ACM Research Inc

Previous wording

ACM Research is not a mainland China operating company, and we do not conduct our operations in mainland China through the use of a variable interest entity, or VIE, or any other structure designed for the purpose of avoiding mainland China legal restrictions on direct foreign investments in mainland China-based companies. ACM Research has a direct ownership interest in ACM Shanghai as the result of its holding 82.1% of the outstanding shares of ACM Shanghai. Stockholders of ACM Research may never directly own equity interests in ACM Shanghai. We do not believe that our corporate structure or any other matters relating to our business operations require that we obtain any permissions or approvals from the China Securities Regulatory Commission, the Cyberspace Administration of China, or any other mainland China central government authority in order to continue to list shares of Class A common stock of ACM Research on the Nasdaq Global Select Market. This determination was based on the facts aforementioned and mainland China Company Law, mainland China Securities Law, cybersecurity regulations and other relevant laws, regulations and regulatory requirements in mainland China currently in effect. However, if this determination proves to be incorrect, then it could have a material adverse effect on ACM Research. See “Item IA. Risk Factors—Risks Related to International Aspects of Our Business—If any mainland China central government authority were to determine that existing mainland China laws or regulations require that ACM Shanghai obtain the authority’s permission or approval to continue the listing of ACM Research’s Class A common stock in the United States or if those existing mainland China laws and regulations, or interpretations thereof, were to change to require such permission or approval, or if we inadvertently conclude that permissions or approvals are not required, ACM Shanghai may be unable to obtain the required permission or approval or may only be able to obtain such permission or approval on terms and conditions that impose material new restrictions and limitations on operation of ACM Shanghai, either of which could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects and on the trading price of ACM Research Class A common stock, which could decline in value or become worthless” in our Annual Report.

Current wording

ACM Research is not a mainland China operating company, and we do not conduct our operations in mainland China through the use of a variable interest entity, or VIE, or any other structure designed for the purpose of avoiding mainland China legal restrictions on direct foreign investments in mainland China-based companies. ACM Research has a direct ownership interest in ACM Shanghai as the result of its holding 82.0% of the outstanding shares of ACM Shanghai. Stockholders of ACM Research may never directly own equity interests in ACM Shanghai. We do not believe that our corporate structure or any other matters relating to our business operations require that we obtain any permissions or approvals from the China Securities Regulatory Commission, the Cyberspace Administration of China, or any other mainland China central government authority in order to continue to list shares of Class A common stock of ACM Research on the Nasdaq Global Select Market. This determination was based on the facts aforementioned and mainland China Company Law, mainland China Securities Law, cybersecurity regulations and other relevant laws, regulations and regulatory requirements in mainland China currently in effect. However, if this determination proves to be incorrect, then it could have a material adverse effect on ACM Research. See “Item IA. Risk Factors—Risks Related to International Aspects of Our Business—If any mainland China central government authority were to determine that existing mainland China laws or regulations require that ACM Shanghai obtain the authority’s permission or approval to continue the listing of ACM Research’s Class A common stock in the United States or if those existing mainland China laws and regulations, or interpretations thereof, were to change to require such permission or approval, or if we inadvertently conclude that permissions or approvals are not required, ACM Shanghai may be unable to obtain the required permission or approval or may only be able to obtain such permission or approval on terms and conditions that impose material new restrictions and limitations on operation of ACM Shanghai, either of which could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects and on the trading price of ACM Research Class A common stock, which could decline in value or become worthless” in our Annual Report.

Previous wording

Since 2009 we have delivered more than 850 tools to our customers, more than 705 of which were repeat orders or acceptances upon contractual performance obligations having been met and thereby generated revenue to us. The balance of the delivered tools is subject to the customer's acceptance of the tool upon the tool's satisfaction of applicable contractual requirements or subject to the customer's subsequent discretionary commitment to purchase the tool. To date, substantially all of our sales of equipment for semiconductor-manufacturing have been to customers located in Asia, and we anticipate that a substantial majority of our revenue from these products will continue to come from customers located in this region for the foreseeable future. We have begun to add to our efforts to further address customers in North America, Western Europe and Southeast Asia, by expanding our direct sales teams and increasing our global marketing activities.

Current wording

Since 2009 we have delivered more than 925 tools to our customers, more than 765 of which were repeat orders or acceptances upon contractual performance obligations having been met and thereby generated revenue to us. The balance of the delivered tools is subject to the customer's acceptance of the tool upon the tool's satisfaction of applicable contractual requirements or subject to the customer's subsequent discretionary commitment to purchase the tool. To date, substantially all of our sales of equipment for semiconductor-manufacturing have been to customers located in Asia, and we anticipate that a substantial majority of our revenue from these products will continue to come from customers located in this region for the foreseeable future. We have begun to add to our efforts to further address customers in North America, Western Europe and Southeast Asia, by expanding our direct sales teams and increasing our global marketing activities.

Previous wording

In February 2024, ACM Research's principal operating subsidiary, ACM Shanghai (SSEC: 688082.SS), announced in a filing with the Shanghai Stock Exchange a proposal to pay a cash dividend of RMB 0.627 per share or an aggregate total of approximately RMB 273.2 million (approximately $38.5 million) to the stockholders of ACM Shanghai. The proposed dividend is subject to approval by ACM Shanghai’s stockholders at ACM Shanghai’s annual stockholder meeting expected to be held in June 2024. ACM Research owns 82.1% of the outstanding shares of ACM Shanghai. It is possible that the proposed dividend may not be approved by ACM Shanghai’s stockholders, or that ACM Shanghai may not pay the dividend, even if approved, and even if approved and paid, the net amount and the timing of any proceeds to be repatriated by ACM Research to the United States would be uncertain. If the proposed dividend is approved and paid, ACM Research estimates that it would intend to use the net proceeds, if any, for working capital and general corporate purposes.

Current wording

In June 2024, ACM Research's principal operating subsidiary, ACM Shanghai (SSEC: 688082.SS) held its Annual Stockholder Meeting in Shanghai, China and approved to pay a cash dividend for an aggregate total of approximately RMB 273.2 million (approximately $38.4 million) to the stockholders of ACM Shanghai. The dividend is expected to be paid by the end of 2024. ACM Research owns 82.0% of the outstanding shares of ACM Shanghai. It is possible that ACM Shanghai may not pay the dividend per the approved resolutions, and even if paid, the net amount and the timing of any proceeds to be repatriated by ACM Research to the United States would be uncertain. If the dividend is paid, ACM Research intends to use the net proceeds, if any, for working capital and general corporate purposes.

Previous wording

ACM Research estimates that if consummated in full, the proposed Private Offering would generate gross proceeds of up to RMB 4.5 billion ($625 million) to ACM Shanghai, whose management would have broad discretion over the use of such proceeds. It is unlikely that any of such proceeds would be distributed to ACM Research, and that its equity interest in ACM Shanghai would decline from 82.1% to approximately 74.6%. As of March 31, 2024 and the date of this report, the proposed Private Offering has not been completed.

Current wording

ACM Research estimates that if consummated in full, the proposed Private Offering would generate gross proceeds of up to RMB 4.5 billion ($625 million) to ACM Shanghai, whose management would have broad discretion over the use of such proceeds. It is unlikely that any of such proceeds would be distributed to ACM Research, and that its equity interest in

Previous wording

The governmental grants contain certain operating conditions, and we are required to go through a government due diligence process once the project is complete. The grants therefore are recorded as long-term liabilities upon receipt, although we are not required to return any funds ACM Shanghai receives. Grant amounts are recognized in our statements of comprehensive income as follows:

Current wording

Grant amounts are recognized in our statements of comprehensive income (loss) as follows:

Previous wording

•Government subsidies relating to current expenses are recorded as reductions of those expenses in the periods in which the current expenses are recorded. For the three months ended March 31, 2024 and 2023, related government subsidies recognized as reductions of relevant expenses in the condensed consolidated statements of comprehensive income were $0.4 million and $0.5 million, respectively.

Current wording

•Government subsidies are recorded as reductions of current expenses in the periods in which the qualified expenses are incurred. For the six months ended June 30, 2024 and 2023, government subsidies recognized as reductions of relevant expenses in the condensed consolidated statements of comprehensive income (loss) were $0.6 million and $0.8 million, respectively.

Previous wording

•Government subsidies related to tax refund and others are recorded as other income in the periods as incurred. For the three months ended March 31, 2024 and 2023, related government subsidies recognized as other income in the condensed consolidated statements of comprehensive income were $1.7 million and $0.1 million, respectively.

Current wording

•Other subsidies are recorded as other income in the periods as incurred. For the six months ended June 30, 2024 and 2023, related government subsidies recognized as other income in the condensed consolidated statements of comprehensive income (loss) were $1.8 million and $0.2 million, respectively.

Previous wording

In 2019 ACM Shanghai sold a total number of shares representing 8.3% of its outstanding ACM Shanghai shares, after which ACM Research held the remaining 91.7% of ACM Shanghai’s outstanding shares. In 2021 ACM Shanghai sold a total number shares representing an additional 10% of its outstanding ACM Shanghai shares in its STAR IPO, after which ACM Research held the remaining 82.5% of ACM Shanghai’s outstanding shares. However, in May 2023, ACM Research's ownership declined to 82.1% due to the exercise of 2,150,309 stock options related to ACM Shanghai shares. As a result, we reflect the portion of our net income allocable to the minority holders of ACM Shanghai shares as net income attributable to non-controlling interests.

Current wording

In 2019 ACM Shanghai sold a total number of shares representing 8.3% of its outstanding ACM Shanghai shares, after which ACM Research held the remaining 91.7% of ACM Shanghai’s outstanding shares. In 2021 ACM Shanghai sold a total number of shares representing an additional 10% of its outstanding ACM Shanghai shares in its STAR IPO, after which ACM Research held the remaining 82.5% of ACM Shanghai’s outstanding shares. However, in May 2023, ACM Research's ownership declined to 82.1% due to the exercise of 2,150,309 stock options related to ACM Shanghai shares. In June 2024, ACM Research's ownership further declined to 82.0% due to the exercise of 446,154 stock options related to ACM Shanghai shares. As a result, we reflect the portion of our net income allocable to the minority holders of ACM Shanghai shares as net income attributable to non-controlling interests.

Previous wording

The increase in revenue for three months ended March 31, 2024 as compared to the same period in 2023 reflects higher sales of single wafer cleaning, Tahoe and semi-critical cleaning equipment, and Advanced packaging (excluding ECP), services and spares, partly offset by lower ECP (front-end and packaging), furnace and other technologies. The increased demand from is due in part to a longer term commitment by our mainland China-based customers to increase production capacity to achieve a greater share of the global semiconductor market.

Current wording

The increase in revenue for three months ended June 30, 2024 as compared to the same period in 2023 reflects higher sales of single wafer cleaning, Tahoe and semi-critical cleaning equipment, and ECP (front-end and packaging), furnace and other technologies, partly offset by lower Advanced packaging (excluding ECP), services and spares. The increased demand from is due in part to a longer term commitment by our mainland China-based customers to increase production capacity to achieve a greater share of the global semiconductor market.

Previous wording

Cost of revenue and gross profit increased in the three months ended March 31, 2024 as compared to the corresponding period in 2023 due to the increased sales volume, partly offset by a decrease in gross margin. The decrease in gross margin versus the prior-year period was primarily due to revenue mix between product categories, net of a favorable impact from fluctuations in the RMB to U.S. dollar exchange rate. Gross margin may vary from period to period, primarily related to the level of utilization and the timing and mix of revenue. We expect gross margin to be between 40.0% and 45.0% for the foreseeable future, with direct manufacturing costs approximating 50.0% to 55.0% of revenue and overhead costs totaling 5.0% of revenue.

Current wording

Cost of revenue and gross profit increased in the three months ended June 30, 2024 as compared to the corresponding period in 2023 due to the increased sales volume together with a slight increase in gross margin. The increase in gross margin versus the prior-year period was primarily due to revenue mix between product categories, net of a favorable impact from fluctuations in the RMB to U.S. dollar exchange rate. Gross margin may vary from period to period, primarily related to the level of utilization and the timing and mix of revenue. We expect gross margin to be between 40.0% and 45.0% for the foreseeable future, with direct manufacturing costs approximating 50.0% to 55.0% of revenue and overhead costs totaling 5.0% of revenue.

Previous wording

Research and development expense increased in the three months ended March 31, 2024 as compared to the corresponding period in 2023, reflecting an increase of $3.8 million in stock-based compensation, $3.6 million in costs of components for tools built for product development purposes, $2.7 million in R&D-related personnel costs and $0.3 million outside service, offset by a $0.5 million decrease in other R&D-related costs.

Current wording

Research and development expense increased in the three months ended June 30, 2024 as compared to the corresponding period in 2023, reflecting an increase of $3.5 million in stock-based compensation, $2.0 million in R&D-related personnel costs, and $1.6 million in depreciation, outside services and other R&D-related costs, offset by a $1.2 million decrease in costs of components for tools built for product development purposes.

Previous wording

Research and development expense represented 15.7% and 18.9% of our revenue in the three months ended March 31, 2024 and 2023, respectively. Without reduction by grant amounts received from mainland China governmental authorities (see ‘–Mainland China Government Research and Development Funding’’), gross research and development expense totaled $24.4 million, or 16.0% of total revenue, in the three months ended March 31, 2024 as compared to $14.5 million, or 19.6% of revenue, in the corresponding period in 2023.

Current wording

Research and development expense represented 12.8% and 13.9% of our revenue in the three months ended June 30, 2024 and 2023, respectively. Without reduction by grant amounts received from mainland China governmental authorities (see ‘–Mainland China Government Research and Development Funding’’), gross research and development expense totaled $26.1 million, or 12.9% of total revenue, in the three months ended June 30, 2024 as compared to $20.3 million, or 14.1% of revenue, in the corresponding period in 2023.

Previous wording

Interest income (expense), net consists of interest earned on our cash and cash equivalents, restricted cash accounts, and short-term and long-term time deposits, offset by interest expense incurred from outstanding short-term and long-term borrowings. Interest income (expense), net decreased in the three months ended March 31, 2024 as compared to the corresponding period in 2023, due to higher interest expense related to a higher balance of total borrowings.

Current wording

Interest income (expense), net consists of interest earned on our cash and cash equivalents, restricted cash accounts, and short-term and long-term time deposits, offset by interest expense incurred from outstanding short-term and long-term borrowings. Interest income (expense), net decreased in the three months ended June 30, 2024 as compared to the corresponding period in 2023, as a result of changes in balances of cash, cash equivalents, time deposits, and debt, together with changes in interest rates earned or expensed on the respective balances.

Previous wording

Other income (expense), net primarily reflects (a) gain recognized from the impact of exchange rates on our working-capital which was $1.4 million for the three months ended March 31, 2024 compared to $1.5 million loss recognized from the impact of exchange rates on our working capital for the three months ended March 31, 2023, (b) government subsidies, as described under “—Mainland China Government Research and Development Funding” above, and other factors.

Current wording

Other income, net primarily reflects (a) gain recognized from the impact of exchange rates on our working-capital which was $1.3 million for the three months ended June 30, 2024 compared to $1.5 million loss recognized from the impact of exchange rates on our working capital for the three months ended June 30, 2023, (b) government subsidies, as described under “—Mainland China Government Research and Development Funding” above, and other factors.

Previous wording

We recorded an unrealized loss on equity investment of $2.6 million for the three months ended March 31, 2024 as compared to an unrealized loss of $0.7 million for the same period in 2023, based on a change in market value of ACM Shanghai’s short term investments (note 15).

Current wording

We recorded an unrealized gain on short term investments of $1.0 million for the three months ended June 30, 2024 as compared to an unrealized loss of $2.5 million for the same period in 2023, based on a change in market value of ACM Shanghai’s short-term investments (note 15).

Previous wording

Loss from equity investments increased by $0.5 million for the three months ended March 31, 2024 due to an decrease of net income from investments in affiliates (Note 14).

Current wording

Loss from equity investments was $0.7 million for the three months ended June 30, 2024 as compared to income from equity method investments of $3.9 million in the same period in 2023 due to a decrease of net income from investments in affiliates (note 14).

Previous wording

We recognized a tax expense of $4.4 million for the three months ended March 31, 2024 as compared to a tax expense of $2.9 million for the prior year period. The tax expense for the three months ended March 31, 2024 primarily resulted from the tax effect of a decrease in our effective income tax rate applied to an increase in operating profit for the period. The decrease in our effective income tax rate for the three months ended March 31, 2023 compared to the same period of the prior year was primarily due to an increased benefit from certain permanent deductions in a foreign jurisdiction.

Current wording

We recognized a tax expense of $9.3 million for the three months ended June 30, 2024 as compared to a tax expense of $7.6 million for the prior year period. The tax expense for the three months ended June 30, 2024 primarily resulted from the tax effect of an increase in our effective income tax rate applied to an increase in operating profit for the period. The increase in our effective income tax rate for the three months ended June 30, 2023 compared to the same period of the prior year was primarily due to an increase in capitalized R&D expenses in certain foreign jurisdictions.

Previous wording

Our effective tax rate differs from statutory rates of 21% for U.S. federal income tax purposes and 12.5% to 25% for mainland China income tax purposes due to the effects of the valuation allowance and certain permanent differences as it pertains to book-tax differences in the treatment of stock-based compensation and non-U.S. research expenses. Our four mainland China subsidiaries, ACM Shanghai, ACM Wuxi, ACM Beijing, and ACM Lingang, are liable for mainland China corporate income taxes at the rates of 15%, 25%, 25%, and 15%, respectively. Pursuant to the Corporate Income Tax Law of mainland China, our mainland China subsidiaries generally would be liable for mainland China corporate income taxes at a rate of 25%. According to Guoshuihan 2009 No. 203, an entity certified as an “advanced and new technology enterprise” is entitled to a preferential income tax rate of 15%. ACM Shanghai was certified as an “advanced and new technology enterprise” in 2012 and again in 2016, 2018, and 2021, effective until December 31, 2023, and is expected to be re-certified for future years in 2024. In 2021, ACM Shanghai was certified as an eligible integrated circuit production enterprise and is entitled to a preferential income tax rate of 12.5% from January 1, 2020 to December 31, 2022. Certain entities which meet requirements according to the Policy of the Lingang New area in China (Shanghai) Pilot Free Trade Zone are entitled to a preferential income tax rate of 15%. ACM Lingang was certified for this in 2021, and this preferential income tax rate is valid from December 31, 2020 until December 31, 2024. We file income tax returns in the United States and state and foreign jurisdictions.

Current wording

Our effective tax rate differs from statutory rates of 21% for U.S. federal income tax purposes and 12.5% to 25% for mainland China income tax purposes due to the effects of the valuation allowance and certain permanent differences as it pertains to book-tax differences in the treatment of stock-based compensation and non-U.S. research expenses. Our four mainland China subsidiaries, ACM Shanghai, ACM Wuxi, ACM Beijing, and ACM Lingang, are liable for mainland China corporate income taxes at the rates of 15%, 25%, 25%, and 15%, respectively. Pursuant to the Corporate Income Tax Law of mainland China, our mainland China subsidiaries generally would be liable for mainland China corporate income taxes at a rate of 25%. According to Guoshuihan 2009 No. 203, an entity certified as an “advanced and new technology enterprise” is entitled to a preferential income tax rate of 15%. ACM Shanghai was certified as an “advanced and new technology enterprise” in 2012 and again in 2016, 2018, and 2021, with an effective period of three years, and is expected to be re-certified for future years in 2024. In 2021, ACM Shanghai was certified as an eligible integrated circuit production enterprise and was entitled to a preferential income tax rate of 12.5% from January 1, 2020 to December 31, 2022. Certain entities which meet requirements according to the Policy of the Lingang New area in China (Shanghai) Pilot Free Trade Zone are entitled to a preferential income tax rate of 15%. ACM Lingang was certified for this in 2021, and this preferential income tax rate is valid from January 1, 2020 until December 31, 2024. We file income tax returns in the United States and state and foreign jurisdictions.

Previous wording

ACM Research owns 82.1% of ACM Shanghai’s (note 1) outstanding shares which is reflected in our condensed consolidated financial statements. We reflect the portion of net income allocable to the minority holders of ACM Shanghai shares as net income attributable to non-controlling interests.

Current wording

ACM Research owns 82.0% of ACM Shanghai’s (note 1) outstanding shares which is reflected in our condensed consolidated financial statements. We reflect the portion of net income allocable to the minority holders of ACM Shanghai shares as net income attributable to non-controlling interests.

Previous wording

We recorded a loss of foreign currency translation adjustmentof ($6.8 million) for the three months ended March 31, 2024, as compared to a gain of $9.4 million for the same period in 2023, primarily based on the net effect of RMB to dollar exchange rate fluctuations for the period on the converted value of ACM Shanghai’s RMB-denominated balances to U.S. dollar equivalents.

Current wording

We recorded a gain of foreign currency translation adjustmentof $0.1 million for the three months ended June 30, 2024, as compared to a loss of $35.3 million for the same period in 2023, primarily based on the net effect of RMB to dollar exchange rate fluctuations for the period on the converted value of ACM Shanghai’s RMB-denominated balances to U.S. dollar equivalents.

Previous wording

Comprehensive income attributable to non-controlling interestsfor the three months ended March 31, 2024 is consistent with the three months ended March 31, 2023, reflecting a change in net income attributable to the non-controlling interests for the period together with the impact of foreign exchange rate fluctuations on the cumulative balance.

Current wording

Comprehensive income attributable to non-controlling interestsfor the three months ended June 30, 2024 increased by $6.6 million as compared to the same period in 2023, reflecting a change in net income attributable to the non-controlling interests for the period together with the impact of foreign exchange rate fluctuations on the cumulative balance.

Previous wording

Sales and marketing expense increased in the three months ended March 31, 2024 as compared to the corresponding period in 2023, reflecting an increase of $2.9 million due to increased costs for personnel, commissions, travel & entertainment and professional services, $2.6 million in stock-based compensation, $0.3 million in office and outside service, offset by a decrease of $1.0 million from promotional tools.

Current wording

Sales and marketing expense increased in the six months ended June 30, 2024 as compared to the corresponding period in 2023, reflecting an increase of $5.7 million due to increased costs for personnel, commissions, travel & entertainment and professional services, $5.2 million in stock-based compensation, $0.6 million in office and outside service, offset by a decrease of $1.0 million from promotional tools.

Previous wording

General and administrative expense increased in the three months ended March 31, 2024 as compared to the corresponding period in 2023, primarily reflecting a $5.4 million increase in stock based compensation, a $3.0 million in personnel and other costs related to general and administrative costs, and a $0.9 million increase in allowance for credit losses, offset by $1.2 million decrease in professional services expenses.

Current wording

General and administrative expense increased in the six months ended June 30, 2024 as compared to the corresponding period in 2023, primarily reflecting a $11.0 million increase in stock based compensation, a $1.5 million increase in allowance for credit losses, and $5.1 million in personnel and other costs related to general and administrative costs, offset by $0.2 million decrease in professional services expenses.

Previous wording

We recorded a realized gain from sale of equity investment of $0.3 million for the three months ended March 31, 2024 as compared to $4.0 million in the prior-year period due to a sale of short-term investments (Note 15).

Current wording

We recorded a realized gain from sale of equity investment of $0.3 million for the six months ended June 30, 2024 as compared to $7.9 million in the prior-year period due to a sale of short-term investments (note 15).

Previous wording

During the first three months of 2024, we funded our technology development and operations principally through our beginning global cash balances, including the cash balances at ACM Shanghai, borrowings by ACM Shanghai from local financial institutions, and our loan from China CITIC Bank.

Current wording

During the first six months of 2024, we funded our technology development and operations principally through our beginning global cash balances, including the cash balances at ACM Shanghai, borrowings by ACM Shanghai from local financial institutions, and our loan from China CITIC Bank, and cash flow from operations.

Previous wording

Cash and cash equivalents, restricted cash, short-term time deposits and long-term time deposits were $288.3 million at March 31, 2024, compared to $304.5 million at December 31, 2023. The ($16.2 million) decrease was primarily driven by ($9.6 million) of cash used in operations, ($32.9 million), excluding net cash increase for time deposits, used in investing activities, $26.8 million net cash provided by financing activities, and a ($0.5 million) decline from the effect ofexchange rate on cash, cash equivalents and restricted cash.

Current wording

Cash and cash equivalents, restricted cash, short-term time deposits and long-term time deposits were $366.8 million at June 30, 2024, compared to $304.5 million at December 31, 2023. The $62.3 million increase was primarily driven by $51.9 million of cash provided by operations, ($48.4 million), excluding the change in net cash related to time deposits, used in investing activities, $58.3 million net cash provided by financing activities, and a $0.5 million increase from the effect ofexchange rate on cash, cash equivalents, restricted cash and non-cash items.

Previous wording

ACM Shanghai has historically participated in certain mainland China government-sponsored grant and subsidy programs, as described under “—Mainland China Government Research and Development Funding” and “—Contractual Obligations” and we expect that ACM Shanghai will continue to take advantage of these programs when they are available and fit with our business strategy. ACM Shanghai generally applies for these grants and subsidies through the applicable mainland China government agency’s defined processes. Periodically, the public relations department researches the availability of these grants and subsidies through mainland China government agencies with whom ACM Shanghai files business surveys and taxes. Management of ACM Shanghai then assesses which grants and subsidies for which ACM Shanghai may be eligible and submits the relevant application. The decision to award the grant to ACM Shanghai is made by the relevant mainland China government agencies based on suitability and the merits of the application. Neither ACM Research, nor ACM Shanghai or any of our other subsidiaries, has any direct relationship with any mainland China government agency, and our anticipated cash needs for the next twelve months neither anticipate, nor require, receipt of any mainland China government grants or subsidies.

Current wording

ACM Shanghai has historically participated in certain mainland China government-sponsored grant and subsidy programs, as described under “—Mainland China Government Research and Development Funding” and “—Contractual Obligations” and we expect that ACM Shanghai will continue to take advantage of these programs when they are available and fit with our business strategy. ACM Shanghai generally applies for these grants and subsidies through the applicable mainland China government agency’s defined processes. Periodically, the public relations department researches the availability of these grants and subsidies through mainland China government agencies with whom ACM Shanghai files business surveys and taxes. Management of ACM Shanghai then assesses which grants and subsidies for which ACM Shanghai may be eligible and submits the relevant application. The decision to award the grant to ACM Shanghai is made by the relevant mainland China government agencies based on suitability and the merits of the application. Neither ACM

Previous wording

For the three months ended March 31, 2024 and 2023, with the exception of sales and services-related transfer-pricing payments in the ordinary course of business, no transfers, distributions have been made between ACM Research, and its subsidiaries, including ACM Shanghai, or to holders of ACM Research Class A common stock.

Current wording

For the six months ended June 30, 2024 and 2023, with the exception of sales and services-related transfer-pricing payments in the ordinary course of business, no transfers, distributions have been made between ACM Research, and its subsidiaries, including ACM Shanghai, or to holders of ACM Research Class A common stock.

Previous wording

Cash Flow Used in Operating Activities. Net cash used in operating activities of ($9.6 million) during the three months ended March 31, 2024 consisted of:

Current wording

Cash Flow Provided by (used in) Operating Activities. Net cash provided by operating activities of $51.9 million during the six months ended June 30, 2024 consisted of:

Previous wording

Significant net changes in operating asset and liability accounts primarily include the following uses of cash: an increase of inventories, net ($38.6 million) (Note 5), an increase of accounts receivable of ($15.3 million) (Note 4), and an increase in other assets ($10.6 million) and the following sources of cash: a $8.6 million increase on other liabilities and a $2.2 million increase in customer advances.

Current wording

Significant net changes in operating asset and liability accounts primarily include the following uses of cash: an increase of inventories, net ($64.9 million) (note 5), an increase of accounts receivable of ($14.8 million) (note 4), and an increase in other receivable ($11.7 million) and the following sources of cash: a $26.3 million increase in customer advances and a $6.8 million increase in other payable and accrued expense.

Previous wording

Cash Flow Used in Investing Activities. Net cash used in investing activities, excluding net cash increase for time deposits, for the three months ended March 31, 2024 was ($32.9 million), primarily consisting of ($26.1 million) for purchase of property and intangible assets, ($6.0 million) for purchase of long-term investments, and ($1.4 million) for purchase of short-term investment (note 15), partly offset by $0.6 million net dividends received from long term investments (note 14).

Current wording

Cash Flow Used in Investing Activities. Net cash used in investing activities, excluding the change in net cash related to time deposits, for the six months ended June 30, 2024 was ($48.4 million), primarily consisting of ($39.7 million) for purchase of property and intangible assets, ($7.4 million) for purchase of long-term investments, and ($1.4 million) for purchase of short-term investment (note 15).

Previous wording

Cash Flow Provided by Financing Activities. Net cash provided by financing activities for the three months ended March 31, 2024 was $26.8 million, primarily consisting of $23.5 million net proceeds from short-term borrowing, and $4.8 million proceeds from exercise of stock options, partly offset by ($1.5 million) repayment of short-term and long-term borrowings.

Current wording

Cash Flow Provided by Financing Activities. Net cash provided by financing activities for the six months ended June 30, 2024 was $58.3 million, primarily consisting of $32.3 million proceeds from long-term borrowing (note 12), $23.9 million proceeds from short-term borrowing, and $6.4 million proceeds from exercise of stock options, partly offset by ($4.4 million) repayment of short-term and long-term borrowings.

Previous wording

We and ACM Shanghai, together with the subsidiaries of ACM Shanghai, have short-term and long-term borrowings with six banks, as follows:

Current wording

We and ACM Shanghai, together with the subsidiaries of ACM Shanghai, have short-term and long-term borrowings withthe following banks:

Previous wording

Effect of exchange rate changes on cash, cash equivalents and restricted cash. The effect of exchange rate cash, and cash equivalents was $0.6 million during the first three months ended March 31, 2024. The impact of fluctuations of the RMB to U.S. dollar currency exchange rate on a significant balance of these items held in RMB-denominated accounts (Note 2) contributed to the change.

Current wording

Effect of exchange rate changes on cash, cash equivalents and restricted cash. The effect of exchange rate cash, and cash equivalents was ($0.5) million during the first six months ended June 30, 2024. The impact of fluctuations of the RMB to U.S. dollar currency exchange rate on a significant balance of these items held in RMB-denominated accounts (note 2) contributed to the change.

Previous wording

•The Construction Completion Milestone was required to be met by January 9, 2024 but was not achieved. However, ACM Lingang believes it will receive the refund without penalty based on its explanation to the respective regulatory authorities of logistic-related delays, and expectations that it will meet the milestone before July 9, 2024. We cannot guarantee that ACM Lingang will achieve the missed milestone in 2024, or even if it does achieve the milestone in 2024, that it will be refunded some or all of the 20% portion of the performance deposit of RMB 2.5 million ($0.4 million).

Current wording

•The Construction Completion Milestone was required to be met by January 9, 2024 but was not achieved. However, ACM Lingang believes it will receive the refund without penalty based on its explanation to the respective regulatory authorities of logistics-related delays and expectations that it will meet the milestone in 2024. We cannot guarantee that ACM Lingang will achieve the missed milestone in 2024, or even if it does achieve the milestone in 2024, that it will be refunded some or all of the 20% portion of the performance deposit of RMB 2.5 million ($0.4 million).

Previous wording

(b)within seven years after the Delivery Date, or prior to July 9, 2027, it does not (i) generate a minimum specified amount of annual sales of products manufactured on the granted land or (ii) pay at least RMB 157.6 million ($22.2 million) in annual total taxes (including value-added taxes, corporate income tax, personal income taxes, urban maintenance and construction taxes, education surcharges, stamp taxes, and vehicle and shipping taxes) as a result of operations in connection with the granted land.

Current wording

In addition to the milestones, covenants in the Grant Agreement require that, among other things, ACM Lingang will be required to pay liquidated damages in the event that within seven years after the Delivery Date, or prior to July 9, 2027, it does not (i) generate a minimum specified amount of annual sales of products manufactured on the granted land or (ii) pay at least RMB 157.6 million ($22.2 million) in annual total taxes (including value-added taxes, corporate income tax, personal income taxes, urban maintenance and construction taxes, education surcharges, stamp taxes, and vehicle and shipping taxes) as a result of operations in connection with the granted land.

Previous wording

If the Grant Agreement is terminated because of breach of any terms above, the Grantor shall take back the buildings, fixtures and auxiliary facilities on the land area and provide ACM Lingang with corresponding compensation according to the residual value of the buildings, fixtures and auxiliary facilities when they are taken back. The total cumulative investment of land, buildings and construction in progress related to ACM Lingang amounted to $132.0 million and $116.9 million at March 31, 2024 and December 31, 2023, respectively.

Current wording

If the Grant Agreement is terminated because of breach of any terms above, the Grantor shall take back the buildings, fixtures and auxiliary facilities on the land area and provide ACM Lingang with corresponding compensation according to the residual value of the buildings, fixtures and auxiliary facilities when they are taken back. The total cumulative investment of land, buildings and construction in progress related to ACM Lingang amounted to $141.8 million and $116.9 million at June 30, 2024 and December 31, 2023, respectively.

Previous wording

•We define “adjusted EBITDA” as net income excluding interest expense (net), income tax benefit (expense), depreciation and amortization, unrealized (gain) loss on short-term investments, and stock-based compensation. We define adjusted EBITDA to also exclude restructuring costs, although we have not incurred any such costs to date.

Current wording

•We define “adjusted EBITDA” as net income excluding interest expense (net), income tax benefit (expense), depreciation and amortization, unrealized (gain) loss on short-term investments, and stock-based compensation.

Previous wording

Shipments in thethree months ended March 31, 2024 totaled $245.6 million, as compared to $89.2 million for the same periods in 2023. Repeat tool shipments in the three months ended March 31, 2024 totaled $118.6 million, as compared to $38.9 million for same periods in 2023. First tool shipments in the three months ended March 31, 2024 totaled $127.0 million, as compared to $50.3 million for the same periods in 2023.

Current wording

Shipments in thesix months ended June 30, 2024 totaled $448.1 million, as compared to $242.6 million for the same periods in 2023. Repeat tool shipments in the six months ended June 30, 2024 totaled $230.4 million, as compared to $100.3 million for same periods in 2023. First tool shipments in the six months ended June 30, 2024 totaled $217.7 million, as compared to $142.3 million for the same periods in 2023.

Previous wording

The increase in adjusted EBITDA for the three months ended March 31, 2024 as compared to the same period in 2023 reflects a $13.1 million increase in net income, a $12.5 million increase in stock based compensation, a $0.8 million increase in depreciation and amortization, $1.5 million impact from a change in income tax expense, $1.9 million increase in unrealized loss on short-term investment, and other items.

Current wording

The increase in adjusted EBITDA for the six months ended June 30, 2024 as compared to the same period in 2023 reflects a $10.9 million increase in net income, a $24.8 million increase in stock based compensation, a $0.7 million increase in depreciation and amortization, a $3.2 million impact from a change in income tax expense, offset by a $1.5 million decrease in unrealized loss on short-term investment, and other items.