UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 30, 2007

AXT, INC.

(Exact name of registrant as specified in its charter)

Delaware

 

000-24085

 

94-3031310

(State or other jurisdiction of incorporation)

 

(Commission File Number)

 

(IRS Employer Identification No.)

 

 

 

 

 

4281 Technology Drive

Fremont, California   94538

(Address of principal executive offices)  (Zip Code)

 

Registrant’s telephone number, including area code:   (510) 683-5900

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 



Item 2.02 Results of Operations and Financial Condition

On August 1, 2007, AXT, Inc. issued a press release announcing its financial results for the quarter ended June 30, 2007.  A copy of the Company’s press release, announcing the results, is attached hereto as Exhibit 99.1 and incorporated herein by reference.

The information in Exhibit 99.1 hereto discussing the Company’s results of operations and financial condition for the quarter ended June 30, 2007, is being “furnished” in accordance with General Instruction B.2 of Form 8-K and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.  The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to such filing.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

(a)

On July 30, 2007, the Board of Directors approved an amendment to the Company’s Bylaws, to amend and restate Section 5.1 of Article V of the Bylaws in its entirety, to read as set forth below:

“ Section 5.1     Certificates of Stock .  The shares of stock of the Corporation may be represented by certificates in such form as may be approved by the Board of Directors, which certificates shall be signed or signed by facsimile by the Chairman or President and Secretary or Treasurer, certifying the number of shares owned by the shareholder in the Corporation.  Notwithstanding the foregoing provisions regarding share certificates, the Board of Directors or officers of the Corporation may provide that some or all of any or of all classes or series of the Corporation’s common or preferred shares may be uncertificated shares.  Any such resolution shall not apply to shares represented by a certificate until the certificate is surrendered to the Corporation.”

A copy of the amendment to Article VIII of the Bylaws is included herein as Exhibit 99.2.

Item 9.01 Financial Statements and Exhibits

(d)                                  Exhibits

 

99.1                            Press release dated August 1, 2007, regarding the financial results of AXT, Inc. for the quarter ended June 30, 2007.

 

99.2                            Amended and Restated Section 5.1 of Article V of the Second Amended and Restated Bylaws of AXT, Inc.

2



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

AXT, INC.

 

 

 

 

Date: August 1, 2007

By:

/s/ Wilson W. Cheung

 

 

 

Wilson W. Cheung

 

 

Chief Financial Officer

 

3



EXHIBIT INDEX

Exhibit
Number

 

Description

 

 

 

99.1

 

Press release dated August 1, 2007, regarding the financial results of AXT, Inc. for the quarter ended June 30, 2007.

99.2

 

Amended and Restated Section 5.1 of Article V of the Second Amended and Restated Bylaws of AXT, Inc.

 

4


Exhibit 99.1






FOR IMMEDIATE RELEASE


VGF STRENGTH. PERFORMANCE. INNOVATION.

 

 

 

Contacts:

 

 

 

Wilson W. Cheung

 

 

Chief Financial Officer

 

 

(510) 683-5900

 

 

 

 

Leslie Green

 

Green Communications Consulting, LLC

 

(650) 312-9060

 

 

 

AXT, Inc. Announces Second Quarter 2007 Results

FREMONT, Calif., Aug. 1, 2007 — AXT, Inc. (NASDAQ: AXTI ), a leading manufacturer of compound semiconductor substrates today reported financial results for the second quarter ended June 30, 2007.  The company’s financial statements have been presented to reflect the opto-electronics division as a discontinued operation for all periods presented.

Second Quarter 2007 Results

Revenue for the second quarter of 2007 was $13.6 million, compared with $12.5 million in the first quarter of 2007, and $10.4 million in the second quarter of 2006.  Total gallium arsenide (GaAs) substrate revenue was $9.3 million for the second quarter of 2007, compared with $8.8 million in the first quarter of 2007, and $8.1 million in the first quarter of 2006.  Specifically, 6-inch diameter wafer sales were $2.8 million for the second quarter of 2007 compared with $3.3 million in the first quarter of 2007, and $3.0 million in the second quarter of 2006.  The continued decrease in 6-inch diameter wafer sales from the prior quarter was primarily due to the delay in BIFET qualifications of certain customers.  However, the majority of the BIFET qualifications was completed by the end of the second quarter.

Indium phosphide (InP) revenue was $660,000 for the second quarter of 2007, compared with $518,000 in the first quarter of 2007, and $613,000 in the second quarter of 2006.  Germanium (Ge) substrate revenue was $402,000, compared with $541,000 in the first quarter of 2007, and $169,000 in the second quarter of 2006.  Sales of raw materials, primarily 99.99 percent pure gallium, were $3.3 million in the second quarter of 2007, compared with $2.6 million in the first quarter of 2007, and with $1.4 million in the second quarter of 2006.  The increase in raw material sales is the result of our selling to new European customers, as well as the increase in raw materials pricing, particularly average sales price for raw gallium.

Gross margin was 36.9 percent of revenue for the second quarter of 2007.  This included a benefit from the sale of approximately $387,000 in fully reserved wafers, which positively affected the quarterly gross margin by 2.8 percentage points.  By comparison, gross margin in the first quarter of 2007 was 43.2 percent, including a benefit from the sales of approximately $785,000 in fully reserved wafers, which positively affected first quarter gross margin by 6.3 percentage points.  Gross margin in the second quarter of 2006 was 26.6 percent, including a benefit from the sale of approximately $802,000 in fully reserved wafers, which positively affected the quarterly gross margins by 7.7 percentage points.

4281 Technology Drive
Fremont, CA 94538

Tel: 510.683.5900

Fax: 510.353.0668

www.axt.com.

 



Operating expenses were $3.6 million in the second quarter of 2007, which included a bad debt expense of $574,000 partially offset by a recovery of an impairment on assets held for sale of $481,000, compared with operating expenses of $4.2 million in the first quarter of 2007, and operating expenses were $4.4 million in the second quarter of 2006.

Income from operations for the second quarter of 2007 was $1.4 million, compared with income from operations of $1.2 million for the first quarter of 2007, and a loss from operations of $1.7 million for the second quarter of 2006.

Net interest and other income (expense) for the second quarter of 2007 was an expense of $47,000 compared with income of $213,000 for the first quarter primarily due to foreign exchange losses and; net interest and other income (expense) for the second quarter of 2006 was income of $925,000, primarily due to a gain on sale of Finisar stock of $1.0 million.

Net income in the second quarter of 2007 was $1.2 million or $0.04 per diluted share.  By comparison, in the first quarter of 2007 we reported net income of $1.3 million or $0.04 per diluted share.  Net loss in the second quarter of 2006 was $(876,000), or $(0.04) per diluted share.

Management Qualitative Comments

“This has been a very interesting and gratifying quarter for AXT,” said Phil Yin, chief executive officer.  “Shortages in gallium raw material and increasing interest in emerging applications such as photovoltaics are illuminating the unique competitive positioning that AXT is likely to benefit from over the next several years. After an industry wide pause to complete BIFET qualifications and digest some excess inventory, we are poised for renewed growth in our 6 inch products.  Demand is returning across all areas of our core GaAs business and we are completing several strategically important qualifications that will begin to generate revenue in the second half of the fiscal year.  Further, we are very pleased to report that our strategy to vertically integrate our raw material needs has not only proven to be very effective in regards to raw materials pricing and volume, it has clearly become a major differentiator in our industry; and, coupled with our diverse and unique product portfolio, extensive manufacturing capabilities and strong execution, has resulted in significant advantages for our customers and our shareholders.”

Outlook for Third Quarter, Ending September 30, 2007

AXT estimates revenue for the third quarter will increase to between $14.0 million and $14.6 million. The company estimates that net income per diluted share will be between $0.04 and $0.06, which takes into account stock compensation expense of approximately $100,000 and our diluted weighted average share count of approximately 31.2 million shares.

Conference Call

The company will also host a conference call today to discuss these results at 1:30 p.m. PT. The conference call can be accessed at (973) 935-2402 (PIN 8890680). The call will also be simulcast on the Internet at http://www.axt.com. Replays will be available at (973) 341-3080 until August 8, 2007. Financial and statistical information to be discussed in the call will be available on the company’s website immediately prior to commencement of the call.  Additional investor information can be accessed at http://www.axt.com or by calling the company’s Investor Relations Department at (510) 683-5900.

2



About AXT, Inc.

AXT designs, develops, manufactures and distributes high-performance compound and single element semiconductor substrates comprising gallium arsenide (GaAs), indium phosphide (InP) and germanium (Ge) through its manufacturing facilities in Beijing, China.  In addition, AXT maintains its sales, administration and customer service functions at its headquarters in Fremont, California.  The company’s substrate products are used primarily in lighting display applications, wireless communications, and fiber optic communications. Its vertical gradient freeze (VGF) technique for manufacturing semiconductor substrates provides significant benefits over other methods and enabled AXT to become a leading manufacturer of such substrates, particularly in optoelectronics applications. AXT has manufacturing facilities in China and invests in five joint ventures producing raw materials. For more information, see AXT’s website at http://www.axt.com.

Safe Harbor Statement

The foregoing paragraphs contain forward-looking statements within the meaning of the Federal Securities laws, including statements related to the future financial performance of the company and our ability to continue growth, maintain profitability, control costs and improve efficiency, as well as relating to improvements in our manufacturing costs, improvements in our competitive position and our technology development.  These forward-looking statements are based upon specific assumptions that are subject to uncertainties and factors relating to the company’s operations and business environment, which could cause actual results of the company to differ materially from those expressed or implied in the forward-looking statements contained in the foregoing discussion. These uncertainties and factors include but are not limited to the impact of customer qualification of our products, new opportunities for our China joint ventures, improvements in our production processes, product quality and yields, cost and supply of raw materials, the impact of technology developments providing new markets for GaAs and Ge substrates, overall conditions in the markets in which the company competes as well as market conditions and trends; market acceptance and demand for the company’s products; and other factors as set forth in the company’s annual report on Form 10-K and other filings made with the Securities and Exchange Commission.  Each of these factors is difficult to predict and many are beyond the company’s control. The company does not undertake any obligation to update publicly any forward-looking statement, as a result of new information, future events or otherwise.

###

FINANCIAL TABLES TO FOLLOW

3



AXT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share data)

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2007

 

2006

 

2007

 

2006

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

13,639

 

$

10,355

 

$

26,165

 

$

18,826

 

Cost of revenue

 

8,607

 

7,596

 

15,728

 

14,557

 

Gross profit

 

5,032

 

2,759

 

10,437

 

4,269

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

3,743

 

3,853

 

7,446

 

7,083

 

Research and development

 

348

 

571

 

808

 

1,105

 

Recovery of impairment on assets held for sale

 

(481

)

—

 

(481

)

—

 

Restructuring benefit

 

—

 

—

 

—

 

(2

)

Total operating expenses

 

3,610

 

4,424

 

7,773

 

8,186

 

Income (loss) from continuing operations

 

1,422

 

(1,665

)

2,664

 

(3,917

)

Interest income, net

 

225

 

111

 

449

 

239

 

Other income (expense), net

 

(272

)

814

 

(283

)

1,052

 

Income (loss) from continuing operations before provision for income taxes

 

1,375

 

(740

)

2,830

 

(2,626

)

Provision for income taxes

 

162

 

138

 

273

 

456

 

Income (loss) from continuing operations

 

1,213

 

(878

)

2,557

 

(3,082

)

Discontinued operations:

 

 

 

 

 

 

 

 

 

Gain from discontinued operations, net of tax

 

—

 

2

 

—

 

3

 

Net income (loss)

 

$

1,213

 

$

(876

)

$

2,557

 

$

(3,079

)

 

 

 

 

 

 

 

 

 

 

Basic income (loss) per share:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

0.04

 

$

(0.04

)

$

0.08

 

$

(0.14

)

Gain (loss) from discontinued operations, net of tax

 

—

 

—

 

—

 

—

 

Net income (loss) per share - basic

 

$

0.04

 

$

(0.04

)

$

0.08

 

$

(0.14

)

Shares used in computing basic income (loss) per share

 

29,943

 

23,052

 

29,871

 

23,019

 

 

 

 

 

 

 

 

 

 

 

Diluted income (loss) per share:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

0.04

 

$

(0.04

)

$

0.08

 

$

(0.14

)

Gain (loss) from discontinued operations, net of tax

 

—

 

—

 

—

 

—

 

Net income (loss) per share - diluted

 

$

0.04

 

$

(0.04

)

$

0.08

 

$

(0.14

)

Shares used in computing diluted income (loss) per share

 

31,142

 

23,052

 

31,233

 

23,019

 

 

- more -



AXT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

 

 

June 30,

 

December 31,

 

 

 

2007

 

2006

 

Assets:

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

15,416

 

$

16,116

 

Short-term investments

 

18,262

 

19,428

 

Accounts receivable, net

 

9,882

 

9,658

 

Inventories, net

 

24,953

 

20,263

 

Prepaid expenses and other current assets

 

4,121

 

3,985

 

Assets held for sale

 

5,140

 

4,659

 

Total current assets

 

77,774

 

74,109

 

 

 

 

 

 

 

Property, plant and equipment, net

 

14,814

 

12,775

 

Other assets

 

4,843

 

4,298

 

Restricted deposits

 

6,850

 

7,150

 

 

 

 

 

 

 

Total assets

 

$

104,281

 

$

98,332

 

 

 

 

 

 

 

Liabilities and stockholders’ equity:

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

 

$

2,141

 

$

3,764

 

Accrued liabilities

 

3,761

 

3,536

 

Current portion of long-term debt

 

450

 

450

 

Total current liabilities

 

6,352

 

7,750

 

 

 

 

 

 

 

Long-term debt, net of current portion

 

6,456

 

6,839

 

Other long-term liabilities

 

2,592

 

2,543

 

Total liabilities

 

15,400

 

17,132

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock

 

3,532

 

3,532

 

Common stock

 

185,018

 

180,965

 

Accumulated deficit

 

(101,275

)

(103,832

)

Other comprehensive income

 

1,606

 

535

 

Total stockholders’ equity

 

88,881

 

81,200

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

104,281

 

$

98,332

 

 


Exhibit 99.2

AMENDED AND RESTATED SECTION 5.1

OF ARTICLE V OF

THE SECOND AMENDED AND RESTATED BYLAWS OF

AXT, INC.

Section 5.1                       Certificates of Stock .  The shares of stock of the Corporation may be represented by certificates in such form as may be approved by the Board of Directors, which certificates shall be signed or signed by facsimile by the Chairman or President and Secretary or Treasurer, certifying the number of shares owned by the shareholder in the Corporation.  Notwithstanding the foregoing provisions regarding share certificates, the Board of Directors or officers of the Corporation may provide that some or all of any or of all classes or series of the Corporation’s common or preferred shares may be uncertificated shares.  Any such resolution shall not apply to shares represented by a certificate until the certificate is surrendered to the Corporation.