What changed in this filing

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Item 1A. Risk Factors

2022-11-10 compared with 2022-08-12 · 30 added, 28 removed, 773 unchanged (7% of the section changed)

55 unchanged sentences

In late March 2022, as a result of an outbreak of COVID-19, Shanghai was locked down and certain manufacturing facilities were required to close.

In April 2022, rising COVID-19 infections in Beijing may trigger a lockdown and our manufacturing facilities in Beijing may be required to close temporarily.

If there is a renewed surge of the COVID-19 pandemic in cities in which our PRC subsidiaries and PRC joint ventures are located, the Chinese government may require these companies to close again.

In Q2 2022, rising COVID-19 infections in Beijing resulted in concerns of a city-wide lockdown which could have required our manufacturing facilities in Beijing to close temporarily.

Although some apartment complexes were locked down, there was no city-wide lockdown.

If there is a renewed surge of the COVID-19 pandemic

in cities in which our PRC subsidiaries and PRC joint ventures are located, the Chinese government may require these companies to close again.

If one or more of our key suppliers is required to close for an extended period, we might not have enough raw material inventories to continue manufacturing operations.

24 unchanged sentences

In late March 2022, as a result of an outbreak of COVID-19, Shanghai was locked down and certain manufacturing facilities were required to close.

In Q2 2022, rising COVID-19 infections in Beijing resulted

in concerns of a city-wide lockdown.

In Q2 2022, rising COVID-19 infections in Beijing resulted in concerns of a city-wide lockdown, which could have required our manufacturing facilities in Beijing to close temporarily.

Although some apartment complexes were locked down there was no city-wide lockdown.

27 unchanged sentences

At the same time, our manufacturing costs could remain fixed, or could increase.

Lower yields negatively impact our gross

Lower yields negatively impact our gross margin.

We have experienced product shipment delays and difficulties in achieving acceptable yields on both new and older products, and such delays and poor yields have adversely affected our operating results.

27 unchanged sentences

In late March 2022, as a result of an outbreak of COVID-19, Shanghai was locked down and certain manufacturing facilities were required to close.

In April 2022, rising COVID-19 infections in Beijing may trigger a lockdown and our manufacturing facilities in Beijing may be required to close temporarily.

In Q2l 2022, rising COVID-19 infections in Beijing resulted in concerns of a city-wide lockdown which could have required our manufacturing facilities in Beijing to close temporarily.

Although some apartment complexes were locked down, there was no city-wide lockdown.

If the government applies similar restrictions to us or requires mandatory factory shutdowns in the future, then such restrictions or shutdowns could have an adverse impact on our results of operations and our financial condition.

2 unchanged sentences

In addition, from time to time, the Chinese government issues new regulations, which may require additional actions on our part to comply.

On February 27, 2015, the China State Administration of Work Safety updated its list of

hazardous substances.

On February 27, 2015, the China State Administration of Work Safety updated its list of hazardous substances.

The previous list, which was published in 2002, did not restrict the materials that we use in our wafers.

10 unchanged sentences

The initial tariff rate was 10% and subsequently was increased to 25%.

Approximately 10% to 12% of our revenue derives from importing our wafers into the United States.

In the first half of 2022 we paid approximately $1.6 million in tariffs.

Approximately 15% of our revenue derives from importing our wafers into the United States.

In the first three quarters of 2022 we paid approximately $2.6 million in tariffs.

In the years 2021, 2020 and 2019 we paid approximately $1.3 million, $1.3 million and $0.7 million, respectively, in tariffs.

19 unchanged sentences

The ongoing operation of our manufacturing and production facilities in 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 would not be able to manufacture products for our customers.

If we are not able to use all or a significant portion of our facilities for prolonged periods for any reason, we would not be able to manufacture products for our customers.

For example, a fire or explosion caused by our use of combustible chemicals, high furnace temperatures or, in the case of InP, high pressure during our manufacturing processes could render some of our facilities inoperable for an indefinite period of time.

24 unchanged sentences

For example, the average selling prices for 4N gallium and for germanium were driven down by oversupply in the past, and negatively impacted our financial results.

In 2021 and 2020, the companies accounted for under the equity method of accounting contributed a gain of $4.4 million and

$0.1 million, respectively, to our condensed consolidated financial statements.

In 2021 and 2020, the companies accounted for under the equity method of accounting contributed a gain of $4.4 million and $0.1 million, respectively, to our condensed consolidated financial statements.

In 2019, the companies accounted for under the equity method of accounting contributed a loss of $1.9 million to our condensed consolidated financial statements.

Further, in several quarters over the past three years, one of our consolidated subsidiaries incurred a lower of cost or net realizable value inventory write down, which negatively impacted our consolidated gross margin.

In the first quarter of 2019, we incurred an impairment charge of $1.1 million for a germanium materials company in China in which we have a 25% ownership interest, writing down our investment to zero value.

quarter of 2019, we incurred an impairment charge of $1.1 million for a germanium materials company in China in which we have a 25% ownership interest, writing down our investment to zero value.

If the pricing environment remains stressed by oversupply and our raw material companies cannot reduce their production costs, then the reduced average selling prices of the raw materials will have a continuing adverse impact on our revenue, gross margins and net profit.

233 unchanged sentences

In the years 2021, 2020 and 2019 we paid approximately $1.3 million, $1.3 million and $0.7 million, respectively, in tariffs.

In the first half of 2022 we paid approximately $1.6 million in tariffs.

In the first three quarters of 2022 we paid approximately $2.6 million in tariffs.

The future impact of tariffs and trade wars is uncertain.

21 unchanged sentences

In late March 2022, as a result of an outbreak of COVID-19, Shanghai was locked down and certain manufacturing facilities were required to close.

In Q2 2022, rising COVID-19 infections in Beijing resulted in concerns of a city-wide lockdown.

In Q2 2022, rising COVID-19 infections in Beijing resulted in concerns of a city-wide lockdown, which could have required our manufacturing facilities in Beijing to close temporarily.

Although some apartment complexes were locked down there was no city-wide lockdown.

12 unchanged sentences

We are subject to the risks arising from adverse changes and uncertainty in domestic and global economies.

Uncertain global economic and political conditions or low or negative growth in China, Europe or the United States,

along with volatility in the financial markets, increasing national debt and fiscal concerns in various regions and the adoption and availability of fiscal and monetary stimulus measures to counteract the impact of the COVID-19 pandemic, pose challenges to our industry.

Uncertain global economic and political conditions or low or negative growth in China, Europe or the United States, along with volatility in the financial markets, increasing national debt and fiscal concerns in various regions and the adoption and availability of fiscal and monetary stimulus measures to counteract the impact of the COVID-19 pandemic, pose challenges to our industry.

Currently China’s economy is slowing and this could impact our financial performance.

43 unchanged sentences

markets and make our products more expensive than competitors’ products in these markets.

We are subject to foreign exchange gains and losses that materially impact our income statement.

We are subject to foreign exchange gains and losses that materially impact our statement of operations.

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

41 unchanged sentences

The role of the Chinese central and local governments in the Chinese economy is significant.

The Beijing municipal government’s decision to move to the Tongzhou district, the original location of our manufacturing company, resulted in the city instructing virtually all existing manufacturing companies, including AXT, to relocate all or some of their manufacturing lines.

their manufacturing lines.

We were instructed to move our gallium arsenide manufacturing line out of the area.

Chinese policies toward hazardous materials, including arsenic, environmental controls, air pollution, economic liberalization,

laws and policies affecting technology companies, foreign investment, currency exchange rates, taxation structure and other matters could change, resulting in greater restrictions on our ability to do business and operate our manufacturing facilities in China.

Chinese policies toward hazardous materials, including arsenic, environmental controls, air pollution, economic liberalization, laws and policies affecting technology companies, foreign investment, currency exchange rates, taxation structure and other matters could change, resulting in greater restrictions on our ability to do business and operate our manufacturing facilities in China.

We have observed a growing fluidity and tightening of regulations concerning hazardous materials, other environmental controls and air pollution.

80 unchanged sentences

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 second half of 2022, probably in the fourth quarter of 2022.

Subject to review and approval by the CSRC and other authorities, Tongmei expects to accomplish this goal in the fourth quarter of 2022.

The listing of Tongmei on the STAR Market will not change the status of AXT as a U.S.

30 unchanged sentences

The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future.

The issuance of shares of preferred stock could have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting stock.

issuance of shares of preferred stock could have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting stock.

We have no present intention to issue additional shares of preferred stock.

22 unchanged sentences

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income and taxes may be limited.

In general, an “ownership change” occurs if there is a cumulative change in our ownership by “5% shareholders” that exceeds 50 percentage points over a rolling three-year period.

In general, an “ownership change” occurs if there is a cumulative change in our ownership by “5% shareholders” that exceeds 50

percentage points over a rolling three-year period.

Similar rules may apply under state tax laws.

27 unchanged sentences

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

We are subject to federal, state and local environmental and safety laws and regulations in all of our operating locations, including laws and regulations of China, such as laws and regulations related to the development, manufacture and use of our products, the use of hazardous materials, the operation of our facilities, and the use of our real property.

and use of our products, the use of hazardous materials, the operation of our facilities, and the use of our real property.

These laws and regulations govern the use, storage, discharge and disposal of hazardous materials during manufacturing, research and development, and sales demonstrations.

27 unchanged sentences

(1) we fail to maintain effective internal control over financial reporting;

or (2) our management does not timely assess the adequacy of such internal control, we could be subject to regulatory sanctions and the public’s perception of us may be adversely impacted.

or (2) our management does not timely assess the adequacy

of such internal control, we could be subject to regulatory sanctions and the public’s perception of us may be adversely impacted.

We need to continue to improve or implement our systems, procedures and controls.

8 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