DEF 14A 1 tmb-20220519xdef14a.htm DEF 14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No. )



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⌧	Definitive Proxy Statement
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◻	Soliciting Material Pursuant to §240.14a-12

AXT, Inc.
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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◻	Fee paid previously with preliminary materials.

◻	Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

April 8, 2022

Dear Stockholder:

You are cordially invited to attend the annual meeting of stockholders of AXT, Inc. on Thursday, May 19, 2022, at 11:00 a.m. Pacific Daylight Time. The meeting will be held at our principal offices located at 4281 Technology Drive, Fremont, California 94538. As part of our precautions regarding the coronavirus or COVID-19 outbreak, we are planning for the possibility that the annual meeting may be held solely by means of remote communication. If we take this step, we will announce the decision to do so in advance, and details on how to participate will be available on our website at www.axt.com located under the “Investors” section.

This year, we are continuing to use the Internet as our primary means of furnishing proxy materials to our stockholders. Consequently, most of our stockholders will not receive paper copies of our proxy materials. We will instead send to these stockholders a notice with instructions to access the proxy materials and vote via the Internet. The notice will also provide information on how stockholders may obtain paper copies of our proxy materials if they so choose. This makes the proxy distribution process more efficient and less costly, and helps conserve natural resources.

Whether or not you plan to attend the meeting, your vote is very important and we encourage you to vote promptly. As an alternative to voting in person at the annual meeting, you may vote via the Internet, by telephone or, if you receive a paper proxy card in the mail, by mailing the completed proxy card. It is important that you use this opportunity to take part in our affairs by voting on the business to come before this meeting. Regardless of the number of shares you own, your careful consideration of, and vote on, the matters before our stockholders is important.

Thank you for your attention to these matters.


	Sincerely yours,



	Gary L. Fischer
	Chief Financial Officer
	and Corporate Secretary

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON THURSDAY, MAY 19, 2022

TO THE STOCKHOLDERS:

Notice is hereby given that the annual meeting of the stockholders of AXT, Inc., a Delaware corporation, will be held on Thursday, May 19, 2022, at 11:00 a.m. Pacific Daylight Time, at our principal offices located at 4281 Technology Drive, Fremont, California 94538 *, for the following purposes:

To elect one (1) Class III director to hold office for a three year term and until her successor is elected and qualified.

To approve, on an advisory basis, the compensation of our Named Executive Officers.

To ratify the appointment of BPM LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022.

To transact such other business as may properly come before the meeting.

Stockholders of record at the close of business on March 25, 2022 are entitled to notice of, and to vote at, this meeting and any adjournment or postponement. For ten days prior to the meeting, a complete list of stockholders entitled to vote at the meeting will be available for examination by any stockholder, for any purpose relating to the meeting, during ordinary business hours at our principal offices located at 4281 Technology Drive, Fremont, California 94538.


	By order of the Board of Directors,



	Gary L. Fischer
	Chief Financial Officer
	and Corporate Secretary

Fremont, California

April 8, 2022

IMPORTANT: Your vote is important. Whether or not you plan to attend the meeting, we encourage you to vote your shares via a toll-free telephone number or over the Internet according to the instructions on the proxy card. To vote and submit your proxy by mail, please fill in, date, sign and promptly mail the enclosed proxy card in the accompanying postage-paid envelope to ensure that your shares are represented at the meeting. If you attend the meeting, you may choose to vote in person even if you have previously sent in your proxy card.

*As part of our precautions regarding the coronavirus or COVID-19 outbreak, we are planning for the possibility that the annual meeting may be held solely by means of remote communication. If we take this step, we will announce the decision to do so in advance, and details on how to participate will be available on our website at www.axt.com located under the “Investors” section.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL

MEETING OF STOCKHOLDERS TO BE HELD ON THURSDAY, MAY 19, 2022

The proxy materials, including this proxy statement, proxy card or voting instruction card and our 2021 Annual Report, are being distributed and made available on or about April 8, 2022. This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the meeting. Please read it carefully.

In accordance with rules and regulations adopted by the U.S. Securities and Exchange Commission (the "SEC"), we have elected to provide our stockholders access to our proxy materials over the Internet. Accordingly, a Notice of Internet Availability of Proxy Materials (the "Notice") will be mailed on or about April 8, 2022 to most of our stockholders who owned our common stock at the close of business on March 25, 2022, the record date. Stockholders will have the ability to access the proxy materials on a website referred to in the Notice or request a printed set of the proxy materials be sent to them by following the instructions in the Notice.

The Notice will also provide instructions on how you can elect to receive future proxy materials electronically or in printed form by mail. If you choose to receive future proxy materials electronically, you will receive an email next year with instructions containing a link to the proxy materials and a link to the proxy voting site. Your election to receive proxy materials electronically or in printed form by mail will remain in effect until you terminate such election.

Choosing to receive future proxy materials electronically will allow us to provide you with the information you need in a timelier manner, save us the cost of printing and mailing documents to you and conserve natural resources.

The annual meeting will be held on Thursday, May 19, 2022, at 11:00 a.m. Pacific Daylight Time, for the following purposes:

To elect one (1) Class III director to hold office for a three year term and until her successor is elected and qualified.

To approve, on an advisory basis, the compensation of our Named Executive Officers.

To ratify the appointment of BPM LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022.

To transact such other business as may properly come before the meeting.

Our Board of Directors recommends a vote FOR Items 1, 2 and 3 above. If you wish to attend the meeting in person, the meeting will be held at our principal offices located at 4281 Technology Drive, Fremont, California 94538 *, which can be reached by the following directions:

On highway 880 take the Auto Mall Pkwy exit and head east, and turn right into Technology Drive.

On highway 680 take the Auto Mall Pkwy exit and head west, and turn left into Technology Drive.

PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS

The accompanying proxy is solicited by the Board of Directors (the “Board”) of AXT, Inc., a Delaware corporation (“AXT” or the “Company”), for use at AXT’s annual meeting of stockholders to be held on May 19, 2022, or any adjournment or postponement thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. The proxy materials, including this proxy statement, proxy card or voting instruction card and our 2021 Annual Report, are being distributed and made available on or about April 8, 2022.

SOLICITATION AND VOTING

Voting Rights and Outstanding Securities. Only stockholders of record as of the close of business on March 25, 2022, the record date, will be entitled to vote at the meeting and any adjournment thereof. As of that time, we had 42,951,852 shares of common stock outstanding, the holders of which are entitled to vote with respect to all matters to be acted upon at the annual meeting. The holders of our issued and outstanding shares of Series A Preferred Stock are not entitled to vote on any matters at the meeting. Each stockholder of record of our common stock as of the record date is entitled to one vote for each share of our common stock held by such stockholder. Our Bylaws provide that the holders of a majority of all of the shares of the stock entitled to vote, whether present in person or represented by proxy, shall constitute a quorum for the transaction of business at the meeting. Votes for and against, abstentions and “broker non-votes” (shares held by a broker or nominee for which the broker or nominee does not have the authority, either express or discretionary, to vote on a particular matter) will each be counted as present for purposes of determining the presence of a quorum.

Broker Non-Votes. A broker non-vote occurs when a broker submits a proxy card with respect to shares held in a fiduciary capacity (typically referred to as being held in “street name”), but declines to vote on a particular matter because the broker has not received voting instructions from the beneficial owner. Under the rules that govern brokers who are voting with respect to shares held in street name, brokers have the discretion to vote such shares on routine matters, but not on non-routine matters. The ratification of auditors is considered a routine matter. The election of our Class III director and the approval, on an advisory basis, of the compensation of our Named Executive Officers are considered non-routine matters. Your stockbroker, bank or other nominee will not be able to vote on any of the non-routine matters set forth in this proxy statement unless they have your voting instructions, so it is very important that you indicate your voting instructions to the institution holding your shares by completing and returning the voting instruction card.

Solicitation of Proxies. The Board is making this proxy solicitation and we will bear the cost of soliciting proxies. In addition to soliciting stockholders by mail, we will request banks, brokers and other custodians, nominees and fiduciaries to solicit customers for whom they hold our stock and will reimburse them for their reasonable, out-of-pocket costs. We may use the services of our officers, directors and regular employees to further solicit proxies, personally or by telephone, without additional compensation for assisting with the solicitation.

Vote Required. If a quorum is present, the nominee for director receiving the highest number of votes will be elected as the Class III director. Advisory approval of the compensation of our Named Executive Officers requires the affirmative vote of the holders of a majority of the voting power of the shares of our common stock cast affirmatively or negatively. The affirmative vote of the holders of a majority of the voting power of the shares of our common stock cast affirmatively or negatively is required to approve ratification of the selection of our independent auditors. Broker non-votes will have no effect on the election of the Class III director and the advisory vote on executive compensation. Abstentions will have no effect on the election of the Class III director, the advisory vote on executive compensation and the ratification of the selection of our independent auditors.

Voting of Proxies. All valid proxies received before the meeting will be exercised. All shares represented by a proxy will be voted and, where a proxy specifies a stockholder’s choice with respect to any matter to be acted upon, the shares will be voted in accordance with that specification. If no choice is indicated on the proxy, the shares will be voted as the Board recommends on each proposal. The persons named as proxies will vote on any other matters properly presented at the annual meeting in accordance with their best judgment. A stockholder giving a proxy has the power to revoke his or her proxy at any time before it is exercised by delivering to our Corporate Secretary a written instrument revoking the proxy or a duly executed proxy with a later date, or by attending the meeting and voting in person. Attendance at the annual meeting will not, in and of itself, constitute revocation of a proxy.

Voting by Telephone or the Internet or mail. If you hold shares through a bank or brokerage firm, you may be able to simplify your voting process and save us expense by voting your shares by telephone or over the Internet. The bank or brokerage firm through which you hold your shares will provide you with separate instructions on a form you will receive from them. Many such firms make telephone or Internet voting available, but the specific processes available will depend on those firms’ individual arrangements. When you vote by phone or over the Internet, your vote is recorded immediately. We encourage our stockholders to vote using these methods whenever possible. If you attend the annual meeting, you may also submit your vote in person, and any previous votes that you submitted, whether by phone, over the Internet or by mail, will be superseded by the vote that you cast at the annual meeting.

How to Obtain a Separate Set of Proxy Materials. To reduce the expense of delivering duplicate proxy materials to our stockholders who may have more than one AXT stock account, unless otherwise requested, pursuant to current householding rules, we will deliver only one set of proxy materials to stockholders who share the same address. If you share an address with another stockholder and have received only one set of proxy materials, you may write or call us to request a separate copy of these materials at no cost to you. For future annual meetings, you may request separate proxy materials, or request that we send only one set of proxy materials to you if you are receiving multiple copies, by calling our Investor Relations department at: (510) 438-4700, or by writing us at: AXT, Inc., 4281 Technology Drive, Fremont, CA 94538, Attention: Investor Relations.

Communicating with AXT. You can obtain information about us by one of the following methods:

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Our home page on the Internet, located at www.axt.com, gives you access to product and marketing information, in addition to recent press releases, financial information and stock quotes, as well as links to our filings with the SEC. Online versions of this proxy statement, our 2021 Annual Report on Form 10-K, and our letter to stockholders are located under the “Investors” section on our website at www.axt.com.

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To have information such as our latest quarterly earnings release, Form 10-K, Form 10-Q or annual report mailed to you, please contact our Investor Relations at (510) 438-4700 or by email at: ir@axt.com.

For all other matters, please contact our Investor Relations at (510) 438-4700, or send your correspondence to the following address:


	AXT, Inc.
	4281 Technology Drive
	Fremont, CA 94538
	Attention: Investor Relations

PROPOSAL NO. 1

ELECTION OF DIRECTORS

We have a classified Board of Directors consisting of two Class I directors, one Class II director and one Class III director, who will serve until the annual meetings of stockholders to be held in 2023, 2024 and 2022, respectively, and until their respective successors are duly elected and qualified. At each annual meeting of stockholders, directors are elected for terms of three years to succeed those directors whose terms expire at the annual meeting dates.

The term of the Class III director will expire on the date of the 2022 annual meeting. Accordingly, one nominee is to be elected to serve as the Class III director of the Board of Directors at the 2022 annual meeting. Our Nominating and Corporate Governance Committee of the Board of Directors has recommended to the Board of Directors, and the Board of Directors has nominated, Christine Russell, the current Class III member of the Board of Directors, as the nominee for election by the stockholders to this position. If elected, the nominee will serve as the Class III director until our annual meeting of stockholders in 2025 and until her successor is elected and qualified. If the nominee declines to serve or become unavailable for any reason, the proxies may be voted for such substitute nominee as the Board of Directors may designate.

If a quorum is present and voting, the nominee for Class III director receiving the highest number of votes will be elected as the Class III director. Abstentions and broker non-votes have no effect on the vote.

Vote Required and Board of Directors Recommendation

The nominee for director receiving the highest number of votes will be elected as the Class III director.

The Board of Directors recommends a vote “FOR” the nominee named above.

The following table sets forth, for our current directors, including the Class III nominee to be elected at this meeting, and the non-director Executive Officer, information with respect to their ages as of March 25, 2022 and their background:


Name	Principal Occupation	Age	Director Since

Class I directors whose terms expire at the 2023 Annual Meeting of Stockholders:

Morris S. Young	Chairman of the Board, Chief Executive Officer	77	1989
David C. Chang	Director	80	2000

Class II director whose term expires at the 2024 Annual Meeting of Stockholders:

Jesse Chen	Lead Independent Director	64	1998

Class III director whose terms expire at the 2022 Annual Meeting of Stockholders:


Christine Russell	Director	72	2019

Non-director Executive Officer:

Gary L. Fischer	Chief Financial Officer and Corporate Secretary	71

Members of the Board of Directors

Morris S. Young, Ph.D. co-founded AXT in 1986 and has served as a director since 1989. Dr. Young served as our Chairman of the Board of Directors from February 1998 to May 2004 and as our president and chief executive officer from 1989 to May 2004. From 2004 until his retirement in 2006, Dr. Young served as our chief technology officer. He was reappointed as our chief executive officer on July 16, 2009 and Chairman of the Board of Directors on August 12, 2021. From 1985 to 1989, Dr. Young was a physicist at Lawrence Livermore National Laboratory. Dr. Young has a B.S. degree in metallurgical engineering from National Cheng Kung University, Taiwan, a M.S. degree in metallurgy from Syracuse University, and a Ph.D. in metallurgy from Polytechnic University.

The Board has determined that Dr. Young’s long history with the Company, as well as his breadth of experience and on-going, active involvement in the semiconductor industry, make him a valuable asset to the Board.

David C. Chang, Ph.D. has served as one of our directors since December 2000. Dr. Chang co-founded The Global Maximum Educational Opportunities, Inc., which provides study abroad programs in China for U.S. undergraduate students, in 2011 and became its Chairman and Chief Executive Officer in August 2013. Dr. Chang has served as president of Polytechnic University in New York (now known as the Tandon School of Engineering, New York University) from 1994 to 2005 and chancellor from 2005 to 2013, and Professor Emeritus at New York University since 2013. Previously, Dr. Chang was dean of the College of Engineering and Applied Sciences at Arizona State University. Dr. Chang served as a director of the NSF/Industry Corporate Research Center for Microwave and Millimeter-Wave Computer Aided Design from 1981 to 1989. Dr. Chang was a member of the board of directors of Time Warner Cable Inc. from 2004 to 2016. Dr. Chang has a M.S. degree and a Ph.D. in applied physics from Harvard University and a B.S. degree in electrical engineering from National Cheng Kung University, Taiwan.

The Board has determined that Dr. Chang’s extensive experience in the semiconductor industry allows him to make significant contributions to the strategic direction of the Company.

Jesse Chen has served as one of our directors since February 1998 and was our Chairman of the Board of Directors from May 2004 until October 2007, at which time he was appointed our lead independent director. Mr. Chen served as our Chairman of the Board of Directors from March 2009 until August 12, 2021, at which time he was appointed our lead independent director. Since May 1997, Mr. Chen has served as a managing director of Maton Ventures, an investment company. From 1990 to 1996, Mr. Chen served as chief executive officer of BusLogic, Inc., a fabless semiconductor and computer peripherals company. Mr. Chen serves on the board of directors of several private

companies. Mr. Chen has a B.S. degree in aeronautical engineering from National Cheng Kung University, Taiwan and a M.S. degree in electrical engineering from Loyola Marymount University.

The Board has determined that Mr. Chen’s experience as a chief executive officer and his investment background provides him with the experience and knowledge in compensation and governance matters for technology companies to enhance his contributions to the Board and its committees.

Christine Russell has served as one of our directors since December 2019. Ms. Russell also serves on the board of directors and as audit committee chair of both QuickLogic Corporation (Nasdaq: QUIK) and eGain Corporation (Nasdaq: EGAN). She is chairman emeritus and a director on the board of SVDX (Silicon Valley Directors Exchange), a professional organization that provides a forum for education, conversation about current issues, and peer interaction for boards of directors of Silicon Valley companies. From 2018 to 2020, Ms. Russell served as chief financial officer of PDF Solutions, Inc. (Nasdaq: PDFS), a provider of yield improvement technologies for the IC manufacturing process life cycle. She previously served as chief financial officer of Uni-Pixel, Inc., a manufacturer of touch sensor films, which was sold to a China-based firm. Other companies include Vendavo, Inc., a SaaS-based pricing optimization software company addressing the Global 2000 and EAG, Inc. (Evans Analytical Group), a global provider of analytical testing for technology companies, including major semiconductor, chemicals and pharmaceuticals firms. Prior to EAG, she served in the roles of both chief financial officer and EVP of business development at Virage Logic Corporation, a Nasdaq-listed semiconductor intellectual property company that was sold to Synopsys, Inc. in 2010. Ms. Russell holds a bachelor’s degree and an MBA from Santa Clara University.

The Board has determined that Ms. Russell’s financial expertise, her background and experience in the finance function in a number of companies make her a valuable contributor to the Board and its committees.

CORPORATE GOVERNANCE

Director Independence

The Board has determined that, other than Dr. Morris S. Young, each of the members of the Board is an independent director for purposes of the Nasdaq Stock Market listing standards.

Executive Sessions

Our independent directors meet in an executive session without management present each time the Board holds its regularly scheduled meetings. Mr. Jesse Chen, an independent director, was designated by the Board as the lead independent director.

Committees and Meeting Attendance

The Board has an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Each of these committees operates under a written charter adopted by the Board. Copies of these charters are available on our website at www.axt.com. The Board held 14 meetings during the fiscal year ended December 31, 2021. Each of the standing committees of the Board held the number of meetings indicated below. During the last fiscal year, each of our directors attended at least 75% of the total number of meetings of the Board and of the committees of the Board on which such director served during that period. Directors are encouraged to attend our annual meetings of stockholders. Dr. Morris S. Young, Jesse Chen, David C. Chang, Christine Russell and Leonard J. LeBlanc attended our 2021 annual meeting of stockholders.

The following table sets forth the three standing committees of the Board, the members of each committee during the last fiscal year and the number of meetings held by each committee;


Name of Director	Audit		Compensation		Nominating and Corporate Governance
Jesse Chen	√		√		√	(Chair)**
David C. Chang	√		√	(Chair)	√
Leonard J. LeBlanc	√	(Chair until Dec 2021)*	√		√
Christine Russell	√	(Chair as of Dec 2021)	√		√	(Chair)**
Number of Meetings:	9		7		6

* On December 29, 2021, Leonard J. LeBlanc notified the Board of his decision to resign from the Board and all committees thereof, effective as of December 29, 2021. Mr. LeBlanc became a director emeritus, effective as of December 29, 2021.

** Effective as of December 29, 2021, the Board appointed Jesse Chen as Chair of the Nominating and Governance Committee and Christine Russell as Chair of the Audit Committee.

Audit Committee

The members of the Audit Committee during 2021 were Dr. David C. Chang, Jesse Chen, Leonard J. LeBlanc and Christine Russell. The Board has determined that all Audit Committee members are “independent” as defined under the applicable Nasdaq listing standards and SEC rules and regulations and as such rules apply to audit committee members. The Board has determined that each of Mr. Leonard J. LeBlanc, Mr. Jesse Chen and Christine Russell are an “audit committee financial expert” as defined by the rules and regulations of the SEC. The Audit Committee’s functions include:

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overseeing the accounting, financial reporting and audit processes;

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reviewing the qualifications, independence and performance, and approving the terms of engagement, of the independent registered public accounting firm;

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reviewing the results and scope of audit and other services provided by the independent registered public accounting firm;

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reviewing the accounting principles and auditing practices and procedures to be used in preparing our financial statements; and

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reviewing our internal controls.

For additional information concerning the Audit Committee, see “Audit Committee Report” and “Proposal No. 3 - Ratification of Appointment of Independent Registered Public Accounting Firm.”

Compensation Committee

The members of our Compensation Committee during 2021 were Dr. David C. Chang, Jesse Chen, Leonard J. LeBlanc and Christine Russell. The Board has determined that all members of the Compensation Committee are “independent” as the term is defined by applicable Nasdaq listing standards and SEC rules.

The Compensation Committee has been delegated the responsibility by the Board to oversee the programs under which compensation is paid or awarded to our Named Executive Officers and to evaluate the performance of these executive officers. The Compensation Committee has been delegated the authority to: (i) oversee our compensation policies and practices; (ii) review and approve compensation and compensation procedures for our executive officers; (iii) oversee and approve director compensation, and (iv) oversee and approve equity awards to our employees, officers and directors. More specifically, the Compensation Committee’s responsibilities include: overseeing our general compensation structure, policies and programs, and assessing whether our compensation structure establishes appropriate incentives for management and employees; administering our incentive compensation and equity-based compensation plans, including our equity incentive plans; reviewing and approving compensation procedures for our executive officers; reviewing and recommending to the Board the compensation of the Chief Executive Officer based on relevant corporate goals and objectives and the Board’s performance evaluation of the Chief Executive Officer; reviewing and approving the compensation of executive officers, other than the Chief Executive Officer; approving employment and retention agreements and severance arrangements for executive officers, including change-in-control provisions, plans or agreements; and approving the compensation of directors for service on the Board and its committees and recommending changes in compensation to the Board. The Chief Executive Officer does not participate in discussions or approvals related to his compensation. Regarding most compensation matters, including executive and director compensation, our management provides recommendations to the Compensation Committee.

The agenda for meetings of the Compensation Committee is determined by its Chair with the assistance of the Chief Executive Officer and the Chief Financial Officer. Compensation Committee meetings are regularly attended by the Chief Executive Officer and the Chief Financial Officer. The Compensation Committee periodically meets in executive session without members of management present. The Compensation Committee has authority under its charter to retain, approve fees for and terminate advisors, consultants and agents as it deems necessary to assist in the fulfillment of its responsibilities. The Compensation Committee reviews the total fees paid to outside compensation consultants by us to ensure that the consultant maintains its objectivity and independence when rendering advice to the committee.

Nominating and Corporate Governance Committee

The members of our Nominating and Corporate Governance Committee during 2021 were Dr. David C. Chang, Jesse Chen, Leonard J. LeBlanc and Christine Russell. The Board has determined that all members of the Nominating and Corporate Governance Committee are “independent” as the term is defined by applicable Nasdaq listing standards and SEC rules. The Nominating and Corporate Governance Committee is responsible for evaluating and selecting director nominees, determining criteria for selecting new directors, developing and reviewing on an ongoing basis the adequacy of the corporate governance principles and guidelines adopted by the Board, overseeing the evaluation of the Board and committees of the Board, and adopting, approving, monitoring and enforcing compliance with our Code of Business Conduct and Ethics.

Director Nominations

Director Qualifications. The Nominating and Corporate Governance Committee considers the following factors in reviewing possible candidates for nomination as director:

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the appropriate size of our Board and its Committees;

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the perceived needs of the Board for particular skills, background and business experience;

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the skills, background, reputation, and business experience of nominees compared to the skills, background, reputation, and business experience already possessed by other members of the Board;

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nominees’ independence from management;

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applicable regulatory and listing requirements, including independence requirements and legal considerations, such as antitrust compliance;

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the benefits of a constructive working relationship among directors; and

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the desire to balance the considerable benefit of continuity with the periodic injection of the fresh perspective provided by new members.

The Nominating and Corporate Governance Committee’s goal is to assemble a Board consisting of a variety of perspectives and skills derived from high quality business and professional experience. The Nominating and Corporate Governance Committee does not have a formal policy with respect to diversity, but it does consider Board candidates and/or nominees who represent a mix of backgrounds, diversity of race and ethnicity, gender, age, skills and experience that enhance the quality of the Board’s deliberations and decisions. Other than the foregoing, there are no stated minimum criteria for director nominees, although the Nominating and Corporate Governance Committee may also consider such other factors as it may deem, from time to time, are in the best interests of the Company and our stockholders. The Nominating and Corporate Governance Committee believes that it is important that at least one member of the Board should meet the criteria for an “audit committee financial expert” as defined by SEC rules. Under applicable listing requirements, at least a majority of the members of the Board must meet the definition of “independent director.” The Nominating and Corporate Governance Committee also believes it appropriate for one or more key members of our management to participate as a member of the Board.

Other than the foregoing, there are no stated minimum criteria for director nominees, although the Nominating and Corporate Governance Committee may also consider such other factors as it may deem, from time to time, are in the best interests of the Company and our stockholders.

Identification and Evaluation of Nominees for Director. The Nominating and Corporate Governance Committee identifies nominees by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination, balancing the value of continuity of service by existing members of the Board with that of obtaining a new perspective. If any member of the Board does not wish to continue in service or if the Nominating and Corporate Governance Committee or the Board decides not to re-nominate a member for re-election, the Nominating and Corporate Governance Committee will identify the desired skills and experience of a new nominee in light of the criteria above. Current members of the Nominating and Corporate Governance Committee and the Board are polled for suggestions as to individuals meeting the criteria of the Nominating and Corporate Governance Committee. Research may also be performed to identify qualified individuals.

The Nominating and Corporate Governance Committee considers properly submitted stockholder recommendations for candidates for membership on the Board. Our Bylaws contain provisions which address the process by which a stockholder may nominate an individual to stand for election to the Board at our annual meeting of stockholders. Candidates so recommended will be reviewed using the same process and standards for reviewing candidates identified above under “Identification and Evaluation of Nominees for Director.” In order to be evaluated in connection with the Nominating and Corporate Governance Committee’s established procedures for evaluating potential director nominees, any recommendation for director nominees submitted by a stockholder must be sent in writing to the

Corporate Secretary, 4281 Technology Drive, Fremont, CA 94538, at least 120 days prior to the anniversary of the date of the proxy statement that was mailed to stockholders in connection with the prior year’s annual meeting of stockholders and must contain the following information:

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the candidate’s name, age, contact information and present principal occupation or employment;

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a description of the candidate’s qualifications, skills, background, and business experience during, at a minimum, the last five years, including his/her principal occupation and employment and the name and principal business of any corporation or other organization in which the candidate was employed or served as a director; and

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a statement signed by the candidate that the candidate is willing to be considered and willing to serve as a director if nominated and elected.

The Nominating and Corporate Governance Committee will evaluate incumbent directors, as well as candidates for director nominee submitted by directors, management, and stockholders consistently using the criteria stated in this policy and will select the nominees that in the Nominating and Corporate Governance Committee’s judgment best suit the needs of the Board at that time.

Communications with Directors

Stockholders may communicate with the Board by writing to us at AXT, Inc., 4281 Technology Drive, Fremont, CA 94538, Attention: Corporate Secretary. Your letter should indicate that you are an AXT stockholder. Stockholders who would like their submission directed to a member of the Board may so specify, and the communication will be forwarded as appropriate. Depending on the subject matter, management will (i) forward the communication to the director or directors to whom it is addressed; (ii) attempt to handle the inquiry directly, for example where it is a request for information about us or it is a stock related matter; or (iii) not forward the communication if it is primarily commercial in nature, comprises spam, junk mail, mass mailings, product complaints or inquiries, job inquiries, business solicitations, or relates to otherwise inappropriate matters.

Board Leadership Structure

Mr. Jesse Chen currently serves as the lead independent director and was Chairman of the Board until August 12, 2021. Dr. Morris Young currently serves as our Chairman of the Board and Chief Executive Officer. Dr. Morris Young was appointed Chairman of the Board on August 12, 2021.

Board Diversity Matrix


Board Diversity Matrix (As of April 8, 2022)
Total Number of Directors	4
	Female	Male	Non-Binary	Did Not Disclose
Part I: Gender Identity
Directors	1	3	0	0
Part II: Demographic Background
African American or Black	0	0	0	0
Alaskan Native or Native American	0	0	0	0
Asian	0	3	0	0
Hispanic or Latinx	0	0	0	0
Native Hawaiian or Pacific Islander	0	0	0	0
White	0	0	0	0
Two or More Races or Ethnicities	0	0	0	0
LGBTQ+	0
Did Not Disclose Demographic Background	1

Board’s Role in Risk Oversight

The Board’s risk oversight function is administered through Board committees. Generally, the committee with subject matter expertise in a particular area is responsible for overseeing the management of risk in that area. For example, the Audit Committee oversees the management of financial, accounting and internal control risks, the Compensation Committee oversees the management of risks in the Company’s compensation programs, and the Nominating and Corporate Governance Committee oversees compliance with Company policies.

We have an internal audit function that reports directly to the Audit Committee. The Audit Committee reviews and approves the internal audit plan once a year and receives periodic updates of internal audit activity in meetings held at least quarterly throughout the year. Updates include discussion of audit project results, quarterly assessment of internal controls and risks of fraud.

In carrying out their risk oversight duties, the committees review management’s implementation of risk policies and procedures, and review reports from management, independent auditors, internal audit, legal counsel, regulators and outside experts, as appropriate, regarding risks the Company faces.

The Board and its committees are committed to ensuring effective risk management oversight and work with management to ensure that effective risk management strategies are incorporated into the Company’s culture and day-to-day business operations.

Code of Business Conduct and Ethics

The Board has adopted a Code of Business Conduct and Ethics applicable to all of our employees and directors, including our Chief Executive Officer, Chief Financial Officer and Corporate Controller, which is available under the “Investors” section on our website at www.axt.com. In addition, we will provide a copy of the Code of Business Conduct and Ethics upon request made in writing to us at AXT, Inc., 4281 Technology Drive, Fremont, CA 94538, attention: Corporate Secretary. We will disclose any amendment to the Code of Business Conduct and Ethics, or waiver of any of its provisions, applicable to an executive officer or director under the “Investors” section on our website at www.axt.com.

Compensation Committee Interlocks and Insider Participation

The members of our Compensation Committee during 2021 were Dr. David C. Chang, Jesse Chen, Leonard J. LeBlanc and Christine Russell. None of the members of the Compensation Committee is or has been an officer or employee of AXT. During fiscal year 2021, no member of the Compensation Committee had any relationship with us requiring disclosure under Item 404 of Regulation S-K. During fiscal year 2021, none of our executive officers served on the compensation committee (or its equivalent) or on a board of directors of another entity any of whose executive officers served on our Compensation Committee or our Board.

Corporate Governance Guidelines

We have adopted Corporate Governance Guidelines in addition to our Code of Business Conduct and Ethics, Audit Committee Charter, Compensation Committee Charter and Nominating and Governance Committee Charter. These materials are available under the “Investors” section on our website at www.axt.com. A printed copy of these materials may be obtained by any stockholder upon request made in writing to us at AXT, Inc., 4281 Technology Drive, Fremont, CA 94538, attention: Corporate Secretary.

PROPOSAL NO. 2

ADVISORY VOTE ON EXECUTIVE COMPENSATION

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), our stockholders are entitled to cast an advisory vote to approve the compensation of our Named Executive Officers (“NEOs”) as disclosed in this proxy statement. This proposal, commonly known as a "say-on-pay" proposal, gives our stockholders the opportunity to express their views on the design and effectiveness of our executive compensation programs.

As described in detail under the heading “Compensation Discussion and Analysis, ” our executive compensation programs are intended to ensure that our compensation and benefits policies attract, motivate and retain key employees necessary to support our operations and our strategic growth. We urge our stockholders to read the Compensation Discussion and Analysis of this proxy statement, as well as the Summary Compensation Table and the related tables and disclosures, for a more complete understanding of how the Company’s executive compensation policies and procedures operate. We believe that our executive compensation programs are appropriate and aligned with the Company’s performance.

We are asking our stockholders to indicate their support for our NEO compensation as described in this proxy statement by voting “FOR” the following resolution:

“RESOLVED, that the compensation paid to the Company’s Named Executive Officers, as disclosed in the Company’s proxy statement for the 2022 annual meeting of Stockholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”

Even though this say-on-pay vote is advisory and therefore will not be binding on the Company, our Compensation Committee and our Board value the opinions of our stockholders. Accordingly, to the extent there is a significant vote against the compensation of our NEOs, we will consider our stockholders’ concerns and our Compensation Committee will evaluate what actions may be necessary or appropriate to address those concerns. For example, following the 2020 annual meeting of stockholders, our Board and Compensation Committee adopted at-risk, performance-based equity awards as described in the Compensation Discussion and Analysis. We hold an advisory vote on executive compensation each year and will hold another advisory vote at our 2023 annual meeting of stockholders.

The Board of Directors recommends a vote “FOR” the approval, on an advisory basis, the compensation of our Named Executive Officers as disclosed in this proxy statement.

PROPOSAL NO. 3

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee of the Board has selected BPM LLP (“BPM”) as our independent registered public accounting firm to audit our consolidated financial statements for the fiscal year ending December 31, 2022. BPM has acted in such capacity since its appointment in fiscal year 2004. A representative of BPM is expected to be present at the annual meeting, with the opportunity to make a statement if the representative desires to do so, and is expected to be available to respond to appropriate questions.

The following table sets forth the aggregate fees billed to us for the fiscal years ended December 31, 2021 and 2020 by BPM:


	Fiscal 2021		Fiscal 2020
Audit Fees (1)	$	886,687	$	782,001
Audit-Related Fees	$	—	$	—
Tax Fees (2)	$	237,172	$	108,336

(1)

Audit fees represent fees for professional services provided in connection with the audit of our annual consolidated financial statements, review of our quarterly condensed consolidated financial statements and services that are normally provided by BPM in connection with statutory and regulatory filings or engagements.

(2)	Tax fees represent fees for professional services provided in connection with federal and state tax return review, amendment and preparation.

Review of Auditor Independence

The Audit Committee has determined that none of the services rendered by BPM is incompatible with maintaining BPM’s independence as our independent registered public accounting firm.

Pre-approval of Audit Fees

The Audit Committee pre-approves all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services, transfer pricing analysis and other services. Pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The Audit Committee meets at least quarterly with our management and representatives of our independent registered public accounting firm to, among other things, review the results of the annual audit and quarterly reviews and discuss the consolidated financial statements, review the adequacy of accounting and financial controls, review our critical accounting policies, and review and approve any related party transactions. The Audit Committee meets separately, at least once each quarter, with the independent registered public accounting firm. We maintain procedures for the receipt, retention, and handling of complaints, including complaints made anonymously, which the Audit Committee oversees.

Vote Required and Board of Directors Recommendation

Although ratification by stockholders is not required by law, the Board has determined that it is desirable to request approval of this selection by the stockholders. Notwithstanding its selection, the Board, in its discretion, may appoint a new independent registered public accounting firm at any time during the year if the Board believes that such a change would be in our best interests and those of our stockholders. If the stockholders do not ratify the appointment of BPM the Board may reconsider its selection.

The affirmative vote of the holders of a majority of the voting power of the shares of our common stock cast affirmatively or negatively at the annual meeting of stockholders, at which a quorum is present, will be required to ratify the appointment of BPM as our independent registered public accounting firm.

The Board of Directors recommends a vote “FOR” the ratification of the appointment of BPM LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022.

AUDIT COMMITTEE REPORT

The information contained in this report shall not be deemed to be “soliciting material” or “filed” with the SEC or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except to the extent that AXT specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.

The Audit Committee oversees our financial reporting process on behalf of the Board. Management has the primary responsibility for the consolidated financial statements and the reporting process, including internal control systems. BPM, our independent registered public accounting firm, is responsible for expressing an opinion as to the conformity of our audited consolidated financial statements with accounting principles generally accepted in the United States. The Audit Committee has met with BPM, with and without management present, to discuss the overall scope of BPM’s audit, the results of its examinations and the overall quality of our financial reporting.

The Audit Committee currently consists of three directors, each of whom, in the judgment of the Board, is an “independent director” as defined in the listing standards for The Nasdaq Stock Market. The Audit Committee acts pursuant to a written charter that has been adopted by the Board. A copy of this charter is posted under the “Investors” section on our website at www.axt.com.

The Audit Committee has discussed and reviewed the audited consolidated financial statements with management, and has discussed and reviewed with our independent registered public accounting firm all matters required to be discussed by Auditing Standard No. 1301, as adopted by the Public Company Accounting Oversight Board (United States) (“PCAOB”).

The Audit Committee has received from BPM the written disclosures and letter required by applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, discussed with the independent registered public accounting firm any relationships that may impact their objectivity and independence, and satisfied itself as to the independent registered public accounting firm’s independence.

Based on the review and discussions referred to above, the Audit Committee recommended to the Board that our audited consolidated financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.


	AUDIT COMMITTEE

	Christine Russell, Chair
	David C. Chang
	Jesse Chen

EXECUTIVE OFFICERS

The following sets forth information regarding our current non-director executive officers.

Gary L. Fischer was appointed as our Vice President, Chief Financial Officer and Corporate Secretary in August 2014. From June 2014 to August 2014, Mr. Fischer served as a financial consultant to the Company. Prior to serving as a financial consultant to the Company, Mr. Fischer served as a consultant to eRide, Inc., a fabless semiconductor company that develops both GPS devices and software for location-based services, since 2009. Prior to that position, Mr. Fischer served as Vice President and Chief Financial Officer of eRide from 2005 until 2009, when eRide was acquired. From 1993 to 2005, Mr. Fischer held various positions at Integrated Silicon Solution, Inc., a leader in advanced memory solutions, most recently as President and Chief Operating Officer. Mr. Fischer has a B.A. degree from the University of California, Santa Barbara, and an M.B.A. from Santa Clara University.

Information regarding Dr. Morris Young, our Chief Executive Officer, is set forth under Proposal No. 1 Election of Directors.

EXECUTIVE COMPENSATION AND RELATED INFORMATION

Compensation Discussion and Analysis

The following compensation discussion and analysis provides information related to the Company’s executive compensation program for our fiscal year ended December 31, 2021, with respect to our Named Executive Officers, who were:

●

Morris S. Young, Chief Executive Officer

●

Gary L. Fischer, Vice President, Chief Financial Officer and Corporate Secretary

Executive Summary

AXT is a materials science company that develops and produces high-performance compound and single element semiconductor substrates, also known as wafers. Our substrate wafers are used when a typical silicon substrate wafer cannot meet the performance requirements of a semiconductor or optoelectronic device.

Performance Highlights 2021:

The Board of Directors focuses on performance and achievements. Some of the highlights in 2021 include:

●

Double-digit revenue growth - In 2021, AXT achieved strong revenue growth and total revenue of $137.4 million as compared with 2020 total revenue of $95.4 million. This is a 44% growth in revenue and, in comparison to 2019 total revenue, it is a 65% growth in revenue;

●

Gross margin improvement - Gross margin improved in 2021 to 34.5% as compared with 31.7% in 2020;

●

Net income improvement - Net income in 2021 was $14.6 million, compared with net income of $3.2 million in 2020. This represents an improvement of $11.4 million or 350%;

●

Nurtured significant development activity for new applications using our wafer substrates, ranging from health monitoring to laser-based sensors;

●

Continued to meet the requirements and standards of Tier-1 customers;

●

R&D work achieved 8-inch gallium arsenide samples and pilot production shipments to customers;

●

Invented an advanced process to enable the recycling of certain indium phosphide material, a new step towards stronger ESG; and

●

Successfully prepared and submitted a detailed application for a listing of shares of Beijing Tongmei Xtal Technology Co., Ltd. in an initial public offering on the Shanghai Stock Exchange’s Sci-Tech innovAtion boaRd (“The STAR Market”) and submitted it to the Shanghai Stock Exchange authorities for review.

Compensation Summary 2021:

●

A 7.6% increase in CEO salary and a 10.6% increase in CFO salary, effective November 1, 2021, to bring the salaries to the 50^th percentile of the peer group determined by Compensia;

●

Based on financial metrics (60%) and performance target success (40%), bonuses paid out at 110% of target as compared to 2020 when only 82% of target paid out; and

●

The Board of Directors continued to link 50% of the annual equity award to a defined financial metric for the coming year and continued to also require four years to fully vest.

Features of Executive Compensation Program

The Board of Directors establishes non-equity incentive performance targets as well as equity incentive performance targets. Non-equity incentive performance targets are measured against specific financial metrics as well as strategic programs such as business development, market penetration, expansion of capacity, and upgrades to manufacturing among other targets. Our executive compensation program includes the following features designed to focus on pay for performance and stockholder value while more closely aligning the interests of our Named Executive Officers with those of our stockholders:

●

Pay for Performance. We link pay and performance by establishing corporate financial performance metrics under our Executive Incentive Plan and grant a substantial portion of pay in the form of equity awards that vest over multiple years;

●

No Guaranteed Bonuses. We did not provide any guaranteed bonuses to our executive officers for fiscal 2021;

●

Compensation Consultant. The Compensation Committee of the Board (the “Committee”) seeks input from Compensia, an independent compensation consultant retained directly by the Committee in connection with its oversight of the executive compensation program;

●

Target the 50^th percentile. We target compensation to match the 50^th percentile of our peer group compensation notwithstanding the deep industry experience of management;

●

Annual Say on Pay. We conduct annual “say-on-pay” advisory votes;

●

No 280G Tax Gross-ups. We do not provide for any golden parachute tax gross-ups;

●

No Option Repricings. No option repricings are permitted under our 2015 Equity Incentive Plan;

●

No Excessive Executive Perquisites. Our executive officers generally receive only the same benefits and perquisites made available to all of our employees;

●

No Hedging or Pledging. We prohibit our executive officers from pledging or hedging of our common stock; and

●

Clawback. We maintain a clawback policy with respect to incentive compensation as described below in “Forfeiture of Awards”.

Overview of Executive Compensation Program and Philosophy

Our philosophy with respect to our executive compensation program is to provide a total compensation package to our executive team that is competitive with the prevailing practices for our industry and markets. We believe that there should be a strong link between pay and performance, both at the Company level and the individual level. Although we believe that exceptional individual performance should be rewarded, we believe that such rewards should not be awarded unless there has been strong Company performance as well as strong individual performance.

Our executive compensation program is intended to attract, motivate and retain the key employees necessary to support our operations and our strategic growth and create value for our stockholders. To meet these objectives, we have adopted the following overarching policies:

●

Pay total compensation that is competitive with the prevailing practices of other companies of similar size and in similar industries. We rely on a compensation consultant and generally target the 50^th percentile of our peer group;

●

Use total cash compensation (salary plus annual cash bonus, payable quarterly) to recognize appropriately each individual officer’s scope of responsibility, role in the organization, experience and contributions;

●

Reward performance by:

●

providing short-term bonus compensation by establishing a bonus plan to reward achievement at specified levels of Company financial and individual officer performance, with a significant portion of each officer’s goals tied to key financial measures, including Company-specific measures comprising achievement of targeted revenue, gross profit, operating expense, and net income levels, all being line items upon which executive officer performance can have a significant impact and that are linked to beneficial financial performance improvement and, therefore, value to our stockholders. In addition, a portion of each officer’s performance goals are related to individual metrics as determined by the Board of Directors; and

●

providing long-term incentives in the form of stock options and restricted stock awards, in order to retain those individuals with the leadership and management abilities necessary for increasing long-term stockholder value while aligning the interests of our officers with those of our stockholders. In 2020 we modified our annual award of long-term incentives by linking 50% of the award to a specific financial performance metric for the coming year, but still requiring four year vesting. We continued this structure in 2021.

On May 20, 2021, we held a non-binding, stockholder advisory vote on the compensation of our Named Executive Officers, commonly referred to as a say-on-pay vote. Our stockholders approved the compensation of our Named Executive Officers, with over 95% of the votes cast in favor of our say-on-pay resolution. As we evaluated our compensation program throughout fiscal 2021, we were mindful of the strong support our stockholders expressed for our philosophy of linking compensation to performance. For fiscal 2022, our Committee decided to retain our general approach to executive compensation.

Components of Our Executive Compensation Program

There are five major elements that comprise our executive officer compensation program: (i) base salary as compared to the 50^th percentile of our peer group; (ii) annual cash bonus, payable quarterly and based on performance; (iii) long-term incentives, such as stock options and restricted stock awards; (iv) retirement benefits provided under a 401(k) plan; and (v) perquisites and benefit programs that are generally available to all of our employees. We have selected these elements because each is considered useful and/or necessary to meet one or more of the principal objectives of our compensation policies. For example, base salary and bonus target percentages are set with the goal of attracting and retaining employees, adequately compensating them on a day-to-day basis for the time spent and the services they perform, and rewarding them for performance at specified levels of Company financial and individual officer achievement. Our stock option grants and restricted stock awards are intended to provide an incentive and reward for the achievement of long-term business objectives, including achievement of our financial goals, our growth, business development, market penetration, expansion of capacity as the market demands, upgrades to manufacturing, retaining key employees and more. In the past several years we made the decision to stop granting options and currently grant only restricted stock awards. We believe that these elements of compensation, when combined, are effective, and will continue to be effective, in achieving the objectives of our executive compensation program.

Oversight of Executive Compensation and Role of the Board, the Committee, and Management

Our executive compensation program is overseen and administered by the Committee, which is comprised entirely of independent directors as determined in accordance with various Nasdaq and SEC rules and the Internal Revenue Code. The Committee operates under a written charter adopted by our Board. A copy of the charter is available under the “Investors” section on our website at www.axt.com.

The Committee meets regularly with our Chief Executive Officer, Dr. Young, to obtain recommendations with respect to Company compensation programs, practices and packages for executives. Dr. Young made recommendations to the Committee on the base salary, bonus targets and equity compensation for the other member of the executive team for fiscal 2021 compensation. The Committee considers, but is not bound by and does not always accept, Dr. Young’s recommendations with respect to executive compensation. For fiscal 2021 executive compensation, the Committee considered the recommendations and Dr. Young’s views on what would motivate his team financially, both in terms of long-term and short-term compensation and approved compensation changes for the Named Executive Officers generally in line with his recommendations based on market information provided by Compensia, an independent

compensation consulting firm, retained by the Committee.

Dr. Young attended most of the Committee’s meetings, but the Committee also regularly held executive sessions not attended by any members of management or Dr. Young, a non-independent director. The Committee discussed Dr. Young’s compensation package with him, but made decisions with respect to Dr. Young’s compensation without him present. From time to time the Committee recommends to the Board changes to Dr. Young’s compensation and the independent members of the Board must approve such changes. The Committee has not delegated any of its authority with respect to the compensation of executive officers.

The practices and policies followed by our Committee in setting executive officer compensation, include the assessment of the appropriate allocation between current base salary compensation, short-term cash bonus compensation, and long-term equity-based compensation. Other considerations include our business objectives, competitive practices and trends, and regulatory requirements. The Committee reviews the executive compensation program applicable to executive officers on at least an annual basis, other than retirement and other generally available benefits, which are reviewed from time to time to ensure that benefit levels remain competitive, but are not included in the annual determination of an executive’s compensation package. In setting compensation levels for a particular executive, the Committee takes into consideration the proposed compensation package as a whole including the proposed performance targets as well as market information (as described further below), the executive’s past and expected future contributions to our business, internal equity, and certain other factors the Committee deems relevant.

Role of Compensation Consultant

The Committee has the authority to engage its own independent advisors to assist in carrying out its responsibilities. For a number of years, including 2020 and 2021, the Committee retained Compensia to review our executive compensation practices. Compensia advises the Committee on the principal aspects of executive compensation, including base salaries, bonuses and long-term equity incentives, as well as target total, all inclusive, compensation. Compensia also reported on its evaluation of the competitiveness of our executive officer compensation program as compared to peer companies. Compensia provided market information about the competitive framework for executive pay and performance-based incentives. Consistent with the Company’s compensation philosophy, the Committee generally targets the 50^th percentile of the peer group determined by Compensia.

In 2020 and 2021, representatives of Compensia communicated with the chair of the Committee outside of meetings with the Committee. Compensia reports to the Committee and did not perform services for the Company other than for the Committee. Based on the consideration of the various factors as set forth in the rules of Nasdaq, the Committee does not believe that its relationship with Compensia and the work of Compensia on behalf of the Committee have raised any conflicts of interest.

Peer Group

In order to determine each officer’s target total cash compensation (salary and bonuses) in effect at the beginning of fiscal 2021, the Committee reviewed compensation information from a peer group of 16 companies identified by Compensia in 2020, with input from our management. Each company within the peer group is a publicly traded high-technology company. However, given the fact that no U.S. public companies directly compete with AXT, the peer group was composed largely of semiconductor companies, including semiconductor companies that use non-silicon wafer substrates. The peer group consisted of companies that are generally considered “small-cap” companies and included companies with market capitalizations and annual revenues both greater than and less than ours, and that are companies in which we believe could compete with us for executive officer talent. The peer group upon which the Committee relied for decisions relating to the first half of fiscal 2021 executive compensation program consisted of the following companies:

Adesto Technologies Corporation

Alpha & Omega Semiconductor Limited

Amtech Systems, Inc.

Applied Optoelectronics, Inc.

CEVA, Inc.

CyberOptics Corporation

DSP Group, Inc.

EMCORE Corporation

GSI Technology, Inc.

Intermolecular, Inc.

Intevac, Inc.

Kopin Corporation

Nanometrics, Inc.

NeoPhotonics, Inc.

PCTEL, Inc.

Rudolph Technologies, Inc.

Compensia submitted a new report during the third fiscal quarter of 2021 which was used to review and consider any appropriate adjustments to each officer’s compensation in the latter half of 2021. Several of the companies on the previous list were acquired or removed. The peer group upon which the Committee relied for decisions relating to the latter half of fiscal 2021 executive compensation program consisted of the following companies:

Alpha and Omega Semiconductor Limited

Amtech Systems, Inc.

Applied Optoelectronics, Inc.

Cambium Networks Corporation

CEVA, Inc.

CyberOptics Corporation

DSP Group, Inc.

EMCORE Corporation

GSI Technology, Inc.

Intevac, Inc.

Kopin Corporation

Model N, Inc.

NeoPhotonics, Inc.

PCTEL, Inc.

Pixelworks, Inc.

Veeco Instruments, Inc.

Data on the compensation practices of the above-mentioned peer group was gathered by Compensia through searches of publicly available information. The Committee relied upon Compensia to compare compensation levels of our executive officers against the levels for executive officers in applicable roles at the above peer group companies, generally to ensure that our executive compensation program remained competitive in the market for continuing to recruit, retain, and incentivize our executive officers and to reward them appropriately for performance achieved. The data was gathered by Compensia with respect to base salary, bonuses, target total cash compensation, long-term equity incentives, and target total, all-inclusive compensation. The peer group data was not used for purposes of setting any generally available benefits, such as 401(k) plans or health care coverage.

Base Salary

The annual base salaries for our Named Executive Officers in effect as of the beginning of fiscal 2021 were as follows:


	Base Salary
Morris S. Young, Chief Executive Officer	$	445,000
Gary L. Fischer, Chief Financial Officer and Corporate Secretary	$	320,000

The Committee considered current peer group salary data that it received from Compensia in August 2021. The data showed that both officers were below the 50% target. Effective November 1, 2021 Mr. Fischer’s salary was increased to $354,000, a 10.6% increase. Effective November 1, 2021 Dr. Young’s salary was increased to $479,000, a 7.6% increase.

Executive Non-Equity Incentive Plan/Bonus Plan

The Executive Incentive Plan is an incentive bonus program for key executive officers that is intended to increase stockholder value and the success of the Company by motivating employees to perform to the best of their abilities and achieve the Company’s objectives. For fiscal 2021, the structure of the incentive bonus program generally followed the revised design of the Executive Incentive Plan that was adopted in the second half of 2018 and has been used thereafter. As in previous years, the Executive Incentive Plan for fiscal 2021 included performance metrics to reflect certain of the Company’s business objectives set forth in its operating plan for the fiscal year.

In determining the incentive opportunities for our officers under the Executive Incentive Plan, the Committee considered its philosophy to use total cash compensation (salary plus cash bonus) to recognize appropriately each individual officer’s scope of responsibility, role in the organization, experience and contributions. The Committee believes that the terms and target bonus opportunities of the Executive Incentive Plan are consistent with market information provided by Compensia as targeted to the 50^th percentile of the peer group.

The Executive Incentive Plan is administered by the Committee, provided that the actual bonus payment for our Chief Executive Officer is subject to the approval of the Board. The Committee, in its sole discretion, selects the eligible employees who will be participants for any performance period. Participation in the Executive Incentive Plan is in the sole discretion of the Committee, on a performance period by performance period basis. For fiscal 2021, each of our Named Executive Officers participated in the Executive Incentive Plan.

Under the Executive Incentive Plan, the Committee, in its sole discretion, establishes a target award for each participant, which may be a percentage of a participant’s annual base salary as of the beginning or end of the performance period, a fixed dollar amount, or such other amount based on such other formula as the Committee determines. Each performance period, the Committee, in its sole discretion, will establish a bonus pool, which pool may be established before, during or after the applicable performance period. Actual awards will be paid from the bonus pool. The Committee, in its sole discretion, determines the performance goals applicable to any target award. The performance goals are financial targets or other objective goals, but the Executive Incentive Plan allows subjective criteria to be included. The Committee also has the discretion to increase, decrease or eliminate any award under the Executive Incentive Plan.

Each actual award, if any, is paid solely from the general assets of the Company. Payment of each actual award shall be made as soon as practicable after the end of the performance period to which the actual award relates and after the actual award is approved by the Committee, but generally not later than March 15 of the year immediately following completion of the performance period. Each actual award is paid in cash (or its equivalent) in a single lump sum.

In establishing the incentive bonus program for fiscal 2021 under the Executive Incentive Plan, the Committee set four quarterly performance periods, coinciding with the quarterly corporate objectives set forth in the Company’s annual operating plan for fiscal 2021 (the “Operating Plan”). The Committee determined that actual awards would be based upon achievement of corporate financial targets (the “Corporate Targets”) and individual performance. Achievement of the Corporate Targets represented 60% of the actual award, and individual performance represented 40% of the actual award.

The Operating Plan was approved by the Board to guide and drive the Company’s business for the fiscal year, developed with consideration for the markets in which the Company competes, and designed to result in improved business performance for the Company. Individual performance under the Executive Incentive Plan also was assessed by the Committee based on actual performance as compared to agreed upon performance targets and the Committee’s expectations (and with respect to the Named Executive Officers other than the CEO, the CEO’s expectations) that the individual will perform at high levels in his roles and responsibilities and make significant contributions individually in achieving the Operating Plan goals and objectives.

The Corporate Targets were comprised of the following four financial targets, determined on accounting principles generally accepted in the United States (“GAAP”) basis: (1) total revenue (“Total Revenue Target”), (2) gross profit (“Gross Profit Target”), (3) operating expense (“Operating Expense Target”) and (4) net income (“Net Income Target”). The actual quarterly Corporate Targets were set forth in the Operating Plan, and approved by the Board in February 2021. The Corporate Targets were weighted 10% for each of the Total Revenue Target, Gross Profit Target and Operating Expense Target and 30% for the Net Income Target for a total of 60% of the target award. Individual

performance targets are both objective, for example penetrating specific new accounts, proper supervision and development of key executives, proper corporate financial reporting and controls, corporate training sessions, progress on the possible IPO in China, and subjective such as corporate leadership, company culture and dedication.

The Committee approved threshold, target and maximum levels of performance that were required to be achieved with respect to the Corporate Targets for each of the four quarters in 2021 and their corresponding bonus payout eligibility levels, as follows:

Executive Incentive Plan Corporate Targets for 2021

Corporate Target

Percentage of Achievement Required
Under Operating Plan

Payout Upon Applicable Level of
Achievement Under Operating Plan

Net Income Target

Below 70%

70% (threshold)

100% (target)

150% (maximum)

70% (threshold)

100% (target)

150% (maximum

Each of:

Total Revenue Target,

Gross Profit Target and

Operating Expense Target

Below 90%

90% (threshold)

100% (target)

150% (maximum)

90% (threshold)

100% (target)

150% (maximum)

For fiscal 2021, for each 1% increase in the performance of a Corporate Target over the threshold, the actual award increased by 1%, up to a maximum of 150%. The Net Income Target was required to be achieved at a minimum of 70% of the Operating Plan for threshold achievement, 100% of the Operating Plan for target achievement, and 150% or greater under the Operating Plan for maximum achievement. The applicable weighted portion of the target award payable for each fiscal quarter could vary from 70% at threshold achievement of the Net Income Target to 150% at maximum achievement of the Net Income Target, with target achievement of the Net Income Target resulting in 100% payout with respect to the portion of the target award attributable to the Net Income Target. Each of the Total Revenue Target, Gross Profit Target, and Operating Expense Target (each, an “Additional Target”) was required to be achieved at a minimum of 90% of the Operating Plan for threshold achievement, 100% of the Operating Plan for target achievement, and 150% or greater under the Operating Plan for maximum achievement. Based on actual performance, the applicable weighted portion of the target award payable for each fiscal quarter could vary from 90% at threshold achievement of the applicable Additional Target to 150% at maximum achievement of the applicable Additional Target, with target achievement of the applicable Additional Target resulting in 100% payout with respect to the portion of the target award attributable to that performance objective.

For fiscal 2021 the financial targets for revenue, gross profit, operating expense and net income were as follows:


(in thousands)	Year 2021 Operating Plan Key Metrics				Total
	Q1	Q2	Q3	Q4	2021
Revenue	$ 28,012	$ 26,371	$ 27,937	$ 28,096	$ 110,416
Gross Profit	9,402	8,797	9,720	9,982	37,901
Operating Expense	6,700	6,800	6,800	6,900	27,200
Net Income	2,059	903	2,017	2,519	7,498

Individual performance was weighted at 40% of the target award and the individual portion of the award payable was capped at 150% of the individual target award. For fiscal 2021, the Committee made assessments regarding individual performance on a quarterly basis with the assistance of the CEO for the named executive officer other than himself. The determination was based on actual performance as compared to agreed upon performance targets and the Committee’s general assessment of the named executive officer’s roles, responsibilities, and expected contributions individually in achieving the Operating Plan goals and objectives, for the applicable fiscal quarter.

The fiscal 2021 annualized target bonus opportunity, expressed in dollar amount as a percentage of the named executive officer’s base salary earned during fiscal 2021 are as set forth below. The target bonus opportunities as a percentage of base salary remained the same as in fiscal 2020.


	Target Bonus
	Opportunity		Target Bonus Opportunity As
Named Executive Officer	Amount⁽¹⁾		Percentage of Base Salary
Morris S. Young	$	445,000	100.0	%
Gary L. Fischer	$	176,000	55.0	%

The targeted bonus opportunity for both Dr. Young and Mr. Fischer, as a percentage of salary approximated the 50^th percentile of the peer group.

Based on the achievements in fiscal 2021, executive officers in aggregate were paid cash bonuses under the Executive Incentive Plan at approximately 110% of the target bonus amount shown above, based on Company and individual performance. The bonuses paid to our Named Executive Officers in 2021 were as follows:

SEC Form DEF 14A filed by AXT Inc