<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6, 2000.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
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REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AXT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 94-3031310
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER
OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
4281 TECHNOLOGY DRIVE, FREMONT, CA 94538
(510) 683-5900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MORRIS S. YOUNG
CHIEF EXECUTIVE OFFICER
AXT, INC.
4281 TECHNOLOGY DRIVE
FREMONT, CALIFORNIA 94538
(510) 683-5900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
SALLY J. RAU, ESQ.
JULIE L. HSU, ESQ.
GRAY CARY WARE & FREIDENRICH LLP
400 HAMILTON AVENUE
PALO ALTO, CA 94301
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER UNIT(1) PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock ($0.001 par value)... 234,115 $40.50 $9,481,657.50 $2,504
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</TABLE>
(1) Estimated pursuant to Rule 457(c) solely for the purpose of computing the
registration fee and based on the average of the high and low trading prices
of the common stock of AXT, Inc. as reported on the Nasdaq National Market
on October 3, 2000.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a), MAY
DETERMINE.
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<PAGE> 2
The information in this prospectus is not complete and may be changed. The
selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective.
This prospectus is not an offer to sell these securities and is not
soliciting offers to buy these securities in any state where the offer or
sale is not permitted.
SUBJECT TO COMPLETION -- OCTOBER 6, 2000
PRELIMINARY PROSPECTUS
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234,115 Shares
[AXT LOGO]
Common Stock
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This prospectus relates to the public offering, which is not being underwritten,
of shares of the common stock of AXT, Inc. The shares of AXT common stock may be
offered by any of the selling stockholders named in this prospectus. We will
receive no part of the proceeds of any sales made under this prospectus. All
expenses of registration incurred in connection with this offering are being
borne by us, but all selling and other expenses incurred by the selling
stockholders will be borne by the selling stockholders. None of the shares
offered by this prospectus have been registered prior to the filing of the
registration statement of which this prospectus is a part.
The common stock offered in this prospectus may be offered and sold by the
selling stockholders directly or through broker-dealers or underwriters acting
solely as agents. In addition, the broker-dealers and underwriters may acquire
the common stock as principals. The distribution of the common stock may be
effected in one or more transactions. These transactions may take place through
the Nasdaq National Market, privately negotiated transactions, underwritten
public offerings, or a combination of any such methods of sale. These
transactions may be made at market prices prevailing at the time of sale, prices
related to such prevailing market prices or negotiated prices. Usual and
customary or specially negotiated brokerage fees or commissions may be paid by
the selling stockholders in connection with these sales.
The shares of AXT are included for quotation in the Nasdaq National Market under
the symbol "AXTI." On October 4, 2000 the reported last sale price of AXT's
common stock in the Nasdaq National Market was $35.25 per share.
SEE "RISK FACTORS" ON PAGES 4 TO 13 FOR FACTORS THAT SHOULD BE CONSIDERED BEFORE
INVESTING IN THE SHARES OF AXT.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
October , 2000
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
AXT................................ 1
Where You Can Find More
Information...................... 2
Information Incorporated By
Reference........................ 2
Forward-Looking Statements......... 3
Risk Factors....................... 4
Use of Proceeds.................... 14
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Selling Stockholders............... 14
Plan of Distribution............... 15
Legal Matters...................... 15
Experts............................ 15
Index to Consolidated Financial
Statements....................... F-1
</TABLE>
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American Xtal Technology, AXT, the AXT logo, Laserlyte, Opti, Lyte
Optronics, Safe Escape and Minibrite are all trademarks of AXT, Inc. This
prospectus contains trademarks of other companies.
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You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with different information. We are not
making an offer of these securities in any jurisdiction where the offer or sale
is not permitted. You should not assume that the information contained in this
prospectus is accurate as of any other date other than the date on the front
cover of this prospectus.
i
<PAGE> 4
AXT
We design, develop, manufacture and distribute high-performance compound
semiconductor substrates, as well as opto-electronic semiconductor devices, such
as high-brightness light emitting diodes, or HB LEDs, and vertical cavity
surface emitting lasers, or VCSELs. Our substrate products are used primarily in
fiber optic communications, wireless communications and lighting display
applications. We believe our proprietary vertical gradient freeze, or VGF,
technique for manufacturing compound semiconductor substrates provides
significant benefits over traditional methods and has enabled us to become a
leading manufacturer of compound semiconductor substrates. We pioneered the
commercial use of VGF technology to manufacture gallium arsenide, or GaAs,
substrates and have used VGF technology to manufacture substrates from other
materials, such as indium phosphide, or InP, and germanium, or Ge. Customers for
our substrates include Agilent Technologies, Alpha Industries, EMCORE, Nortel
Networks, RF Micro Devices, SDL and Sumitomo Chemical. Our acquisition of Lyte
Optronics provided us with expertise in epitaxial processes for manufacturing
opto-electronic semiconductor devices. We have used these capabilities to make
blue, green and cyan HB LEDs and VCSELs. Our opto-electronic semiconductor
devices are used in a wide range of applications, such as solid-state lighting
and fiber optic communications. We have recently undertaken an initiative to
significantly expand our substrate and device manufacturing capacity and to
reduce the overall cost structure of our manufacturing operations.
The semiconductor industry is experiencing rapid technological changes.
These changes are driven primarily by increased transmission and storage of
voice, video and data over communications networks and the Internet. This growth
has generated increased demand for devices to send, receive and display
information, as well as new wireless and wireline networks used to transmit
information. This increased demand has created a growing need for power
efficient, high-performance electronic systems that operate at very high
frequencies and can be produced cost-effectively in high volumes. To address
these demands, semiconductor device manufacturers are increasingly using
compound semiconductor substrates, such as GaAs and InP, to improve the
performance of semiconductor devices and to enable new applications.
Our strategy is to strengthen our position as a leading developer and
supplier of high-performance compound semiconductor substrates and to develop a
leading position in the market for opto-electronic semiconductor devices by:
- expanding our GaAs substrate manufacturing capacity and decreasing our
manufacturing cost structure;
- strengthening our position in the InP substrate market;
- advancing our VGF technology leadership;
- enhancing our opto-electronic semiconductor devices; and
- leveraging existing customer relationships.
We were incorporated in California in December 1986 and reincorporated in
Delaware in May 1998. We changed our name from American Xtal Technology, Inc. to
AXT, Inc. in July 2000. Our principal executive offices are located at 4281
Technology Drive, Fremont, California 94538, and our telephone number is (510)
683-5900.
RECENT EVENTS
In September, 2000, we completed a public offering of 2,530,000 shares of
our common stock, including 330,000 shares from the exercise of the
underwriters' over-allotment option. Of these shares, 2,510,000 shares were sold
by us and 20,000 shares were sold by a selling stockholder. The public offering
price was $34.25 per share for total proceeds to AXT of $80.8 million after
payment of underwriting discounts and commissions and estimated offering
expenses. The proceeds of the offering will be used for general corporate
purposes, including working capital and capital expenditures for our
manufacturing expansion, and to repay approximately $10 million of indebtedness
under our revolving line of credit.
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<PAGE> 5
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-3 under the Securities Act
of 1933, as amended, with the Securities and Exchange Commission. This
prospectus, which constitutes a part of the registration statement, does not
contain all of the information set forth in the registration statement or the
exhibits and schedules which are a part of the registration statement. For
further information with respect to us and our common stock, please refer to the
registration statement and the exhibits and schedules filed with it. You may
read and copy any document which we file with the SEC at the SEC's public
reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549, or in New
York, New York and Chicago, Illinois.
We are also subject to the information and periodic reporting requirements
of the Securities Exchange Act of 1934, as amended. We file reports, proxy
statements and other information with the SEC to comply with the Exchange Act.
These reports, proxy statements and other information can be inspected and
copied on the Internet at http://www.sec.gov; at the SEC's regional offices at:
Seven World Trade Center, New York, New York 10048 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and at the Public Reference Room of the
SEC, 450 Fifth Street, N.W., Washington, D.C. 20549. You may call the SEC at
1-800-SEC-0330 to obtain information regarding the operation of the Public
Reference Room. Reports, proxy statements and other information concerning our
company also may be inspected at the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be a part of this prospectus. Any information that we file with the SEC will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any additional documents we file with the SEC.
This registration statement incorporates by reference the documents listed below
that we have previously filed with the Securities and Exchange Commission. They
contain important information about us and our financial condition.
The following documents filed with the SEC are incorporated by reference
into this prospectus:
- our Annual Report on Form 10-K for the year ended December 31, 1999;
- our Definitive Proxy Statement relating to the Annual Meeting of
Stockholders held June 7, 2000.
- our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000
and June 30, 2000; and
- the description of our common stock contained in Item 1 of our Form 8-A
filed with the SEC on April 24, 1998.
All documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this prospectus and prior to the termination
of the offering of securities contemplated by this prospectus shall be deemed to
be incorporated by reference in this prospectus. Such documents shall be
considered to be a part of this prospectus from the date of filing of such
documents. Any statement contained in a document incorporated by reference or
deemed to be incorporated by reference into this prospectus shall be deemed to
be modified or superseded for all purposes of this prospectus and the
registration statement to the extent that a statement contained in this
prospectus, in any document incorporated by reference or in any subsequently
filed document which also is incorporated or deemed to be incorporated by
reference in this prospectus modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this prospectus.
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<PAGE> 6
We will provide without charge to each person, including any beneficial
owner, to whom a copy of this prospectus has been delivered a copy of any and
all of the documents referred to above which have been or may be incorporated in
this prospectus by reference and were not delivered with this prospectus. We
will not deliver exhibits to such documents, unless such exhibits are
specifically incorporated by reference. We will provide this information upon
written or oral request by a person to whom we delivered a copy of the
prospectus. Requests for such copies should be directed to our principal
executive offices located at 4281 Technology Drive, Fremont, California 94538,
Attention: Secretary. Our general telephone number is (510) 683-5900.
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. We have
based these forward-looking statements largely on our current expectations and
projections about future events and financial trends affecting the financial
condition of our business. These forward-looking statements are subject to a
number of risks, uncertainties and assumptions about us, including among other
things:
- general economic and business conditions, both nationally and
internationally;
- our expectations and estimates concerning future financial performance,
financing plans and the impact of competition;
- anticipated trends in our business;
- existing and future regulations affecting our business; and
- other risk factors set forth under "Risk Factors" in this prospectus.
In addition, in this prospectus, the words "believe," "may," "will,"
"estimate," "continue," "anticipate," "intend," "expect," "could," "plan" and
similar expressions, as they relate to us, our business or our management, are
intended to identify forward-looking statements.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise
after the date of this prospectus. In light of these risks and uncertainties,
the forward-looking events and circumstances discussed in this prospectus may
not occur and actual results could differ materially from those anticipated or
implied in the forward-looking statements.
3
<PAGE> 7
RISK FACTORS
You should carefully consider the risks described below, in addition to the
other information in this prospectus, before purchasing shares of our common
stock. Each of these risk factors could adversely affect our business, financial
condition and operating results as well as adversely affect the value of an
investment in our common stock.
RISKS RELATED TO OUR BUSINESS
UNPREDICTABLE FLUCTUATIONS IN OUR OPERATING RESULTS COULD DISAPPOINT
ANALYSTS OR OUR INVESTORS, WHICH COULD CAUSE OUR STOCK PRICE TO DECLINE.
We may not be able to sustain our historical growth rate, and we may
experience significant fluctuations in our revenue and earnings in the future.
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:
- fluctuations in demand for our products;
- expansion of our manufacturing capacity;
- expansion of our operations in China;
- limited availability and increased cost of raw materials;
- integration of Lyte Optronics and its business, operations and facilities
with our operations;
- the volume and timing of orders from our customers;
- fluctuation of our manufacturing yields;
- decreases in the prices of our competitors' products;
- costs incurred in connection with any future acquisitions of businesses
or technologies;
- increases in our expenses, including expenses for research and
development; and
- our ability to develop, manufacture and deliver high quality products in
a timely and cost-effective manner.
Due to these factors, we believe that period-to-period comparisons of our
operating results may not be a meaningful indicator of our future performance.
It is possible that in some future quarter, our operating results may be below
the expectations of securities analysts or investors. If this occurs, the price
of our common stock would likely decline.
IF WE FAIL TO EXPAND OUR MANUFACTURING CAPACITY, WE MAY NOT BE ABLE TO MEET
DEMAND FOR OUR PRODUCTS, LOWER OUR COSTS OR INCREASE REVENUE.
In order to increase production, we must build new facilities, expand our
existing facilities and purchase additional manufacturing equipment. If we do
not expand our manufacturing capacity, we will be unable to increase production,
adversely impacting our ability to reduce unit costs, margins and improve our
operating results.
We are currently constructing additional capacity and facilities in
California and China. Our expansion activities subject us to a number of risks,
including:
- unforeseen environmental or engineering problems;
- unavailability or late delivery of production equipment;
- delays in completing new facilities;
- delays in bringing production equipment on-line;
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<PAGE> 8
- work stoppages or delays;
- unanticipated cost increases; and
- restrictions imposed by requirements of local, state or federal
regulatory agencies.
If any of these risks occurs, construction may be costlier than anticipated
and completion could be delayed, which could hurt our ability to expand capacity
and increase our sales. In addition, if we experience delays in expanding our
manufacturing capacity, we might not be able to timely meet customer
requirements, and we could lose future sales. We are also making substantial
investments in equipment and facilities as part of our capacity expansion. To
offset the additional fixed operating expenses, we must increase our revenue by
increasing production and improving yields. If demand for our products does not
grow or if our yields do not improve as anticipated, we may be unable to offset
these costs against increased revenue, which would adversely impact our
operating results.
WE HAVE LIMITED EXPERIENCE WITH SOME OF OUR NEW PRODUCTS, AND WE MAY NOT BE
ABLE TO ACHIEVE ANTICIPATED SALES OF THESE PRODUCTS.
To date, we have limited experience producing and selling our HB LED and
VCSEL products, and we may be unable to successfully market and sell these
products. To market and sell our HB LED and VCSEL products, we will have to
develop additional distribution channels. In addition, we must apply our
proprietary VGF technique to new substrate products and successfully introduce
and market new opto-electronic semiconductor devices, including LED and VCSEL
products.
IF WE DO NOT SUCCESSFULLY DEVELOP NEW PRODUCTS TO RESPOND TO RAPIDLY
CHANGING CUSTOMER REQUIREMENTS, OUR ABILITY TO GENERATE SALES AND OBTAIN
NEW CUSTOMERS MAY SUFFER.
Our success depends on our ability to offer new products that incorporate
leading technology and respond to technological advances. In addition, our new
products must meet customer needs and compete effectively on quality, price and
performance. The life cycles of our products are difficult to predict because
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, our existing products could
become obsolete and unmarketable. If we fail to offer new products, we may not
generate sufficient revenue to offset our development costs and other expenses
or meet our customers' requirements. Other companies, including IBM, are
actively developing substrate materials that could be used to manufacture
devices that could provide the same high-performance, low-power capabilities as
GaAs-based devices at competitive prices. If these substrate materials are
successfully developed and semiconductor device manufacturers adopt them, demand
for our GaAs substrates could decline and our revenue could suffer.
The development of new products can be a highly complex process, and we may
experience delays in developing and introducing new products. Any significant
delays 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.
OUR OPERATING RESULTS DEPEND IN LARGE PART ON FURTHER CUSTOMER ACCEPTANCE
OF OUR EXISTING SUBSTRATE PRODUCTS AND ON OUR ABILITY TO DEVELOP NEW
PRODUCTS BASED ON OUR CORE VGF TECHNOLOGY.
A majority of GaAs substrates are manufactured from crystals grown using
the traditional Liquid Encapsulated Czochralski, or LEC, or
Horizontal-Bridgeman, or HB, techniques. In order to expand sales of our
products, we must continue to promote our VGF technique as a preferred process
for producing substrates, and we must offer products with superior prices and
performance on a timely basis and in sufficient volumes. If we fail to gain
increased market acceptance of our VGF technique, we may not achieve anticipated
revenue growth.
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<PAGE> 9
INTENSE COMPETITION IN THE MARKETS FOR OUR PRODUCTS COULD PREVENT US FROM
INCREASING REVENUE AND SUSTAINING PROFITABILITY.
The markets for our products are intensely competitive. We face competition
for our substrate products from other manufacturers of substrates, such as
Freiberger, Hitachi Cable, Japan Energy, Litton Airtron and Sumitomo Electric
and from semiconductor device manufacturers that produce substrates for their
own use, and from companies, such as IBM, that are actively developing
alternative materials to GaAs. We believe that at least one of our competitors
has recently begun shipping GaAs substrates manufactured using a technique
similar to our VGF technique. Other competitors may develop and begin using
similar technology. If we are unable to compete effectively, our revenue may not
increase and we may not continue to be profitable. We face many competitors that
have a number of significant advantages over us, particularly in our compound
semiconductor device products, including:
- greater experience in the business;
- more manufacturing experience;
- broader name recognition; and
- significantly greater financial, technical and marketing resources.
Our competitors could develop new or enhanced products that are more
effective than the products that we have developed or may develop. For example,
some competitors in the HB LED market offer devices that are brighter than our
HB LEDs. Some of our competitors may also develop technologies that enable the
production of commercial products with characteristics similar to or better than
ours, but at a lower cost.
We expect the intensity of competition to increase in the future.
Competitive pressures could reduce our market share, require us to reduce the
prices of our products, affect our ability to recover costs or result in reduced
gross margins.
IF WE HAVE LOW PRODUCT YIELDS, THE SHIPMENT OF OUR PRODUCTS MAY BE DELAYED
AND OUR OPERATING RESULTS MAY BE ADVERSELY IMPACTED.
Our products are manufactured using complex technologies, and the number of
usable substrates and devices we can produce can fluctuate as a result of many
factors, including:
- impurities in the materials used;
- contamination of the manufacturing environment;
- substrate breakage;
- equipment failure, power outages or variations in the manufacturing
process; and
- performance of personnel involved in the manufacturing process.
Because many of our manufacturing costs are fixed, our revenue could
decline if our yields decrease. We have experienced product shipment delays and
difficulties in achieving acceptable yields on both new and older products, and
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 or their severity. In addition, many of our manufacturing processes are
new and are still being refined, which can result in lower yields, particularly
as we focus on producing higher diameter substrates and new opto-electronic
semiconductor devices. For example, we recently began manufacturing six-inch
GaAs wafers and have also made substantial investments in equipment and
facilities to manufacture blue, green and cyan HB LEDs. If we are unable to
produce adequate quantities of our high-brightness LEDs and VCSELs, we may not
be able to meet customer demand and our revenue may decrease.
6
<PAGE> 10
DEMAND FOR OUR PRODUCTS MAY DECREASE IF OUR CUSTOMERS EXPERIENCE DIFFICULTY
MANUFACTURING, MARKETING OR SELLING THEIR PRODUCTS.
Our products are used as components in our customers' products.
Accordingly, demand for our products is subject to factors affecting the ability
of our customers to successfully introduce and market their products, including:
- the competition our customers face in their particular industries;
- the technical, manufacturing, sales and marketing and management
capabilities of our customers;
- the financial and other resources of our customers; and
- the inability of our customers to sell their products if they infringe
third party intellectual property rights.
If demand for the products offered by our customers decreases, our
customers may reduce purchases of our products.
WE PURCHASE CRITICAL RAW MATERIALS 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 gallium, arsenic and quartz. We generally purchase these
materials through standard purchase orders and not pursuant to long-term supply
contracts and none of our suppliers guarantees supply of raw materials 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, including gallium, due to shortages of these materials.
We may experience delays due to shortages of materials and may be unable to
obtain an adequate supply of materials. These shortages and delays could result
in higher materials 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.
IF WE FAIL TO COMPLY WITH ENVIRONMENTAL REGULATIONS, WE MAY BE SUBJECT TO
SIGNIFICANT FINES OR CESSATION OF OUR OPERATIONS.
We are subject to federal, state and local environmental laws and
regulations. These laws, rules and regulations govern the use, storage,
discharge and disposal of hazardous chemicals during manufacturing, research and
development and sales demonstrations. If we fail to comply with applicable
regulations, we could be subject to substantial liability for clean-up efforts,
personal injury and fines or suspension or cessation of our operations. We are
cooperating with the California Occupational Safety and Health Administration,
or Cal-OSHA, in an investigation primarily regarding impermissible levels of
potentially hazardous materials in certain areas of our manufacturing facility
in Fremont, California. In May 2000, Cal-OSHA levied a fine against us in the
amount of $313,655 for alleged health and safety violations. Although we are
appealing the citations, and have put in place engineering, administrative and
personnel protective equipment programs to address these issues, we may have to
pay this fine, and further penalties, including criminal penalties, could be
levied against us or our management. 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. In
addition, existing or future changes in laws or regulations may require us to
incur significant expenditures or liabilities, or may restrict our operations.
THE LOSS OF ONE OR MORE OF OUR KEY SUBSTRATE CUSTOMERS WOULD SIGNIFICANTLY
HURT OUR OPERATING RESULTS.
A small number of substrate customers have historically accounted for a
substantial portion of our total revenue. Our top five substrate customers
accounted for 34.9% of our substrate revenue in 1997,
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<PAGE> 11
39.5% of our substrate revenue in 1998, 34.3% of our substrate revenue in 1999
and 26.2% of our substrate revenue in the six months ended June 30, 2000. Our
substrate revenue accounted for 58.5% of our total revenue in 1997, 70.4% of our
total revenue in 1998, 69.6% in 1999, and 85.7% in the six months ended June 30,
2000. We expect that a significant portion of our future revenue will continue
to be derived from a limited number of substrate customers. 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 at any time without any significant penalty. 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.
DEFECTS IN OUR PRODUCTS COULD DIMINISH DEMAND FOR OUR PRODUCTS.
Our products are complex and may contain defects. In the past we have
experienced quality control problems with some of our LED and consumer products,
which caused customers to return products to us. If we continue to experience
quality control problems, or experience these problems in our other products,
customers may cancel or reduce orders or purchase products from our competitors.
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.
We are also developing new products and product enhancements, including
substrates and compound semiconductor device products. If our new products
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.
CYCLICALITY IN THE SEMICONDUCTOR INDUSTRY COULD CAUSE OUR OPERATING RESULTS
TO FLUCTUATE SIGNIFICANTLY.
Our business depends in significant part upon manufacturers of
semiconductor devices, as well as the current and anticipated market demand for
such devices and the products using such devices. The semiconductor industry is
highly cyclical. The industry has in the past, and will likely in the future,
experience periods of oversupply that result in significantly reduced demand for
semiconductor devices and components, including our products. When these periods
occur, our operating results and financial condition are adversely affected.
OUR SUBSTRATE AND OPTO-ELECTRONIC SEMICONDUCTOR DEVICE PRODUCTS HAVE A LONG
SALES CYCLE THAT MAKES IT DIFFICULT TO PLAN OUR EXPENSES AND FORECAST OUR
RESULTS.
Customers typically place orders with us for our substrate and
opto-electronic semiconductor device products three months to a year or more
after our initial contact with them. The sale of our products may be subject to
delays due to our customers' lengthy internal budgeting, approval and evaluation
processes. During this time, we may incur substantial expenses and expend sales,
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, we may not be able to cover expenses,
causing our operating results to vary. In addition, if a customer decides not to
incorporate our products into its initial design, we may not have another
opportunity to sell products to this customer for many months or even years. We
anticipate that sales of any future substrate and opto-electronic semiconductor
device products under development will also have lengthy sales cycles and will,
therefore, be subject to risks substantially similar to those inherent in the
lengthy sales cycle of our current substrate and opto-electronic semiconductor
device products.
IF WE FAIL TO MANAGE OUR POTENTIAL GROWTH, OUR OPERATIONS MAY BE DISRUPTED.
We have experienced a period of rapid growth and expansion that has
strained our management and other resources, and we expect this rapid growth to
continue. Our acquisition of Lyte Optronics, together with expansion of our
manufacturing capacity, has placed and continues to place a significant strain
on our
8
<PAGE> 12
operations and management resources. If we fail to manage our growth
effectively, our operations may be disrupted. To manage our growth effectively,
we must implement additional and improved management information systems,
further develop our operating, administrative, financial and accounting systems
and controls, add experienced senior level managers, and maintain close
coordination among our executive, engineering, accounting, marketing, sales and
operations organizations.
We will spend substantial sums to support our growth and may incur
additional unexpected costs. Our systems, procedures or controls may not be
adequate to support our operations, and we may be unable to expand quickly
enough to exploit potential market opportunities. Our future operating results
will also depend on expanding sales and marketing, research and development and
administrative support. If we cannot attract qualified people or manage growth
effectively, our business and operating results could be adversely affected.
ANY FUTURE ACQUISITIONS MAY DISRUPT OUR BUSINESS, DILUTE STOCKHOLDER VALUE
OR DISTRACT MANAGEMENT ATTENTION.
As part of our strategy, we may consider acquisitions of, or significant
investments in, businesses that offer products, services and technologies
complementary to ours, such as our acquisition of Lyte Optronics in May 1999.
Acquisitions entail numerous risks, including:
- we may have difficulty assimilating the operations, products and
personnel of the acquired businesses;
- our ongoing business may be disrupted;
- we may incur unanticipated costs;
- our management may be unable to manage the financial and strategic
position of acquired or developed products, services and technologies;
- we may be unable to maintain uniform standards, controls and procedures
and policies; and
- our relationships with employees and customers may be impaired as a
result of any integration.
For example, we incurred substantial costs in connection with our
acquisition of Lyte Optronics, including the assumption of approximately $10.0
million of debt, much of which has been repaid or renegotiated, resulting in a
decline of cash available. We incurred one-time charges and merger-related
expenses of $2.8 million and an extraordinary item of $508,000 relating to the
early extinguishment of debt in the quarter ended June 30, 1999 as a result of
the acquisition. Ten percent of the shares issued to the Lyte Optronics'
stockholders are held in escrow to satisfy any claims that we may bring under
the acquisition agreement. We have filed certain claims under the agreement and
expect that all of the shares held in escrow will be returned to us in
satisfaction of these claims.
To the extent that we issue shares of our stock or other rights to purchase
stock in connection with any future acquisitions, dilution to our existing
stockholders will result and our earnings per share may suffer. Any future
acquisitions may not generate additional revenue or provide any benefit to our
business.
IF ANY OF OUR FACILITIES IS DAMAGED, WE MAY NOT BE ABLE TO MANUFACTURE OUR
PRODUCTS.
The ongoing operation of our manufacturing and production facilities in
California and China 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 will not be able to manufacture products
for our customers. For example, a natural disaster, fire or explosion caused by
our use of combustible chemicals and high temperatures during our manufacturing
processes would render some or all of our facilities inoperable for an
indefinite period of time. Actions outside of our control, such as earthquakes,
could also damage our facilities, rendering them inoperable. All of our crystal
growth is currently performed at our Fremont, California facilities, which are
located very near to an active seismic fault line. If we are unable
9
<PAGE> 13
to operate our facilities and manufacture our products, we will lose customers
and revenue and our business will be harmed.
IF WE LOSE KEY PERSONNEL OR ARE UNABLE TO HIRE ADDITIONAL QUALIFIED
PERSONNEL AS NECESSARY, WE MAY NOT BE ABLE TO SUCCESSFULLY MANAGE OUR
BUSINESS OR ACHIEVE OUR OBJECTIVES.
Our success depends upon the continued service of Morris S. Young, Ph.D.,
our president, chairman of the board and chief executive officer, as well as
other key management and technical personnel. We do not have long-term
employment contracts with, or key person life insurance on, any of our key
personnel. In addition, we have only recently hired our chief financial officer,
and need to retain senior marketing personnel, particularly for our new
opto-electronic semiconductor device products.
We believe our future success will also depend in large part upon our
ability to attract and retain highly skilled managerial, engineering, sales and
marketing, finance and manufacturing personnel. The competition for these
employees is intense, especially in Silicon Valley, and we cannot assure you
that we will be successful in attracting and retaining new personnel. The loss
of the services of any of our key personnel, the inability to attract or retain
qualified personnel in the future or delays in hiring required personnel,
particularly engineers, could make it difficult for us to manage our business
and meet key objectives, including the timely introduction of new products.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, WE MAY LOSE VALUABLE
ASSETS OR INCUR COSTLY LITIGATION.
We rely on a combination of patents, copyrights, trademark and trade secret
laws, non-disclosure agreements and other intellectual property protection
methods to protect our proprietary technology. However, we believe that, due to
the rapid pace of technological innovation in the markets for our products, 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, a third party
could 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 one of our competitors has begun to ship GaAs
substrates produced using a process similar to our VGF technique. Our
competitors may also develop and patent improvements to the VGF, LED and VCSEL
technologies upon which we rely, and thus may limit any exclusivity we enjoy by
virtue of our patents.
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 the
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.
WE MIGHT FACE INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS THAT 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
10
<PAGE> 14
who 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. Litigation to determine the validity of alleged claims could be
time-consuming and result in significant expense to us and divert the efforts of
our technical and management personnel, whether or not the litigation is
ultimately determined in our favor. If a lawsuit is decided against us, we could
be subject to significant liabilities, requiring us to seek costly licenses or
preventing us from manufacturing and selling our products. We may not be able to
obtain required licensing agreements on terms acceptable to us or at all.
RISKS RELATED TO OUR INTERNATIONAL 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.
Our revenue growth depends in part on the expansion of our international
sales and operations. International sales represented 29.2% of our total revenue
for 1997, 31.7% for 1998, 48.5% for 1999 and 47.3% for the six months ended June
30, 2000. We expect that sales to customers outside the U.S. will continue to
represent a significant portion of our revenue.
Our dependence on international sales involves a number of risks,
including:
- changes in tariffs, import restrictions and other trade barriers;
- unexpected changes in regulatory requirements;
- longer periods to collect accounts receivable;
- changes in export license requirements;
- political and economic instability;
- unexpected changes in diplomatic and trade relationships; and
- foreign exchange rate fluctuations.
Our sales are denominated in U.S. dollars, except for sales to our Japanese
and some Taiwanese customers, which are denominated in Japanese yen. Thus,
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. Also, denominating some sales in
Japanese yen subjects us to fluctuations in the exchange rates between the U.S.
dollar and the Japanese yen. The functional currencies of our Japanese and
Chinese subsidiaries are the local currencies. We incur transaction gains or
losses resulting from consolidation of expenses incurred in local currencies for
these subsidiaries, as well as in translation of the assets and liabilities of
these assets at each balance sheet date. If we do not effectively manage the
risks associated with international sales, our revenue and financial condition
could be adversely affected.
IF OUR EXPANSION IN CHINA IS MORE COSTLY THAN WE EXPECT, OUR OPERATING
RESULTS WILL SUFFER.
As part of our planned expansion of our manufacturing capacity, we are
building new facilities and expanding existing facilities in China. If we are
unable to build and expand our Chinese facilities in a timely manner, we may not
be able to increase production of our products and increase revenue as planned.
If our expansion in China proves more costly than we anticipate or we incur
greater ongoing costs than we expect, our operating results would be adversely
affected. If we do not realize expected cost savings once our expansion is
complete in China, our margins may be negatively impacted and our operating
results may suffer.
11
<PAGE> 15
CHANGES IN CHINA'S POLITICAL, SOCIAL AND ECONOMIC ENVIRONMENT MAY AFFECT
OUR FINANCIAL PERFORMANCE.
Our financial performance may be affected by changes in China's political,
social and economic environment. The role of the Chinese central and local
governments in the Chinese economy is significant. Chinese policies toward
economic liberalization, and laws and policies affecting technology companies,
foreign investment, currency exchange rates and other matters could change,
resulting in greater restrictions on our ability to do business and operate our
manufacturing facilities in China. Any imposition of surcharges or any increase
in Chinese tax rates could hurt our operating results. The Chinese government
could revoke, terminate or suspend our license for national security and similar
reasons without compensation to us. If the government of China were to take any
of these actions, we would be prevented from conducting all or part of our
business. Any failure on our part to comply with governmental regulations could
result in the loss of our ability to manufacture our products in China.
China has from time to time experienced instances of civil unrest and
hostilities. Confrontations have occurred between the military and civilians.
Events of this nature could influence the Chinese economy, result in
nationalization of foreign-owned operations such as ours, and could negatively
affect our ability to operate our facilities in China.
RISKS RELATED TO THE OFFERING
OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE.
Our stock price has fluctuated significantly since we began trading on the
Nasdaq National Market. For the 12 months ended October 4, 2000, the high and
low sales prices of our common stock were $47.00 and $12.063. A number of
factors could cause the price of our common stock to continue to fluctuate
substantially, including:
- actual or anticipated fluctuations in our quarterly or annual operating
results;
- changes in expectations about our future financial performance or changes
in financial estimates of securities analysts;
- announcements of technological innovations by us or our competitors;
- new product introduction by us or our competitors;
- large customer orders or order cancellations; and
- the operating and stock price performance of comparable companies.
In addition, the stock market in general has experienced extreme volatility
that often has been unrelated to the operating performance of particular
companies. These broad market and industry fluctuations may adversely affect the
trading price of our common stock, regardless of our actual operating
performance.
WE MAY NEED ADDITIONAL CAPITAL TO FUND EXPANSION OF OUR MANUFACTURING
CAPACITY AND OUR FUTURE OPERATIONS, WHICH MAY NOT BE AVAILABLE.
We may need capital in addition to the net proceeds of this offering to
fund expansion of our manufacturing and production capacity and our future
operations or acquisitions. If we raise additional capital through the sale of
equity or debt securities, the issuance of such securities could result in
dilution to existing stockholders. These securities could have rights,
preferences and privileges that are senior to those of holders of our common
stock. For example, in December 1998 we issued debt securities for the purchase
and improvement of our facilities in Fremont, California.
If we require additional capital in the future, it might not be available
on acceptable terms, or at all. If we are unable to obtain additional capital
when needed, we may be required to reduce the scope of our planned expansion of
our manufacturing capacity or of our product development and marketing efforts,
which could adversely affect our business and operating results.
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<PAGE> 16
PROVISIONS IN OUR CHARTER, BYLAWS OR DELAWARE LAW MAY DELAY OR PREVENT A
CHANGE IN CONTROL OF OUR COMPANY.
Provisions in our amended and restated certificate of incorporation and
bylaws may have the effect of delaying or preventing a merger, acquisition or
change of control of us, or changes in our management. These provisions include:
- the division of our board of directors into three separate classes, each
with three year terms;
- the right of our board to elect a director to fill a space created by a
board vacancy or the expansion of the board;
- the ability of our board to alter our bylaws;
- the ability of our board to authorize the issuance of up to 2,000,000
shares of blank check preferred stock; and
- the requirement that only our board 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 large stockholders, in particular those owning 15% or more
of the outstanding voting stock, from consummating a merger or combination with
a corporation unless:
- 66 2/3% of the shares of voting stock not owned by these large
stockholders approve the merger or combination, or
- the board of directors approves the merger or combination or the
transaction which resulted in the large stockholder owning 15% or more of
our outstanding voting stock.
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<PAGE> 17
USE OF PROCEEDS
AXT will not receive any proceeds from the sale of common stock by the
selling stockholders. See "Selling Stockholders" and "Plan of Distribution."
SELLING STOCKHOLDERS
A total of 234,155 shares of common stock are being registered in this
offering for the account of the selling stockholders. All of the selling
stockholders acquired the shares of common stock as part of a private placement
completed in July 2000. These shares are being registered under registration
rights granted as part of the original issuance of these securities. The
following table sets forth information known to us with respect to the selling
stockholders for whom we are registering the shares for resale to the public.
The shares being registered under the registration statement of which this
prospectus is a part will be sold, if at all, by the selling stockholders listed
below. Each of these selling stockholders own less than one percent of our
outstanding common stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES BENEFICIALLY
BENEFICIALLY OWNED SHARES THAT MAY OWNED AFTER
NAME OF SELLING STOCKHOLDERS PRIOR TO THE OFFERING BE SOLD THE OFFERING
---------------------------- --------------------- --------------- -------------------
<S> <C> <C> <C>
Jui-Wen Wang.......................... 5,500 5,500 0
The Amalom Co., Ltd................... 44,000 44,000 0
Su-Chang Hsieh........................ 42,815 41,315 1,500
Jeng-Cheng Lin........................ 5,500 5,500 0
Teh-Chien Ou.......................... 5,500 5,500 0
Yu-Chen Chen.......................... 19,200 19,200 0
Yu-Lien Yen........................... 4,400 4,400 0
Yen Yung Chuan Yang................... 22,000 22,000 0
Li-Chen Chiang........................ 11,000 11,000 0
</TABLE>
14
<PAGE> 18
PLAN OF DISTRIBUTION
We have been advised by the selling stockholders that they may sell all or
a portion of their shares of common stock. The selling stockholders plan to sell
on the Nasdaq National Market, or otherwise. The selling stockholders may sell
their shares at prices and on terms prevailing at the time of sale, at prices
related to the then current market price, or in negotiated transactions. The
selling stockholders may sell one or more of the following methods:
- block trades in which the broker or dealer so engaged will attempt to
sell the shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction;
- purchases by a broker or dealer as principal and resale by such broker or
dealer for its own account pursuant to this prospectus;
- on over-the-counter distribution in accordance with the rules of the
Nasdaq National Market;
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
- privately negotiated transactions.
There is no assurance that selling stockholders will offer or sell any or
all of their shares of common stock registered under this prospectus.
In effecting sales, brokers or dealers engaged by the selling stockholders
may arrange for other brokers or dealers to participate. Brokers or dealers will
receive commissions or discounts from the selling stockholders in amounts to be
negotiated prior to the sale. Such brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. We will pay all
expenses incident to the offering and sale to the public of shares by the
selling stockholders. We will not pay underwriting commissions or similar
charges and legal fees and disbursements of counsel for the selling
stockholders.
We agreed with the selling stockholders to keep the registration statement
of which this prospectus constitutes a part effective until the earlier of:
- such time as each of the selling stockholders may sell all of the shares
held by him, her or it without registration pursuant to Rule 144 under
the Securities Act within a three-month period;
- such time as all of the shares have been sold by the selling
stockholders; or
- July 18, 2001 (one year following the date we closed the private
placement).
We intend to de-register any of the shares not sold by the selling
stockholders at the end of such period. At such time, however, any unsold shares
may be freely tradeable subject to compliance with Rule 144 of the Securities
Act.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for AXT by Gray Cary Ware & Freidenrich LLP, Palo Alto, California.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K for the year ended December 31, 1999
and for each of the three years ended December 31, 1999, except as they relate
to Lyte Optronics, Inc. as of December 31, 1998 and for the two years in the
period then ended, have been audited by PricewaterhouseCoopers LLP, independent
accountants, and, insofar as they relate to Lyte Optronics, Inc. as of December
31, 1998 and for the two years in the period then ended, by Arthur Andersen LLP,
independent accountants, whose report thereon appears therein. Such consolidated
financial statements have been so included in reliance on the reports of such
independent accountants given on the authority of said firms as experts in
auditing and accounting.
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<PAGE> 19
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[AXT LOGO]
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<PAGE> 20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses payable by us in
connection with the sale and distribution of the securities being registered.
All of the amounts shown are estimates except for the Securities and Exchange
Commission registration fee and the Nasdaq listing application fee.
<TABLE>
<CAPTION>
TO BE
PAID BY
THE REGISTRANT
--------------
<S> <C>
Securities and Exchange Commission registration fee......... $ 2,504
Nasdaq National Market additional shares listing application
fee....................................................... 2,342
Accounting fees and expenses................................ 10,000
Printing expenses........................................... 20,000
Transfer agent and registrar fees and expenses.............. 5,000
Legal fees and expenses..................................... 30,000
Miscellaneous expenses...................................... 30,154
--------
Total............................................. $100,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102 of the Delaware General Law, or DGCL, as amended, allows a
corporation to eliminate the personal liability of directors of a corporation to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except where the director breached his duty of loyalty,
failed to act in good faith, engaged in intentional misconduct or knowingly
violated a law, authorized the payment of a dividend or approved a stock
repurchase in violation of Delaware corporate law or obtained an improper
personal benefit.
Section 145 of the DGCL provides, among other things, that we may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (other than an
action by or in the right of AXT) by reason of the fact that the person is or
was a director, officer, agent, or employee of AXT, or is or was serving at our
request as a director, officer, agent or employee of another corporation,
partnership, joint venture, trust or other enterprise against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by the person in connection with such action,
suit or proceeding. The power to indemnify applies (a) if such person is
successful on the merits or otherwise in defense of any action, suit or
proceeding, or (b) if such person acting in good faith and in a manner he
reasonably believed to be in the best interest, or not opposed to the best
interest, of AXT, and with respect to any criminal action or proceeding had no
reasonable cause to believe his conduct was unlawful. The power to indemnify
applies to actions brought by or in the right of AXT as well but only to the
extent of defense expenses (including attorneys' fees but excluding amounts paid
in settlement) actually and reasonably incurred and not to any satisfaction of
judgment or settlement of the claim itself, and with the further limitation that
in such actions no indemnification shall be made in the event of any
adjudication of liability to AXT, unless the court believes that in light of all
the circumstances indemnification should apply.
Section 174 of the DGCL provides, among other things, that a director, who
willfully or negligently approves of an unlawful payment of dividends or an
unlawful stock purchase or redemption, may be held liable for such actions. A
director who was either absent when the unlawful actions were approved or
dissented at the time, may avoid liability by causing his or her dissent to such
actions to be entered in the books containing minutes of the meetings of the
board of directors at the time such action occurred or immediately after such
absent director receives notice of the unlawful acts.
II-1
<PAGE> 21
Our Certificate of Incorporation and Bylaws provide that we shall indemnify
our directors, officers, employees and agents to the maximum extent permitted by
Delaware Law, including in circumstances in which indemnification is otherwise
discretionary under Delaware Law. In addition, we have entered into separate
indemnification agreements with our directors and officers which would require
us, among other things, to indemnify them against certain liabilities which may
arise by reason of their status or service (other than liabilities arising from
willful misconduct of a culpable nature). We also intend to maintain director
and officer liability insurance, if available on reasonable terms. These
indemnification provisions and the indemnification agreements may be
sufficiently broad to permit indemnification of our officers and directors for
liabilities (including reimbursement of expenses incurred) arising under the
Securities Act of 1933, as amended (the "Securities Act").
The Underwriting Agreement hereto provides for indemnification by the
Underwriters of us and our officers and directors for certain liabilities,
including matters arising under the Securities Act.
We have a policy of directors' and officers' liability insurance that
insures our directors and officers against the cost of defense, settlement or
payment of a judgment under certain circumstances.
At present, there is no pending litigation or proceeding involving any of
our directors, officers, employees or other agents in which indemnification is
being sought. We are not aware of any threatened litigation that may result in a
claim for indemnification by any of our directors, officers, employees or other
agents.
ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
5.1 Legal opinion of Gray Cary Ware & Freidenrich LLP, counsel
to the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP, independent
accountants.
23.2 Consent of Arthur Andersen LLP, independent public
accountants.
23.3 Consent of Gray Cary Ware & Freidenrich LLP (included in
Exhibit 5.1 to this Registration Statement).
24.1 Power of Attorney (included as page II-4).
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
We hereby undertake that:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to
include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(4) for purposes of determining any liability under the Securities
Act of 1933, as amended, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934, as amended (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new
II-2
<PAGE> 22
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-3
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fremont, State of California, on the 6th day of
October, 2000.
AXT, INC.
By: /s/ MORRIS S. YOUNG
------------------------------------
Morris S. Young
Chief Executive Officer
POWER OF ATTORNEY
Each of the officers and directors of AXT, Inc. whose signature appears
below hereby constitutes and appoints Morris S. Young and Donald Tatzin his true
and lawful attorneys and agents, with full power of substitution, and with power
to act alone, to sign on behalf of the undersigned any amendment or amendments
to this Registration Statement on Form S-3 (including post-effective amendments)
and any and all new registration statements filed pursuant to Rule 462 under the
Securities Act of 1933, as amended, and to perform any acts necessary to file
such amendments or registration statements, with exhibits thereto and other
documents in connection therewith, and each of the undersigned does hereby
ratify and confirm his signature as it may be signed by his said attorneys and
agents to any and all such documents and all that said attorneys and agents, or
their substitutes, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on October 5, 2000 by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ MORRIS S. YOUNG Chief Executive Officer and October 6, 2000
--------------------------------------------- Director
Morris S. Young
/s/ DONALD L. TATZIN Chief Financial Officer and October 6, 2000
--------------------------------------------- Director
Donald L. Tatzin
/s/ JESSE CHEN Director October 6, 2000
---------------------------------------------
Jesse Chen
/s/ B. J. MOORE Director October 6, 2000
---------------------------------------------
B. J. Moore
</TABLE>
II-4
<PAGE> 24
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
5.1 Legal opinion of Gray Cary Ware & Freidenrich LLP, counsel
to the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP, independent
accountants.
23.2 Consent of Arthur Andersen LLP, independent public
accountants.
23.3 Consent of Gray Cary Ware & Freidenrich LLP (included in
Exhibit 5.1 to this Registration Statement).
24.1 Power of Attorney (included as page II-4).
</TABLE>
