8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 15, 2006

AXT, INC.

(Exact name of registrant as specified in its charter)

Delaware	000-24085	94-3031310
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

4281 Technology Drive

Fremont, California   94538

(Address of principal executive offices)  (Zip Code)

Registrant’s telephone number, including area code: (510) 683-5900

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement

                On February 13, 2006, the Compensation Committee (the “Compensation Committee”) of the Board of Directors of AXT, Inc. approved the 2006 Bonus Plan (the “Plan”) for the Company’s executive officers.  Under the terms of the Plan, bonuses are payable quarterly to executive officers upon achievement of quarterly performance measures established by the Compensation Committee.  A portion a portion of each executive officer’s target bonuses shall be determined based upon achievement of Company financial measures and a portion shall be determined based upon individual performance metrics established for each executive officer, including financial and operating metrics.  The performance measures include financial measures for the Company of target revenues, gross profit and operating expenses.  The following sets forth the annual maximum target bonus payable to each executive officer if performance measures are achieved:

Name	Maximum Target Bonus Amount
Philip C.S. Yin
Chief Executive Officer	$120,000
Minsheng Lin
Chief Operating Officer	$100,000
Davis Zhang
President, Joint Venture Operations	$70,000
Morris S. Young
Chief Technology Officer	$60,000
Wilson W. Cheung
Chief Financial Officer	$60,000

Item 2.02 Results of Operations and Financial Condition

The following information is being “furnished” in accordance with General Instruction B.2 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.

On February 15, 2006, AXT, Inc. issued a press release announcing its financial results for the quarter and year ended December 31, 2005.  Attached hereto as exhibit 99.1 and incorporated by reference herein is financial information of AXT, Inc. for the three-month and twelve-month periods ended December 31, 2005 as presented in a press release of February 15, 2006.

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Item 9.01 Financial Statements and Exhibits

(d)           Exhibits

99.1Earnings release dated February 15, 2006, regarding the financial results of AXT, Inc. for the quarter and year ended December 31, 2005.

Exhibit 99.1 shall not be deemed “filed” for the purpose of Section 18 of the Securities Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		AXT, INC.
Date: February 15, 2006	By:	/s/ WILSON W. CHEUNG
		Wilson W. Cheung
		Chief Financial Officer

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EXHIBIT INDEX

Exhibit Number	Description
99.1	Earnings release dated February 15, 2006, regarding the financial results of AXT, Inc. for the quarter and year ended December 31, 2005.

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EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

Contacts:
	Wilson W. Cheung
	Chief Financial Officer
	(510) 683-5900
	Leslie Green
	Stapleton Communications
	(650) 470-0200

AXT, Inc. Announced Fourth Quarter and Annual 2005 Results

Revenue Increases 25 Percent From Q3 2005

FREMONT, Calif., Feb. 15, 2006 — AXT, Inc. (NASDAQ: AXTI), a leading manufacturer of compound semiconductor substrates today reported financial results for the fourth quarter and fiscal year ended December 31, 2005.  The company’s financial statements have been presented to reflect the opto-electronics division as a discontinued operation for all periods presented.

Fourth Quarter 2005 Results

Revenue for the fourth quarter of 2005 was $7.7 million compared with $6.2 million for the third quarter of 2005.  During the fourth quarter, substrate revenue was $6.1 million compared with $5.6 million in the prior quarter due to higher demands for larger diameter wafers.  In addition, revenue from raw materials sales increased to $1.7 million for the fourth quarter of 2005 compared with $600,000 in the prior quarter.  The increase of raw materials sales was primarily the result of shipments delayed in the prior quarter, as well as new customer sales.

Gross margin was 8.4 percent in the fourth quarter of 2005 compared with 18.6 percent in the third quarter of 2005.  The 8.4 percent gross margin included year-end inventory valuation adjustments of $573,000, which negatively affected the quarterly gross margin by 7.4 percent.

Operating expenses were $4.0 million in the fourth quarter of 2005 compared with $3.4 million in the third quarter of 2005.  The increase in operating expenses from prior quarter was primarily due to bad debt expense of $293,000 and a restructuring charge of $460,000 in December 2005 to further reduce our Fremont, California facility headcount and to liquidate the remaining assets of AXT’s Japan office.

The company reported a loss from operations of $3.4 million for the fourth quarter of 2005 compared with a loss from operations of $2.2 million for the third quarter of 2005.

Net interest and other expense was $286,000 for the fourth quarter of 2005 compared with net interest and other expense of $57,000 for the third quarter of 2005.  The company also recorded an income tax benefit of $1.0 million for the fourth quarter of 2005 compared with an income tax expense of $45,000 in the prior quarter.

AXT, Inc 4281 Technology Drive Fremont, CA 94538 Tel: 510.683.5900 Fax: 510.353.0668 www.axt.com.

AXT, Inc. Announces Fourth Quarter and Annual 2005 Results

Feb. 15, 2006

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Net loss in the fourth quarter of 2005 was $2.7 million or a loss of $0.12 per basic and diluted share, compared with a loss of $2.1 million or a loss of $0.09 per basic and diluted share for the third quarter of 2005.

Fiscal 2005 Results

Revenue for fiscal 2005 was $26.5 million compared with $35.5 million for fiscal 2004.  Gross margin was 8.3 percent for fiscal 2005 compared with negative 0.7 percent for fiscal 2004.

Operating expenses were $15.5 million for fiscal 2005 compared with $14.6 million for fiscal 2004.  Loss from operations was $13.3 million compared with $14.8 million for fiscal 2004.

Net loss for fiscal 2005 was $12.2 million or a loss of $0.53 per basic and diluted share, compared with a loss of $13.6 million or a loss of $0.60 per basic and diluted share for fiscal 2004.

Management Qualitative Comments

“2005 was an important year of change and accomplishment for AXT,” said Phil Yin, chief executive officer.  “We successfully resolved the product quality issue that we had experienced during the last two years.  We put in place a strong team and we are leveraging their talent and experience to execute an aggressive growth plan.

“In the next year, our growth will be driven both by the positive effects of these changes and by a growing market that is rapidly evolving in our favor.  The industry trend toward compound semiconductor substrates is intensifying as device manufacturers are looking for ways to increase performance and lower power consumption, while incorporating more features and functionality into their devices.

“Over the next several quarters, we will continue our strong focus on sales penetration and improvements in our manufacturing costs and efficiencies.  We are entering the new year with momentum in our sales efforts, significant competitive advantages and positive industry trends.  We believe that the strength of our team, the performance of our products and the innovation that has characterized AXT since its inception will position us for renewed growth and excellence in 2006.”

Outlook for First Quarter, Ending March 31, 2006

AXT projects the following performance for the first quarter of 2006:

•Revenue is expected to show normal seasonality and to be between $7.1 million and $7.7 million;

•Net loss is expected to be between $2.6 million and $2.9 million, including stock compensation expense of $225,000; and

•Net loss per diluted share is expected to be between $0.11 and $0.13.

Conference Call

A conference call will be held today at 1:30 p.m. PST.  The conference call can be accessed at (973) 935-2100 (PIN 6844940).  The call will also be webcast on the Internet at www.axt.com.  The webcast will be archived for one year.  Replays will be available at (973) 341-3080 until February 22, 2006.  Financial and statistical information to be discussed in the call will be available on the company’s website immediately

AXT, Inc. Announces Fourth Quarter and Annual 2005 Results

Feb. 15, 2006

Page 3 of 5

prior to commencement of the call.  Management’s accompanying script will be available on the company’s website immediately after the call through February 15, 2007. Additional investor information can be accessed at http://www.axt.com or by calling company’s Investor Relations Department at (510) 683-5900.

About AXT, Inc.

AXT designs, develops, manufactures and distributes high-performance compound and single element semiconductor substrates comprising gallium arsenide (GaAs), indium phosphide (InP) and germanium (Ge). The company’s substrate products are used primarily in lighting display applications, wireless communications, and fiber optic communications. Its vertical gradient freeze (VGF) technique for manufacturing semiconductor substrates provides significant benefits over other methods and enabled AXT to become a leading manufacturer of such substrates, particularly in optoelectronics applications.  AXT has manufacturing facilities in China and invests in five joint ventures producing raw materials.  For more information, see AXT’s website at http://www.axt.com. The company can also be reached at 4281 Technology Drive, Fremont, California 94538 or by calling (510) 683-5900. AXT is traded on the NASDAQ National Market under the symbol AXTI.

Safe Harbor Statement

The foregoing paragraphs contain forward-looking statements within the meaning of the Federal Securities laws, including statements related to our aggressive growth plan, market growth, improvements in our product quality and in our manufacturing costs and efficiencies, and opportunities to grow our business, as well as expected quarterly financial results for the first quarter of fiscal 2006.  Such forward-looking statements are based upon specific assumptions that are subject to uncertainties and factors relating to the company’s operations and business environment, which could cause actual results of the company to differ materially from those expressed or implied in the forward-looking statements contained in the foregoing discussion. Such uncertainties and factors include: our ability to increase sales and maintain product quality improvements, the potential outcome of securities litigation and other litigation filed against us, as well as any other actions that may be filed against us by current or former employees for wrongful termination or health and safety issues, overall conditions in the markets in which we compete, market acceptance and demand for our products, the impact of competitive products and pricing, and other factors as set forth in the company’s Form 10-K and other filings made with the Securities and Exchange Commission, all of which are difficult to predict and some of which are beyond the company’s control. The company does not undertake any obligation to update publicly any forward-looking statement, either as a result of new information, future events or otherwise.

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FINANCIAL TABLES TO FOLLOW

AXT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share data)

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2005			2004			2005			2004
Revenue	$	7,717		$	7,623		$	26,536		$	35,454
Cost of revenue	7,069			7,000			24,337			35,705
Gross profit (loss)	648			623			2,199			(251		)
Operating expenses:
Selling, general and administrative	3,089			3,120			12,955			11,561
Research and development	466			391			1,723			1,479
Asset impairment charge	-			-			-			210
Restructuring charge	460			73			836			1,308
Total operating expenses	4,015			3,584			15,514			14,558
Loss from operations	(3,367		)	(2,961		)	(13,315		)	(14,809		)
Interest income, net	130			89			516			262
Other income (expense), net	(416		)	60			(910		)	94
Loss before provision for income taxes	(3,653		)	(2,812		)	(13,709		)	(14,453		)
Provision (benefit) for income taxes	(1,048		)	(106		)	(950		)	71
Loss from continuing operations	(2,605		)	(2,706		)	(12,759		)	(14,524		)
Discontinued operations:
Gain (loss) from discontinued operations	(126		)	250			544			472
Gain from disposal	-			194			-			419
Net loss	$	(2,731	)	$	(2,262	)	$	(12,215	)	$	(13,633	)
Basic and diluted loss per share:
Loss from continuing operations	$	(0.11	)	$	(0.12	)	$	(0.55	)	$	(0.64	)
Gain (loss) from discontinued operations	(0.01		)	0.02			0.02			0.04
Net loss per share	$	(0.12	)	$	(0.10	)	$	(0.53	)	$	(0.60	)
Shares used in computing basic and diluted loss per share	22,975			23,119			23,047			23,063

- more -

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AXT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

	December 31,			December 31,
	2005			2004
Assets:
Current assets
Cash and cash equivalents	$	17,472		$	12,117
Short-term investments	5,555			20,062
Accounts receivable, net	5,226			4,034
Inventories, net	16,156			16,462
Prepaid expenses and other current assets	1,801			2,523
Assets held for sale	-			1,250
Total current assets	46,210			56,448
Property, plant and equipment, net	17,306			19,045
Other assets	3,832			3,832
Restricted deposits	7,450			8,215
Total assets	$	74,798		$	87,540
Liabilities and stockholders' equity:
Current liabilities
Accounts payable	$	3,070		$	1,895
Accrued liabilities	6,028			7,690
Accrued restructuring	465			552
Current portion of long-term debt	300			450
Total current liabilities	9,863			10,587
Long-term debt, net of current portion	7,420			7,600
Other long-term liabilities	1,897			1,336
Total liabilities	19,180			19,523
Stockholders' equity:
Preferred stock	3,532			3,532
Common stock	155,464			155,454
Accumulated deficit	(104,776		)	(92,561		)
Other comprehensive income	1,398			1,592
Total stockholders' equity	55,618			68,017
Total liabilities and stockholders' equity	$	74,798		$	87,540

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