay or reduce technology purchases. Should similar events occur again, our business and operating results could be significantly and adversely affected.

The PRC central government may also exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in our operations and/or the value of our common stock.

The PRC central government may also exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in our operations and/or the value of our common stock. The PRC central government may also seek to significantly limit or completely hinder our ability to offer or continue to offer our securities to investors and cause the value of such securities to significantly decline or be worthless.

Our international operations are exposed to potential adverse tax consequence in China.

Our international operations create a risk of potential adverse tax consequences. Taxes on income in our China-based companies are dependent upon acceptance of our operational practices and intercompany transfer pricing by local tax authorities as being on an arm's length basis. Due to inconsistencies among taxing authorities in application of the arm’s length standard, transfer pricing challenges by tax authorities could, if successful, materially increase our consolidated income tax expense. We are subject to tax audits in China and an audit could result in the assessment of additional income tax against us. This could have a material adverse effect on our operating results or cash flows in the period or periods for which that determination is made and could result in increases to our overall tax expense in subsequent periods. Various taxing agencies in China are increasingly focused on tax reform and other legislative action to increase tax revenue. In addition to risks regarding income tax we have in the past been retroactively assessed value added taxes (“VAT” or “sales tax”) and such VAT assessments could occur again in the future.

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Uncertainty regarding the United States’ foreign policy, particularly with regards to China, could disrupt our business.

We manufacture our substrates in China and, in the year ended December 31, 2023, approximately 90% of our sales were to customers located outside the United States. Further, we have partial ownership of raw material companies in China as part of our supply chain. The United States’ current foreign policy has created uncertainty and caution in the international business community, resulting in disruptions in manufacturing, import/export, trade tariffs, sales, investments and other business activity. Such disruptions have had an adverse impact on our financial performance and could continue in the future.

Dividends from within our corporate structure are subject to PRC withholding tax and SAFE approval.

Occasionally, one of our PRC subsidiaries or PRC raw material joint ventures declares and pays a dividend. These dividends generally occur when the PRC joint venture declares a dividend for all of its shareholders. We have no current intentions to distribute to our investors earnings under our corporate structure. Dividends paid to the Company are subject to a 10% PRC withholding tax. The Company is required to obtain approval from SAFE to transfer funds in or out of the PRC. SAFE requires a valid agreement to approve the transfers, which are processed through a bank. Other than PRC foreign exchange restrictions, the Company is not subject to any PRC restrictions and limitations on its ability to distribute earnings from its businesses. If SAFE approval is denied the dividend payable to the Company would be owed but would not be paid.

Our PRC subsidiaries and PRC joint ventures are subject to data security oversight.

Our PRC subsidiaries and PRC joint ventures are subject to oversight by the Cyberspace Administration of China (the “CAC”) regarding data security. Except for routine personal information necessary to process payroll and other benefits and emergency contact information, our PRC subsidiaries and PRC joint ventures do not collect or maintain personal information. All of our products are manufactured in the PRC by our PRC subsidiaries and PRC joint ventures. Although we are neither a PRC operating company nor do we conduct our operations in China through the use of VIEs, cybersecurity is increasingly a focus of the central government and the CAC could require AXT to comply with PRC cybersecurity regulations, which could cause us to make changes to our operations that could materially harm our business, financial condition and results of operations.

We derive a significant portion of our revenue from international sales, and our ability to sustain and increase our international sales involves significant risks.

Approximately 90% of our revenue is from international sales. We expect that sales to customers outside the United States, particularly sales to customers in Japan, Taiwan, Europe and China, will continue to represent a significant portion of our revenue. Therefore, our revenue growth depends significantly on the expansion of our international sales and operations.

All of our manufacturing facilities and most of our suppliers are also located outside the United States. Managing our overseas operations presents challenges, including periodic regional economic downturns, trade balance issues, threats of trade wars, varying business conditions and demands, political instability, variations in enforcement of intellectual property and contract rights in different jurisdictions, differences in the ability to develop relationships with suppliers and other local businesses, changes in U.S. and international laws and regulations, including import and export restrictions, fluctuations in interest and currency exchange rates, the ability to provide sufficient levels of technical support in different locations, cultural differences and perceptions of U.S. companies, shipping delays and terrorist acts or acts of war, natural disasters and epidemics or pandemics, such as COVID-19, among other risks. Many of these challenges are present in China, which represents a large potential market for semiconductor devices. Global uncertainties with respect to: (i) economic growth rates in various countries; (ii) sustainability of demand for electronic products; (iii) capital spending by semiconductor manufacturers; (iv) price weakness for certain semiconductor devices; (v) changing and tightening environmental regulations; (vi) political instability in regions where we have operations and (vii) trade wars may also affect our business, financial condition and results of operations.

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Our dependence on international sales involves a number of risks, including:

changes in tariffs, import restrictions, export restrictions, or other trade barriers;
unexpected changes in regulatory requirements;
longer periods to collect accounts receivable;
foreign exchange rate fluctuations;
changes in export license requirements;
political and economic instability; and
unexpected changes in diplomatic and trade relationships.

Most of our sales are denominated in U.S. dollars, except for sales to our Chinese customers which are denominated in renminbi and our Japanese customers which are denominated in Japanese yen. We also have some small sales denominated in Euro. Increases in the value of the U.S. dollar could increase the price of our products in non-U.S. markets and make our products more expensive than competitors’ products in these markets.

We are subject to foreign exchange gains and losses that may materially impact our condensed consolidated statements of operations.

We are subject to foreign exchange gains and losses that may materially impact our condensed consolidated statements of operations. For example, in 2023 and 2022, we incurred foreign exchange gains of $169,000 and $1.6 million, respectively, and in 2021, we incurred a foreign exchange loss of $434,000.

The functional currency of our companies in China is the Chinese renminbi, the local currency. We can incur foreign exchange gains or losses when we pay dollars to one of our China-based companies or a third-party supplier in China. Similarly, if a company in China pays renminbi into one of our bank accounts transacting in dollars the renminbi will be converted to dollars and we can incur a foreign exchange gain or loss. Hedging renminbi will be considered in the future but it is complicated by the number of companies involved, the diversity of transactions and restrictions imposed by the banking system in China.

Sales to Japanese customers are denominated in Japanese yen. This subjects us to fluctuations in the exchange rates between the U.S. dollar and the Japanese yen and can result in foreign exchange gains and losses. This has been problematic in the past and, therefore, we instituted a foreign currency hedging program dealing with yen which has historically mitigated the gains and losses caused by fluctuations in the exchange rates.

Joint venture raw material companies in China bring certain risks.

Since our consolidated subsidiaries and all of our joint venture raw material companies operate in China, their activities could subject us to a number of risks associated with conducting operations internationally, including:

import and export restrictions;
unexpected changes in regulatory requirements that may limit our ability to manufacture, export the products of these companies, sell into particular jurisdictions or impose multiple conflicting tax laws and regulations;
the imposition of tariffs, trade barriers and duties;

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difficulties in managing geographically disparate operations;
difficulties in enforcing agreements through non-U.S. legal systems;
political and economic instability, civil unrest or war;
terrorist activities that impact international commerce;
difficulties in protecting our intellectual property rights, particularly in countries where the laws and practices do not protect proprietary rights to as great an extent as do the laws and practices of the United States;
new or changing laws and policies affecting economic liberalization, foreign investment, currency convertibility or exchange rates, taxation or employment;
new or changing PRC regulations and policies regarding data security and oversight by the CAC of our consolidated subsidiaries and all of our joint venture raw material companies; and
nationalization of foreign-owned assets, including intellectual property.

If China places restrictions on freight and transportation routes and on ports of entry and departure this could result in shipping delays or increased costs for shipping.

In August 2015, there was an explosion at the Port of Tianjin, China. As a result of this incident the government placed restrictions on importing certain materials and on freight routes used to transport these materials. We experienced some modest disruption from these restrictions. If the government were to place additional restrictions on the transportation of materials, then our ability to transport our raw materials or products could be limited and result in manufacturing delays or bottlenecks at shipping ports, affecting our ability to deliver products to our customers. During periods of such restrictions, we may increase our stock of critical materials (such as arsenic, gallium and other items) for use during the period that these restrictions are likely to last, which will increase our use of cash and increase our inventory level. Any of these restrictions could materially and adversely impact our results of operations and our financial condition.

Our operating results depend in large part on continued customer acceptance of our substrate products manufactured in China and continued improvements in product quality.

We manufacture all of our products in China, and source most of our raw materials in China. We have in the past experienced quality problems with our China manufactured products. Our previous quality problems caused us to lose market share to our competitors as some of our customers reduced their orders until our wafer surface quality was as good and as consistent as that offered by our competitors. If we are unable to continue to achieve customer qualifications for our products, or if we are unable to control product quality, customers may not increase purchases of our products, our China facilities will become underutilized, and we will be unable to achieve revenue growth.

If there are power shortages in China, we may have to temporarily close our China operations, which would adversely impact our ability to manufacture our products and meet customer orders, and would result in reduced revenue.

In the past, China has faced power shortages resulting in power demand outstripping supply in peak periods. Instability in electrical supply has caused sporadic outages among residential and commercial consumers causing the Chinese government to implement tough measures to ease the energy shortage. If further problems with power shortages occur in the future, we may be required to make temporary closures of our operations or of our subsidiary and joint venture raw material companies. We may be unable to manufacture our products and would then be unable to meet customer orders except from finished goods inventory on hand. As a result, our revenue could be adversely impacted, and our relationships with our customers could suffer, impacting our ability to generate future revenue. In addition, if

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power is shut off at any of our facilities at any time, either voluntarily or as a result of unplanned brownouts, during certain phases of our manufacturing process including our crystal growth phase, the work in process may be ruined and rendered unusable, causing us to incur costs that will not be covered by revenue, and negatively impacting our cost of revenue and gross margins.

Although the audit report is prepared by an independent registered public accounting firm who is currently inspected fully by the PCAOB, there is no guarantee that future audit reports will be prepared by an independent registered public accounting firm that is completely inspected by the PCAOB.

Our independent registered public accounting firm, BPM, is registered with the PCAOB and is subject to regular inspections by the PCAOB to assess its compliance with the applicable professional standards. Although we have operations in China, a jurisdiction where the PCAOB was, until recently, unable to conduct inspections without the approval of the Chinese government authorities, our independent registered public accounting firm is currently inspected fully by the PCAOB.

Inspections of other independent registered public accounting firms conducted by the PCAOB outside China have at times identified deficiencies in those independent registered public accounting firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. The lack of PCAOB inspections of audit work undertaken in China prevented the PCAOB from regularly evaluating independent registered public accounting firms’ audits and their quality control procedures. As a result, to the extent that any component of our independent registered public accounting firm’s work papers is or becomes located in China, such work papers may not be subject to inspection by the PCAOB. As a result, investors would be deprived of such PCAOB inspections, which could result in limitations or restrictions to our access of the U.S. capital markets.

As part of a continued regulatory focus in the United States on access to audit and other information currently protected by national law, in particular PRC laws, in June 2019, a bipartisan group of lawmakers introduced bills in both houses of the U.S. Congress which, if passed, would require the SEC to maintain a list of issuers for which PCAOB is not able to inspect or investigate the audit work performed by a non-U.S. independent registered public accounting firm completely. The proposed Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges Act prescribes increased disclosure requirements for these issuers and, beginning in 2025, the delisting from U.S. national securities exchanges such as the Nasdaq Global Select Market of issuers included on the SEC’s list for three consecutive years. It is unclear if this proposed legislation will be enacted. Furthermore, there have been recent deliberations within the U.S. government regarding potentially limiting or restricting companies based in China from accessing U.S. capital markets. On May 20, 2020, the U.S. Senate passed the HFCA Act, which includes requirements for the SEC to identify issuers whose audit work is performed by independent registered public accounting firms that the PCAOB is unable to inspect or investigate completely because of a restriction imposed by a non-U.S. authority in the independent registered public accounting firms’ local jurisdiction. The U.S. House of Representatives passed the HFCA Act on December 2, 2020, and the HFCA Act was signed into law on December 18, 2020. Additionally, in July 2020, the U.S. President’s Working Group on Financial Markets issued recommendations for actions that can be taken by the executive branch, the SEC, the PCAOB or other federal agencies and department with respect to Chinese companies listed on U.S. stock exchanges and their independent registered public accounting firms, in an effort to protect investors in the United States. In response, on November 23, 2020, the SEC issued guidance highlighting certain risks (and their implications to U.S. investors) associated with investments in issuers based in China and summarizing enhanced disclosures the SEC recommends issuers based in China make regarding such risks. On March 18, 2021, the SEC adopted interim final rules to implement the HFCA Act, which requires the SEC to identify certain issuers that filed annual reports with audit reports issued by registered public accounting firms located in foreign jurisdictions and that the PCAOB is unable to inspect or investigate completely because of a position taken by an authority in those jurisdictions (the “Commission-Identified Issuers”). Specifically, the SEC implemented the submission and disclosure requirements of the HFCA Act. On December 2, 2021, the SEC issued amendments to finalize the interim final rules. Further, the SEC established procedures to identify Commission-Identified Issuers and prohibit the trading of the securities of Commission-Identified Issuers as required by the HFCA Act. We will be required to comply with these rules if the SEC identifies us as a Commission-Identified Issuer. Under the HFCA Act, our securities may be prohibited from trading on the Nasdaq Global Select Market or other U.S. stock exchanges if we are determined to be a Commission-Identified Issuer for three consecutive years, and this ultimately could result in our common stock being delisted. Furthermore, on

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June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if enacted, would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if the issuer is determined to be a Commission-Identified Issuer for two consecutive years instead of three. On December 15, 2021, the Accelerating Holding Foreign Companies Accountable Act was introduced to the U.S. House of Representatives. On September 22, 2021, the PCAOB adopted a final rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act, whether the PCAOB is unable to inspect or investigate completely independent registered public accounting firms located in a non-U.S. jurisdiction because of a position taken by one or more authorities in that jurisdiction and was approved by the SEC on November 5, 2021. On December 16, 2021, the PCAOB issued a report on its determinations that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in the PRC and Hong Kong because of positions taken by PRC authorities in those jurisdictions.

Beginning in March 2022, the SEC listed companies on either its conclusive list of issuers identified under the HFCA Act or its provisional list of issuers identified under the HFCA Act. Companies listed on the SEC’s conclusive list of issuers identified under the HFCA Act are determined to be Commission-Identified Issuers. The SEC did not list AXT, Inc. on either its conclusive list of issuers identified under the HFCA Act or its provisional list of issuers identified under the HFCA Act.

On December 15, 2022, the PCAOB vacated its 2021 determinations that the positions taken by authorities in the PRC and Hong Kong prevented it from inspecting and investigating completely registered public accounting firms headquartered in those jurisdictions. As a result, the SEC will not provisionally or conclusively identify an issuer as a Commission-Identified Issuer if it files an annual report with an audit report issued by a registered public accounting firm headquartered in either jurisdiction on or after December 15, 2022, until such time as the PCAOB issues a new determination. The SEC will continue to include any Commission-Identified Issuer on the provisional or conclusive list if they filed an annual report with an audit report issued by a registered public accounting firm headquartered in mainland China and Hong Kong prior to the PCAOB’s decision to vacate its 2021 determinations.

While an agreement has been reached among the CSRC, the SEC and the PCAOB regarding the inspection of PCAOB-independent registered public accounting firms in China, there can be no assurance that we will be able to comply with requirements imposed by U.S. regulators. If the PRC authorities do not fully perform their obligations under the agreement with the PCAOB in the future, or if authorities in the PRC otherwise take positions that render the PCAOB unable to inspect or investigate completely registered public accounting firms headquartered in the PRC and Hong Kong, the PCAOB will make determinations under the HFCA Act. Delisting of our common stock would force holders of our common stock to sell their shares. The market price of our common stock could be adversely affected as a result of anticipated negative impacts of these executive or legislative actions upon, as well as negative investor sentiment towards, companies with operations in China that are listed in the United States, regardless of whether these executive or legislative actions are implemented and regardless of our actual operating performance.

IV.         Risks Related to Our Financial Results and Capital Structure

We may utilize our cash balances for relocating manufacturing lines, adding capacity, acquiring state-of-the-art equipment or offsetting a business downturn resulting in the decline of our existing cash and if we need additional capital, funds may not be available on acceptable terms, or at all.

Our liquidity is affected by many factors, including among others, the relocation of our gallium arsenide manufacturing lines, the expansion of our capacity to meet market demand, the acquisition of state-of-the-art equipment, other capital expenditures, operating activities, the effect of exchange rate changes and other factors related to the uncertainties of the industry and global economies. Such matters could draw down our cash reserves, which could adversely affect our financial condition, require us to incur debt, reduce our value and possibly impinge our ability to raise debt and equity funding in the future, at a time when we might need to raise additional cash or elect to raise additional cash. Accordingly, there can be no assurance that events will not require us to seek additional capital or, if required, that such capital would be available on terms acceptable to us, if at all.

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The terms of the private equity raised in China as a first step toward an IPO on the STAR Market grant each Investor a right of redemption if Tongmei fails to achieve its IPO.

Pursuant to the Capital Investment Agreements with the Investors, each Investor has the right to require AXT to redeem any or all Tongmei shares held by such Investor at the original purchase price paid by such Investor, without interest, in the event the IPO fails to pass the audit of the Shanghai Stock Exchange, is not approved by the CSRC or Tongmei cancels the IPO application. The aggregate redemption amount is approximately $49 million.

Tongmei submitted its IPO application to the Shanghai Stock Exchange and it was formally accepted for review on January 10, 2022. The Shanghai Stock Exchange approved the IPO application on July 12, 2022. On August 1, 2022, the CSRC accepted for review Tongmei’s IPO application. The STAR Market IPO remains subject to review and approval by the CSRC and other authorities. The process of going public on the STAR Market includes several periods of review and, therefore, is a lengthy process. Subject to review and approval by the CSRC and other authorities, Tongmei expects to accomplish this goal in the coming months. The listing of Tongmei on the STAR Market will not change the status of AXT as a U.S. public company. There can be no assurances that Tongmei will complete its IPO in 2024 or at all. In the event that investors exercise their redemption rights, we may be required to seek additional capital in order to redeem their Tongmei shares and there would be no assurances that such capital would be available on terms acceptable to us, if at all. Any redemptions could have a material adverse effect on our business, financial condition and results of operations.

Unpredictable fluctuations in our operating results could disappoint analysts or our investors, which could cause our stock price to decline.

We have experienced, and may continue to experience, significant fluctuations in our revenue, gross margins and earnings. Our quarterly and annual revenue and operating results have varied significantly in the past and may vary significantly in the future due to a number of factors, including:

inventory corrections within the technology sector;
our ability to develop, manufacture and deliver high quality products in a timely and cost-effective manner;
unforeseen disruptions at our new sites;
disruptions in manufacturing if air pollution, or other environmental hazards, or outbreaks of contagious diseases causes the Chinese government to order work stoppages;
fluctuation of our manufacturing yields;
decreases in the prices of our or our competitors’ products;
fluctuations in demand for our products;
the volume and timing of orders from our customers, and cancellations, push-outs and delays of customer orders once booked;
decline in general economic conditions or downturns in the industry in which we compete;
expansion of our manufacturing capacity;
expansion of our operations in China;
limited availability and increased cost of raw materials;

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costs incurred in connection with any future acquisitions of businesses or technologies; and
increases in our expenses, including expenses for research and development.

Due to these factors, we believe that period-to-period comparisons of our operating results may not be meaningful indicators of our future performance.

A substantial percentage of our operating expenses are fixed, and we may be unable to adjust spending to compensate for an unexpected shortfall in revenue. As a result, any delay in generating revenue could cause our operating results to fall below the expectations of market analysts or investors, which could also cause our stock price to decline.

If our operating results and financial performance do not meet the guidance that we have provided to the public, our stock price may decline.

We provide public guidance on our expected operating and financial results. Although we believe that this guidance provides our stockholders, investors and analysts with a better understanding of our expectations for the future, such guidance is comprised of forward-looking statements subject to the risks and uncertainties described in this Report and in our other public filings and public statements. Our actual results may not meet the guidance we have provided. If our operating or financial results do not meet our guidance or the expectations of investment analysts, our stock price may decline.

We have adopted certain anti-takeover measures that may make it more difficult for a third party to acquire us.

Our Board of Directors has the authority to issue up to 800,000 shares of preferred stock in addition to the outstanding shares of Series A preferred stock and to determine the price, rights, preferences and privileges of those shares without any further vote or action by the stockholders. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. The issuance of shares of preferred stock could have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting stock. We have no present intention to issue additional shares of preferred stock.

Provisions in our restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a merger, acquisition or change of control, or changes in our management, which could adversely affect the market price of our common stock. The following are some examples of these provisions:

the division of our Board of Directors into three separate classes, each with three-year terms;
the right of our Board of Directors to elect a director to fill a space created by a board vacancy or the expansion of the board;
the ability of our Board of Directors to alter our amended and restated bylaws; and
the requirement that only our Board of Directors or the holders of at least 10% of our outstanding shares may call a special meeting of our stockholders.

Furthermore, because we are incorporated in Delaware, we are subject to the provisions of Section 203 of the Delaware General Corporation Law. These provisions prohibit us from engaging in any business combination with any interested stockholder (a stockholder who owns 15% or more of our outstanding voting stock) for a period of three years following the time that such stockholder became an interested stockholder, unless:

662/3% of the shares of voting stock not owned by the interested stockholder approve the merger or combination, or

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the Board of Directors approves the merger or combination or the transaction which resulted in the stockholder becoming an interested stockholder.

Our common stock may be delisted from The Nasdaq Global Select Market, which could negatively impact the price of our common stock and our ability to access the capital markets.

Our common stock is listed on The Nasdaq Global Select Market. The bid price of our common stock has in the past closed below the $1.00 minimum per share bid price required for continued inclusion on The Nasdaq Global Select Market under Marketplace Rule 5450(a). If the bid price of our common stock remains below $1.00 per share for thirty consecutive business days, we could be subject to delisting from the Nasdaq Global Select Market.

Any delisting from The Nasdaq Global Select Market could have an adverse effect on our business and on the trading of our common stock. If a delisting of our common stock were to occur, our common stock would trade in the over-the-counter market and be quoted on a service such as those provided by OTC Markets Group, Inc. Such alternatives are generally considered to be less efficient markets, and our stock price, as well as the liquidity of our common stock, may be adversely impacted as a result. Delisting from The Nasdaq Global Select Market could also have other negative results, including the potential loss of confidence by customers, suppliers and employees, the loss of institutional investor interest and fewer business development opportunities, as well as the loss of liquidity for our stockholders.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, 2023, we had U.S. federal net operating loss carryforwards of approximately $40.2 million. We have net operating loss carryforwards of approximately $115,000, primarily in the state of California, as of December 31, 2023. We do not expect to utilize the loss carryforwards in the next several years unless Tongmei pays a dividend. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income and taxes may be limited. In general, an “ownership change” occurs if there is a cumulative change in our ownership by “5% shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. We might have undergone prior ownership changes, and we may undergo ownership changes in the future, which may result in limitations on our net operating loss carryforwards and other tax attributes. Any such limitations on our ability to use our net operating loss carryforwards and other tax attributes could adversely impact our business, financial condition and results of operations.

V.         Risks Related to Our Intellectual Property

Intellectual property infringement claims may be costly to resolve and could divert management attention.

Other companies may hold or obtain patents on inventions or may otherwise claim proprietary rights to technology necessary to our business. The markets in which we compete are comprised of competitors that in some cases hold substantial patent portfolios covering aspects of products that could be similar to ours. We could become subject to claims that we are infringing patent, trademark, copyright or other proprietary rights of others. We may incur expenses to defend ourselves against such claims or enter into cross license agreements that require us to pay royalty payments to resolve such claims. For example, in 2020, we and a competitor entered into a cross license and covenant agreement (the “Cross License Agreement”), which has a term that began on January 1, 2020 and expires on December 31, 2029. We have in the past been involved in lawsuits alleging patent infringement, and could in the future be involved in similar litigation.

If we are unable to protect our intellectual property, including our non-patented proprietary process technology, we may lose valuable assets or incur costly litigation.

We rely on a combination of patents, copyrights, trademarks, trade secrets and trade secret laws, non-disclosure agreements and other intellectual property protection methods to protect our proprietary technology. We believe that our

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internal, non-patented proprietary process technology methods, systems and processes are a valuable and critical element of our intellectual property. We must establish and maintain safeguards to avoid the theft of these processes. Our ability to establish and maintain a position of technology leadership also depends on the skills of our development personnel. Despite our efforts to protect our intellectual property, third parties can develop products or processes similar to ours. Our means of protecting our proprietary rights may not be adequate, and our competitors may independently develop similar technology, duplicate our products or design around our patents. We believe that at least two of our competitors ship GaAs substrates produced using a process similar to our VGF process. Our competitors may also develop and patent improvements to the VGF technology upon which we rely, and thus may limit any exclusivity we enjoy by virtue of our patents or trade secrets.

It is possible that pending or future United States or foreign patent applications made by us will not be approved, that our issued patents will not protect our intellectual property, or that third parties will challenge our ownership rights or the validity of our patents. In addition, the laws of some foreign countries may not protect our proprietary rights to as great an extent as do the laws of the United States and it may be more difficult to monitor the use of our intellectual property. Our competitors may be able to legitimately ascertain non-patented proprietary technology embedded in our systems. If this occurs, we may not be able to prevent the development of technology substantially similar to ours.

We may have to resort to costly litigation to enforce our intellectual property rights, to protect our trade secrets or know-how or to determine their scope, validity or enforceability. Enforcing or defending our proprietary technology is expensive, could cause us to divert resources and may not prove successful. Our protective measures may prove inadequate to protect our proprietary rights, and if we fail to enforce or protect our rights, we could lose valuable assets.

VI.           Risks Related to Compliance, Environmental Regulations and Other Legal Matters

If we, or any of our partially owned supply chain companies, fail to comply with environmental and safety regulations, we may be subject to significant fines or forced to cease our operations.

We are subject to federal, state and local environmental and safety laws and regulations in all of our operating locations, including laws and regulations of China, such as laws and regulations related to the development, manufacture and use of our products, the use of hazardous materials, the operation of our facilities, and the use of our real property. These laws and regulations govern the use, storage, discharge and disposal of hazardous materials during manufacturing, research and development, and sales demonstrations. If we, or any of our partially owned supply chain companies, fail to comply with applicable regulations, we could be subject to substantial liability for clean-up efforts, personal injury, fines or suspension or be forced to close or temporarily cease our operations, and/or suspend or terminate the development, manufacture or use of certain of our products, the use of our facilities, or the use of our real property, each of which could have a material adverse effect on our business, financial condition and results of operations.

The Chinese central government is demonstrating strong leadership to improve air quality and reduce environmental pollution. The central government encourages employees to report to the appropriate regulatory agencies possible safety or environmental violations but there may not be actual violations. These efforts have impacted manufacturing companies through mandatory shutdowns, increased inspections and regulatory reforms. In the first quarter of 2018, from February 27 to March 31 over 300 manufacturing companies were again intermittently shut down by the local government for a total of ten days, or 30 percent of the remaining calendar days, due to severe air pollution. Our shipments were delayed and our revenue for the quarter was negatively impacted. We expect that mandatory factory shutdowns may occur in the future. If the frequency of such shutdowns increases, especially at the end of a quarter, or if the total number of days of shutdowns prevents us from producing enough wafers to ship, then the shutdowns will have a material adverse effect on our manufacturing output, revenue and factory utilization. We believe the relocation of our gallium arsenide and germanium manufacturing lines mitigates our exposure to factory shutdowns. Each of our raw material supply chain companies could also be impacted by environmental related orders from the central government.

In addition, from time to time, the Chinese government issues new regulations, which may require additional actions on our part to comply. For example, on February 27, 2015, the China State Administration of Work Safety updated its list of hazardous substances. The previous list, which was published in 2002, did not restrict the materials

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that we use in our wafers. The new list added gallium arsenide. As a result of the newly published list, we were required to seek additional permits.

We face litigation and legal proceedings which could adversely affect our business, financial condition, results of operations or cash flows.

We are subject to lawsuits, investigations and claims covering a wide range of matters. We are currently the subject of complaints alleging violations of various laws, including but not limited to federal securities laws, including a shareholder class action, described under the “Legal Proceedings” elsewhere in this report, and in the future could be subject to other proceedings. This litigation and any other regulatory proceedings or actions may be time consuming, could cause us to incur significant defense costs, and could damage our reputation or adversely affect our stock price. In the event that there is an adverse ruling in any legal or regulatory proceeding or action, we may be required to make payments to third parties that could have a material adverse effect on our business, financial condition, results of operations or cash flows.

We could be subject to suits for personal injuries caused by hazardous materials.

In 2005, a complaint was filed against us alleging personal injury, general negligence, intentional tort, wage loss and other damages, including punitive damages, as a result of exposure of plaintiffs to high levels of gallium arsenide in gallium arsenide wafers, and methanol. Other current and/or former employees could bring litigation against us in the future. Although we have in place engineering, administrative and personnel protective equipment programs to address these issues, our ability to expand or continue to operate our present locations could be restricted or we could be required to acquire costly remediation equipment or incur other significant expenses if we were found liable for failure to comply with environmental and safety regulations. Existing or future changes in laws or regulations in the United States and China may require us to incur significant expenditures or liabilities, or may restrict our operations. In addition, our employees could be exposed to chemicals or other hazardous materials at our facilities and we may be subject to lawsuits seeking damages for wrongful death or personal injuries allegedly caused by exposure to chemicals or hazardous materials at our facilities.

Litigation is inherently uncertain and while we would expect to defend ourselves vigorously, it is possible that our business, financial condition, results of operations or cash flows could be affected in any particular period by litigation pending and any additional litigation brought against us. In addition, future litigation could divert management’s attention from our business and operations, causing our business and financial results to suffer. We could incur defense or settlement costs in excess of the insurance covering these litigation matters, or that could result in significant judgments against us or cause us to incur costly settlements, in excess of our insurance limits.

We are subject to internal control evaluations and attestation requirements of Section 404 of the Sarbanes-Oxley Act.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we must include in our Annual Report on Form 10-K a report of management on the effectiveness of our internal control over financial reporting. Ongoing compliance with this requirement is complex, costly and time-consuming and it extends to our companies in China. If: (1) we fail to maintain effective internal control over financial reporting; or (2) our management does not timely assess the adequacy of such internal control, we could be subject to regulatory sanctions and the public’s perception of us may be adversely impacted.

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我们需要继续改进或实施我们的系统、程序和控制措施。

我们依赖于某些手工流程进行数据收集和信息处理,我们的合资创业公司也是如此。如果我们未能妥善管理这些程序或未能有效管理从手工流程到自动化流程的过渡,我们的系统和控制可能会受到干扰。为了有效管理我们的业务,我们可能需要实施额外的管理信息系统,进一步发展我们的运营、行政、财务和会计系统和控制措施,增加经验丰富的高级管理人员,并保持我们的执行、工程、会计、营销、销售和运营部门之间的密切协调。

事项 2. 未注册的股权证券销售和募集资金以及所得款项的使用

无。

项目3. 高级证券违约

项目4.矿山安全披露

不适用。

项目5.其他信息

在我们上个财季,没有根据《交易所法》第16a-1(f)条规定定义的董事或高管 已采纳终止 “Rule 10b5-1交易安排”或“非Rule 10b5-1交易安排”,均由Regulation S-k Item 408定义。

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项目6.附件

a. 展品

展览
数字

描述

31.1

根据《证券交易法》第13a-14(a)条和第15d-14(a)条的相关要求,首席执行官根据2002年《萨班斯-奥克斯利法案》第302节进行认证。

31.2

致富金融(临时代码)根据首席财务官的认证 根据2002年《萨班斯-豪利法案》第302条规定采纳的交易法规13a-14(a)和15d-14(a)。

32.1

根据《萨班斯-豪利法案》第906条采纳的《美国法典》第1350条,由首席执行官证明。

32.2

根据《萨班斯-豪利法案》第906条采纳的《美国法典》第1350条,由致富金融(临时代码)发官证明。.

101.INS

内联XBRL实例。

101.SCH

内联XBRL分类扩展模式。

101.CAL

内联XBRL分类扩展计算链接基础。

101.DEF

内联XBRL分类扩展定义链接基础。

101.LAB

行内XBRL分类扩展标签链接基础。

101.PRE

行内XBRL分类扩展演示链接基础。

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封面互动数据文件(格式为内联XBRL,包含在展示文件101中)

† 附在本季度报告10-Q表格中的附件32.1和32.2所附的证书被视为已提供,未向证券交易委员会提交,并不得被纳入AXt,Inc.根据修订后的1933年证券法或1934年证券交易法下的任何提交中,无论是在本季度报告10-Q表格日期之前还是之后,无论该提交中是否包含任何普遍纳入语言。

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签名

根据1934年《证券交易法》的要求,注册人已正式促使下列签署人代表其签署本报告,并获得正式授权。

axT, INC.

日期:2024 年 11 月 12 日

作者:

/s/ 莫里斯 S. 杨

莫里斯·S·杨

首席执行官兼董事会主席

(首席执行官)

/s/ GARY L. FISCHER

Gary L. Fischer

首席财务官兼公司秘书

(首席财务官和 首席会计官)

88