What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2026-08-13 compared with 2026-05-14 · 28 added, 18 removed, 851 unchanged (5% of the section changed)

23 unchanged sentences

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.

On July 8, 2026, the STAR Market accepted Tongmei's withdrawal of its IPO application..

In the event, all the Investors exercise their full redemption rights this would result in returning the $49 million that we raised from these Investors.

Defects in our products could diminish demand for our products.

9 unchanged sentences

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

Long-term supply agreements with customers, including those involving customer prepayments, may not result in anticipated revenue or profitability and create obligations to deliver products or services in the future.

If we are unable to fulfill our contractual obligations or if customer demand or market conditions change, our revenue, liquidity and results could be adversely affected.

Risks Related to Our Business and Operations

198 unchanged sentences

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 may not achieve the revenues we expect under our long term supply agreement with our customers.

We have entered into long-term supply agreements with customers that include customer prepayments or other advance payments.

We are currently in discussions with other customers to form similar agreements.

Although these arrangements may provide increased visibility into future demand and cash flows, they do not guarantee future revenue or profitability.

Our ability to recognize revenue from such arrangements depends on our ability to satisfy our contractual performance obligations, including delivering products or services in accordance with agreed-upon specifications, quantities, and delivery schedules.

In addition, customer prepayments received under these arrangements may result in obligations to provide products or services in future periods.

If we are unable to fulfill these obligations, including due to production delays, supply constraints, changes in customer requirements, or other factors, we may be required to provide refunds, credits, or other concessions, which could adversely affect our financial condition and results of operations.

In addition, customer demand, market conditions, technology changes, pricing pressures, or other circumstances may change after entering into long-term agreements.

If customers reduce, delay, or cancel orders, or if we are unable to convert customer prepayments into recognized revenue as anticipated, our revenue, operating results, and liquidity could be adversely affected.

Defects in our products could diminish demand for our products.

172 unchanged sentences

However, with the Foreign Trade Law’s enhanced power over import and export prohibitions and restrictions, no assurances can be given that additional restrictions will not be imposed in the future.

The fluidity of the export permit requirements and ongoing lack of surety for us and for our customers.

The fluidity of the export permit requirements presents an ongoing lack of certainty for us and for our customers.

To our knowledge, indium phosphide is rarely used in military applications and we can reasonably expect that export permits to ship our indium phosphide substrates to the U.S.

will be granted.

will eventually be granted.

But the timing for receiving permits remains uncertain, unclear and beyond our control.

Further, we consider the effects of geopolitical uncertainties between the United States and the People's Republic of China to be a risk.

Obtaining export permits for the sale of our indium phosphide substrates on a timely basis may result in a mismatch between our receipt of purchase orders for indium phosphide substrates and the recognition of revenue under U.S.

GAAP which may have a material adverse effect on our business, financial condition, and results of operations.

We are actively monitoring and following up on the status of our applications.

276 unchanged sentences

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.

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.

Certain Investors of Tongmei have a right of redemption as a result of Tongmei ’ s withdrawal of the IPO application.

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 2026 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.

On July 8, 2026, the STAR Market accepted Tongmei's withdrawal of its IPO application.

Tongmei’s withdrawal of the listing application gives rise to a redemption right:

each Investor has the right, but not the obligation, to require the Company or Tongmei to redeem its investment, and the Company or Tongmei has the right, but not the obligation, to redeem each Investor’s investment, in each case for a price equal to the original amount invested, without interest or any other return.

Because the redemption price is fixed in RMB, the U.S.

dollar amount payable will vary with the RMB/USD exchange rate.

Tongmei and the Company are in discussions with each Investor to determine whether it wishes to continue its investment as Tongmei advances toward an application for a Hong Kong Stock Exchange listing, or to have its investment redeemed in whole or in part.

The Company has sufficient funds to redeem the Investors' investments in full should full redemption be required.

The price of shares of our Common Stock has fluctuated substantially.

34 unchanged sentences

As a result, we do not anticipate paying cash dividends in the foreseeable future.

In addition, dividends accrue on our outstanding Series A preferred stock at the rate of $0.20 per annum per share of Series A preferred stock.

The 883,000 shares of $0.001 par value Series A preferred stock issued and outstanding as of June 30, 2026 and December 31, 2025, valued at $3,532,000, are non-voting and non-convertible preferred stock with a 5.0% cumulative annual dividend rate payable when declared by the Board and a $4 per share liquidation preference over common stock, which must be paid before any distribution is made to common stockholders.

Any future determination as to the declaration and payment of cash dividends will be at the discretion of our Board of Directors and will depend on factors the Board of Directors deems relevant, including, among others, our results of operations, financial condition and cash requirements, business prospects, and the terms of our financing arrangements, if any.

122 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors