📄 What This Document Is

This is a Prospectus Supplement (Form 424B5), which acts like an official detailed guide for an anticipated sale of the company’s stock. Since this is part of an automatic "shelf" registration, the company (AXT Inc.) is selling its shares of common stock to institutional investors, not the general public. 👉 This document doesn't offer a fixed price or guarantee the sale, but it outlines the rules, the company's business, and how the proceeds will be used.

🏢 What AXT Inc. Does 🔬

AXT Inc. is a worldwide materials science company whose core business is the development and production of high-performance semiconductor substrates, commonly known as wafers. They are critical suppliers in the semiconductor supply chain. 💻 While their corporate headquarters are in Fremont, California, the physical manufacturing of all their products is conducted by their PRC subsidiaries and joint ventures located in the People’s Republic of China (PRC/China).

🔄 The Corporate Structure and Cash Flow 💰

The company operates a complex, vertically integrated supply chain, meaning it controls many parts of the process from start to finish. Because of the physical split between the US corporate structure and Chinese manufacturing, AXT manages money through three specific mechanisms:

• Intellectual Property (IP) Licensing: The US parent company licenses its IP to its PRC subsidiaries, receiving royalty payments or one-time fees in return.
• Transfer Pricing: The company uses formal pricing arrangements to buy raw materials and finished wafers from its PRC subsidiaries and joint ventures.
• Dividends: The PRC subsidiaries and joint ventures send dividends (payments) to entities within the Company’s corporate structure.

👉 Why it matters: This structure requires careful annual review of "transfer pricing arrangements" by an independent public accounting firm to ensure all transactions are legitimate and properly valued.

🗺️ Key Business Operations and Risk Profile ⚠️

AXT must navigate complex geopolitical and export regulations. While the company confirms it is not a PRC operating company and is not using Variable Interest Entities (VIEs), its operations are heavily reliant on China.

• Export Permits: AXT’s subsidiary, Tongmei, must obtain export permits from China’s Ministry of Commerce to ship its wafers. While Tongmei recently obtained permits for shipments to Europe, Japan, the UK, and Canada, the critical export permit for the United States is still pending review.
• Geopolitical Risk: The filing explicitly notes that the final issuance of export permits is beyond the company’s control, especially given the potential for geopolitical uncertainties between the US and the PRC. The lack of these permits would have a "material adverse effect" on the business.

🚀 Use of Proceeds from the Offering 🎯

The net cash raised from selling these shares will be focused on growth and supporting the subsidiary, Tongmei. The proceeds are intended for three main areas:

• Capacity Expansion: Increasing Tongmei’s capacity to produce indium phosphide substrates for worldwide export.
• R&D: Funding the research and development of new or improved semiconductor products.
• General Purposes: Covering working capital and general corporate expenses.

👉 The amount of net proceeds will ultimately depend on the final sale price and the actual amount of capital received from the offering, and the timing is subject to the Board's discretion.

💵 Investor Rights and Dividend Policy 💎

AXT does not have any current plans to distribute cash payments to investors. The company’s stated intent is to retain all future earnings to fund its development and expansion.

• Common Stock: Holders are entitled to one vote per share, but the company has "no current plans to pay dividends."
• Series A Preferred Stock: The company has outstanding Series A preferred stock, valued at $3,532,000 (based on 883,000 shares outstanding as of Dec 31, 2025). This stock is non-voting and has a significant $4.00 per share liquidation preference. This means that any investor holding this preferred stock must be paid this amount before any common stockholders receive anything.

🚧 Market and Legal Risks to Consider 🚨

The filing dedicates substantial space to outlining the significant risks inherent in the business, which include both market and operational concerns.

• Stock Price Volatility: The stock price has fluctuated substantially, with recent increases observed during Q4 2025 and Q1/Q2 2026. The document warns that this price can decline rapidly, regardless of the company's business developments.
• Executive Discretion: The board retains broad discretion over how the proceeds are used. The filing warns that management could spend the funds in ways that the investor disagrees with, which could harm the stock price.
• Corporate Status: AXT is currently a "well-known seasoned issuer" (Rule 405), which keeps them from being classified as a "smaller reporting company." If they keep this status, they avoid certain disclosure rules, but if their market value changes, they could face increased compliance obligations.

📞 Key Contacts and Legal Details 🧑‍💼

For prospective investors, the primary point of contact for corporate matters is:

• AXT, Inc., Investor Relations: (510) 438-4700
• Address: 4281 Technology Drive, Fremont, California 94538

The underwriting group includes Northland Capital Markets Co-Managers, Needham & Company, B. Riley Securities, Craig-Hallum, and Wedbush Securities.

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🧠 The Analogy

Think of AXT like a highly valuable, specialized factory (the wafers) that is located in China, but whose sales contracts and primary corporate identity are based in the US. The US parent company acts as the sophisticated "brain" or investor, directing money to the "hands" in China. Because the physical process happens overseas, the US headquarters must execute complex financial and legal maneuvers—like licensing IP and managing royalties—just to ensure money can legally and reliably flow from the factory back to the US parent, all while fighting through unpredictable political customs checkpoints.

🧩 Final Takeaway

AXT is raising capital to expand its critical chip substrate production in China, but the investment is weighted with significant structural risks, particularly the pending export permits for the US market and the corporate complexity of transferring funds and assets across international borders.