ACM Research Inc

NOTE 1 –DESCRIPTION OF BUSINESS

ACM Research, Inc. (“ACM” or “ACM Research”) and its subsidiaries (collectively with ACM, the “Company”) develop, manufacture and sell capital equipment to the global semiconductor industry.

The Company has direct or indirect interests in the following subsidiaries:

(1) ACM Research (Lingang) Inc. is the English name referred to by its Chinese language name Shengwei Research (Shanghai), Inc., or ACM Shengwei in prior filings. ACM Research (Lingang), Inc. and Shengwei Research (Shanghai), Inc. refer to the same entity.

NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The Company’s condensed consolidated financial statements include the accounts of ACM and its subsidiaries. ACM’s subsidiaries are those entities in which ACM, directly or indirectly, controls a majority of the voting power. All significant intercompany transactions and balances have been eliminated upon consolidation.

The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting on Form 10-Q. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. The accompanying condensed consolidated financial statements should be read in conjunction with the historical consolidated financial statements of the Company for the year ended December 31, 2023 included in ACM’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

The accompanying condensed consolidated financial statements are unaudited. In the opinion of management, these unaudited condensed consolidated financial statements of the Company reflect all adjustments that are necessary for a fair presentation of the Company’s financial position and results of operations. Such adjustments are of a normal recurring nature, unless otherwise noted. The balance sheet as of September 30, 2024 and the results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for any future period.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet date and the reported revenues and expenses during the reported period in the condensed consolidated financial statements and accompanying notes. The Company’s significant accounting estimates and assumptions include, but are not limited to, those used for revenue recognition and deferred revenue, the valuation and recognition of fair value of certain short-term investments and long-term investments, stock-based compensation arrangements, realization of deferred tax assets, assessment for impairment of long-lived assets and long-term investments, allowance for credit losses, inventory valuation, useful lives of property, plant and equipment and useful lives of intangible assets.

Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates and assumptions.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand, bank deposits that are unrestricted as to withdrawal and use, and highly liquid investments with an original maturity date of three months or less at the date of purchase. At times, cash deposits may exceed government-insured limits.

The following table presents cash and cash equivalents, according to jurisdiction as of September 30, 2024 and December 31, 2023:

The amounts in mainland China do not include short-term and long-term time deposits which in aggregate totaled $33,821 and $121,342 at September 30, 2024 and December 31, 2023, respectively.

Cash held in the U.S. exceeds the Federal Deposit Insurance Corporation insurance limits and is subject to risk of loss. No losses have been experienced to date.

Cash amounts held in mainland China are subject to a series of risk control regulatory standards from mainland China bank regulatory authorities. ACM’s subsidiaries in mainland China are required to obtain approval from the State Administration of Foreign Exchange (“SAFE”) to transfer funds into or out of mainland China. SAFE requires a valid agreement to approve the transfers, which are processed through a bank. Other than these mainland China foreign exchange restrictions, ACM’s subsidiaries in mainland China are not subject to any restrictions and limitations on its ability to transfer funds to ACM or among our other subsidiaries. However, cash held in mainland China does exceed applicable insurance limits and is subject to risk of loss, although no such losses have been experienced to date.

ACM California periodically procures goods and services on behalf of ACM Shanghai and ACM Lingang. For these transactions, ACM Shanghai and ACM Lingang make cash payments to ACM California in accordance with applicable transfer pricing arrangements. For the three months ended September 30, 2024 and 2023, cash payments from ACM Shanghai and ACM Lingang to ACM California for the procurement of goods and services was $2,335 and $10,724, respectively. For the nine months ended September 30, 2024 and 2023, cash payments from ACM Shanghai and ACM Lingang to ACM California for the procurement of goods and services was $16,734 and $36,155, respectively. ACM California periodically borrows funds for working capital advances from its direct parent, CleanChip. ACM California repays or renews these intercompany loans in accordance with their terms.

For sales through CleanChip and ACM Research, a certain amount of sales or advanced payments from customers is repatriated back to ACM Shanghai in accordance with applicable transfer pricing arrangements in the ordinary course of business. ACM Research provides services to certain customers located in the U.S., Europe and other regions outside of mainland China to support the evaluation of first tools and provide support for tools under warranty on behalf of ACM Shanghai. For these transactions, ACM Shanghai makes cash payments to ACM Research in accordance with applicable transfer pricing arrangements.

Amounts held in Korea exceed the Korea Deposit Insurance Corporation insurance limits and is subject to risk of loss. No losses have been experienced to date. There is no additional restriction for the transfer of cash from bank accounts in the U.S., Korea, Singapore and Hong Kong.

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

Time Deposits

Time deposits are deposited with banks in mainland China with fixed terms and interest rates which cannot be withdrawn before maturity, and are presented as short-term deposits and long-term deposits in the condensed consolidated financial statements based on their expected time of collection. They are also subject to the risk control regulatory standards described above upon maturity.

At September 30, 2024 and December 31, 2023, time deposits consisted of the following:

For the three months ended September 30, 2024 and 2023, interest income related to time depositswas$486 and $867, respectively. For the nine months ended September 30, 2024 and 2023, interest income related to time deposits was $1,732 and $2,779, respectively.

Financial Instruments

The Company periodically invests in equity securities, and maintains an investment portfolio of various holdings, types, and maturities. For equity investments that do not have a readily determinable fair value, the Company classified them as long-term investments, and records them using either: 1) the measurement alternative which measures the equity investments at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes; or 2) the equity method whereby the Company recognizes its proportional share of the income or loss from the equity method investment. The equity method is utilized when the equity investments are common stock or in substance common stock, and the Company does not have the ability to control the investee but is deemed to have the ability to exercise significant influence over the investee’s operating or financial policies. For equity investments that have a readily determinable fair value, the Company classified them as short-term investments, and records them at fair market value on a recurring basis based upon quoted market prices. Realized and unrealized gains and losses resulting from application of the measurement alternative, the impact of the application of the equity method to the Company’s equity investments, and recognition of changes in fair market value, as applicable, are recognized as non-operating income (expenses), net in the condensed consolidated statements of comprehensive income.

The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact, and it considers assumptions that market participants would use when pricing the asset or liability.

A fair value hierarchy has been established that prioritizes the inputs to valuation techniques used to measure fair value. The level of an asset or liability in the hierarchy is based on the lowest level of input that is significant to the fair value measurement. Assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

Level 1: Valuations based on quoted prices in active markets for identical assets or liabilities with sufficient volume and frequency of transactions.

Level 2: Valuations based on observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active for identical assets or liabilities, or model-derived valuations techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Valuations based on unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities and based on non-binding, broker-provided price quotes and may not have been corroborated by observable market data.

The Company’s primary financial instruments include its cash, cash equivalents, short term and long term deposits, restricted cash, short-term and long-term investments, other receivables, accounts receivable, accounts payable, and short-term and long-term borrowings. The estimated fair value of cash and cash equivalents, short-term time deposits, accounts receivable, other receivables, accounts payable, and short-term borrowings approximates their carrying value due to the short period of time to their maturities.

All transfers between fair value hierarchy levels are recognized by the Company at the end of each reporting period. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value

measurement in its entirety, requires judgment and considers factors specific to the investment. The inputs or methodology

used for valuing financial instruments are not necessarily an indication of the risks associated with investment in those instruments.

Assets and liabilities measured at fair value on a recurring basis:

Assets and liabilities measured at fair value on a non-recurring basis:

The Company did not have any assets and liabilities measured at fair value on a non-recurring basis as of September 30, 2024, and the Company did not recognize any unrealized gains (upward adjustments) or unrealized losses (downward adjustments) resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer for its long-term investments accounted for using measurement alternatives during the three and nine months ended September 30, 2024 and 2023.

Refer to Note 12 for fair value information related to the Company’s outstanding long-term borrowings as of September 30, 2024 and December 31, 2023.

Basic and Diluted Net Income per Share of Common Stock

Basic and diluted net income per share of common stock are calculated as follows:

Basic and diluted net income per share of common stock is presented using thetwo-class method, which allocates undistributed earnings to common stock and any participating securities according to dividend rights and participation rights on a proportionate basis. Under thetwo-class method, basic net income per share of common stock is computed by dividing the sum of distributed and undistributed earnings attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. ACM Research did not have any participating securities outstanding during the three and nine months ended September 30, 2024 and 2023.

ACM Research has been authorized to issue Class A and Class B common stock since redomesticating in Delaware in November 2016. Thetwo classes of common stock are substantially identical in all material respects, except for voting rights. Since ACM Research did not declare cash dividends during the nine months ended September 30, 2024 or 2023, the net income per share of common stock attributable to each class is the same under the “two-class” method. As such, thetwo classes of common stock have been presented on a combined basis in the condensed consolidated statements of comprehensive income and in the above computation of net income per share of common stock.

Diluted net income per share of common stock reflects the potential dilution from securities, such as stock options that could share in ACM Research’s earnings. Certain potential dilutive securities were excluded from the net income per share calculation because the impact would be anti-dilutive. The number of potentially dilutive shares that were not included in the calculation of diluted net income per share in the periods presented where their inclusion would be anti-dilutive were 1,397,590 and 887,985 stock options for the three and nine months ended September 30, 2024, respectively, and 1,757,605 and 4,099,228 stock options for the three and nine months ended September 30, 2023, respectively.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to credit risk consist principally of cash and cash equivalents, time deposits, and accounts receivable. The Company deposits and invests its cash and cash equivalents and time deposits with financial institutions that management believes are creditworthy.

The Company is potentially subject to concentrations of credit risks in its revenue and accounts receivable.

•Revenue concentration. For the three months ended September 30, 2024 and 2023, four customers accounted for 62.3% and two customers accounted for 53.2% of revenue, respectively. For the nine months ended September 30, 2024 and 2023, four customers accounted for 56.3% and three customer accounted for 48.8% of revenue, respectively.

•Accounts receivable concentration. As of September 30, 2024 and December 31, 2023, three customers accounted for 51.6% and four customers accounted for 59.1%, respectively, of the Company’s accounts receivables. The Company believes that the receivable balances from these largest customers do not represent a significant credit risk based on past collection experience.

Recently issued accounting pronouncements not yet adopted

In November 2023, the FASB issued ASU No. 2023-07, Improvements to Reportable Segment Disclosures. This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. The Company is currently evaluating the provisions of this ASU and expect to adopt it for the year ending December 31, 2024.

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Retrospective application is permitted. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is currently evaluating the provisions of this ASU.

NOTE 3 –REVENUE FROM CONTRACTS WITH CUSTOMERS

The Company assesses revenues based upon the nature or type of goods or services it provides and the geographic location of the customer facility. The following tables present disaggregated revenue information:

Below are the accounts receivables and contract liabilities balances as of:

During the nine months ended September 30, 2024, advances from customers increased by $34.3 million, due to an increase of payments made by customers for first tools under evaluation, offset by adecrease in customer pre-payments for tools prior to delivery.

Below are revenues recognized from amounts included in contract liabilities at the beginning of the year.

NOTE 4 –ACCOUNTS RECEIVABLE

At September 30, 2024 and December 31, 2023, accounts receivable consisted of the following:

The $87.4 million increase in accounts receivable, net for the first nine months of 2024 corresponds to a $171.2 million increase in revenue compared to the nine months ended September 30, 2023.

The movement of the allowance for credit losses for the nine months ended September 30, 2024 is as follows:

Allowance for credit losses, before tax, as of December 31, 2023

Provision for credit losses, net

Allowance for credit losses, before tax, as of September 30, 2024

September 30,2024

$(4,830)

(5,030)

$(9,860)

The Company assesses collectability by reviewing accounts receivable on a general basis where similar characteristics exist and on an individual basis when the Company identifies specific customers with known disputes or collectability issues. In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status, the age of the accounts receivable balances, credit quality of the Company’s customers based on ongoing credit evaluations, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from customers.

NOTE 5 –INVENTORIES

At September 30, 2024 and December 31, 2023, inventories consisted of the following:

At September 30, 2024 and December 31, 2023, the value of finished goods inventory of which were first-tools at customer physical locations for which customers were contractually obligated to take ownership upon acceptance totaled $196,987 and $123,390, respectively.

The $15,264 increase in raw materials at September 30, 2024 compared to December 31, 2023 was due to additional purchase of supplies to support a higher level of expected total shipments for the next several quarters, and to reduce the risk of supply chain delays to meet anticipated customer demand for the Company’s products.

The $70,030 increase in finished goods inventory at September 30, 2024 compared to December 31, 2023 primarily reflects a higher value of first-tools under evaluation by existing or prospective customers, partly offset by a reduction of finished goods inventory at the Company's facilities.

The Company’s products each require a certain degree of customization, and the substantial majority of the work-in-process inventory and finished goods inventory is built to meet a specific customer order for a repeat shipment or a first tool shipment. At the end of each period, the Company assesses the status of each item in work-in-process and finished goods. The Company recognizes a loss or impairment if in management’s judgement the inventory cannot be sold or used for production, if it has been damaged or should be considered as obsolete, or if the net realizable value is lower than the cost.

At the end of each period, the Company also assesses the status of its raw materials. The Company recognizes a loss or impairment for any raw materials aged more than three years. Thethree-year aging is based on the Company’s assessment of technology change, its requirement to maintain stock for warranty coverage, and other factors.

During the three months ended September 30, 2024 and 2023, provision for inventory of $849 and $1,807 were recognized in cost of revenue, respectively. During the nine months ended September 30, 2024 and 2023, provision for inventory of $3,858 and $5,031 were recognized in cost of revenue, respectively. Write-downs were due to an internal assessment that certain inventory could not be sold or used for production due to damage or obsolescence.

NOTE 6 –PROPERTY, PLANT AND EQUIPMENT, NET

At September 30, 2024 and December 31, 2023, property, plant and equipment consisted of the following:

Depreciation expense for the three months ended September 30, 2024 and 2023 was $2,389 and $2,023, respectively, and $7,073 and $5,077 for the nine months ended September 30, 2024 and 2023, respectively. Buildings and plants represent Lingang housing property owned by ACM Lingang at a value of RMB 249,746 ($35,639), and facilities for the new headquarters of ACM Shanghai ("Zhangjiang New Building") at a value of RMB 377,779 ($53,909), as of September 30, 2024. The Lingang housing property is pledged as security for loans from China Merchants Bank (Note 12).

Construction in progress primarily reflects costs incurred related to the construction of ACM Shanghai’s Lingang development and production center, which is scheduled to begin initial operations in the fourth quarter of 2024.

NOTE 7 –LAND USE RIGHT, NET

A summary of land use right is as follows:

The amortization for the three months ended September 30, 2024 and 2023 was$58 and $44, respectively, and the nine months ended September 30, 2024 and 2023 was $143 and $136.

The annual amortization of land use right is as follows:

NOTE 8 –OTHER LONG-TERM ASSETS

At September 30, 2024 and December 31, 2023, other long-term assets consisted of the following:

NOTE 9 –SHORT-TERM BORROWINGS

At September 30, 2024 and December 31, 2023, short-term borrowings consisted of the following:

For the three months ended September 30, 2024 and 2023, interest expense related to short-term borrowings amounted to$373 and $364, respectively, and for the nine months ended September 30, 2024 and 2023, interest expense related to short-term borrowings amounted to $1,011 and $1,338, respectively.

NOTE 10 –OTHER PAYABLES AND ACCRUED EXPENSES

At September 30, 2024 and December 31, 2023, other payables and accrued expenses consisted of the following:

Warranties

The Company provides standard warranties on its products. The liability amount is based on actual historical warranty spending activity by type of product, customer, and geographic region, modified for any known differences such as the impact of product reliability improvements.

Changes in the Company’s accrued warranty were as follows:

NOTE 11 –LEASES

The Company leases space under non-cancelable operating leases for several offices and manufacturing locations. These leases do not have significant rent escalation holidays, concessions, leasehold improvement incentives, or other build-out clauses. Further, the leases do not contain contingent rent provisions.

Most leases includeone or more options to renew. The Company regularly evaluates the renewal options, and when they are reasonably certain of exercise, the Company includes the renewal period in its lease term.

The components of lease expense were as follows:

Supplemental cash flow information related to operating leases was as follows:

As of September 30, 2024, maturities of outstanding lease liabilities for all operating leases were as follows:

The weighted average remaining lease terms and discount rates for all operating leases were as follows:

NOTE 12 –LONG-TERM BORROWINGS

At September 30, 2024 and December 31, 2023, long-term borrowings consisted of the following:

The loan from China Merchants Bank is for the purpose of purchasing housing property in Lingang, Shanghai. The loan is repayable in 120 total installments with the last installment due in November 2030, with an annual interest rate of 3.95%. The loan is pledged by the property of ACM Lingang and guaranteed by ACM Shanghai.

The loan from Agricultural Bank of China is for the purpose of purchasing housing property in Lingang, Shanghai. The loan is repayable in 120 total installments with the last installment due in July 2034, with an annual interest rate of 2.78%. The loan is pledged by the property of ACM Lingang and guaranteed by ACM Shanghai.

The second from Agricultural Bank of China is for the purpose of purchasing housing property in Lingang, Shanghai. The loan is repayable in 120 total installments with the last installment due in September 2034, with an annual interest rate of 2.78%. The loan is pledged by the property of ACM Lingang and guaranteed by ACM Shanghai.

Two loans from Bank of China are for the purpose of funding ACM Shanghai project expenditures. The first loan bore interest at an annual rate of 2.60% and was repayable in 6 installments with the last installment paid in September 2024. The second loan from Bank of China is for the purpose of funding ACM Shanghai's general corporate expenses and working capital. The loan bears interest at an annual rate of 2.62% and is payable in 6 installments, with the last installment due in June 2027.

The loan from Bank of Shanghai is for the purpose of funding ACM Shanghai project expenditures. The loan bears interest at an annual rate of 2.85%, and will be fully repaid in April 2025.

The first loan from China CITIC Bank is for the purpose of funding ACM Shanghai project expenditures. The loan bears interest at an annual rate of 3.1% and is repayable in 4 installments, with the last installment due in August 2025.

The second loan from China CITIC bank is for the purpose of funding ACM's general corporate expenses and working

capital. The loan bears interest at an annual rate of 4.50% payable quarterly, and the principal amount is repayable in 4

installments, with the last installment due in November 2025.

The loan from the China Everbright Bank is for the purpose of funding ACM's general corporate expenses and working

capital. The loan bears interest at an annual floating rate of 2.60% and is payable in 6 installments, with the last installment due in June 2027.

As of September 30, 2024 and December 31, 2023, the total carrying amount of long-term loans was $136,739 and$60,735, compared with an estimated fair value of $129,024 and $56,462, respectively. The fair value of the long-term loans is estimated by discounting cash flows using interest rates currently available for debts with similar terms and maturities (Level 2 fair value measurement).

Scheduled principal payments for the outstanding long-term loan, including the current portion, as of September 30, 2024 are as follows:

For the three months ended September 30, 2024 and 2023, interest expense related to long-term borrowings was$835 and $276, respectively.

For the nine months ended September 30, 2024 and 2023, interest expense related to long-term borrowings was $1,912 and $646, respectively.

NOTE 13 –OTHER LONG-TERM LIABILITIES

Other long-term liabilities represent government subsidies received from mainland China governmental authorities for development and commercialization of certain technology but not yet recognized. At September 30, 2024 and December 31, 2023, other long-term liabilities consisted of the following unearned government subsidies:

NOTE 14 –LONG-TERM INVESTMENTS

On January 12, 2024, ACM Shanghai entered into an investment agreement with Company C to invest RMB 12,500 ($1,760), which represented 5.0% of the Company C's total equity interest. Since there is no readily determinable fair value, the Company measures the investments at measurement alternative.

On January 19, 2024, ACM Shanghai entered into a limited partnership agreement with Company D to invest RMB 30,000 ($4,230), which represented 16.7% of the partnership's total equity interest. The investment in the limited partnership with Company D is accounted for under the equity method in accordance with ASC323-30-S99-1.

On January 22, 2024, ACM Shanghai entered into an investment agreement with Company E to invest RMB 10,000 ($1,403) which represented 0.6% of the Company E's total equity interest. The transaction was closed in April 2024. Since there is no readily determinable fair value, the Company measures the investments at measurement alternative.

For the three months ended September 30, 2024 and 2023, the Company’s share of equity investees’ net income (loss) was $1,316 and $(160), respectively, and $101 and $3,728 for the nine months ended September 30, 2024 and 2023, respectively, which amounts were included in income (loss) from equity method investments in the accompanying condensed consolidated statements of comprehensive income. For the three months ended September 30, 2024 and 2023, the Company received $131 and $52 dividends from equity investee. For the nine months ended September 30, 2024 and 2023, the Company received $731 and $5,147 dividends from equity investee.

NOTE 15 –SHORT-TERM INVESTMENTS

Pursuant to an Agreement entered into on September 19, 2022 (the ‘‘Agreement’’), ACM Shanghai became a limited partner of the Nuode Asset Fund Pujiang No. 783 Single Asset Management Plan (‘‘Nuode Asset Fund’’), a Chinese limited partnership formed by Nuode Asset Management Co., Ltd, a financial services firm based in Shanghai, China. The limited partners of the Nuode Asset Fund contributed a total RMB 160 million ($22,160) to the fund, of which ACM Shanghai contributed RMB 30 million ($4,196), or 18.75% of the contribution on September 27, 2022. In December 2022, the Nuode Asset Fund purchased shares in the secondary stock offering of a publicly traded mainland China-stock listing, and was apportioned to the limited partners in proportion to their respective capital contributions. The investments were fully-disposed by Nuode Asset Fund during the three months ended June 30, 2024. The Company received net proceeds of RMB 22,478 ($3,167) during the three months ended September 30, 2024.

Pursuant to a Share Purchase Agreement dated June 2023, ACM Shanghai acquired shares of Huahong Semiconductor Limited (“Huahong”) in July 2023 with amount of RMB 100 million ($13,930). The shares held by ACM Shanghai are restricted for sale for a minimum period of twelve months. Huahong completed its STAR IPO in August 2023.

Pursuant to a Share Purchase Agreement dated August 2023, ACM Shanghai acquired shares of Zhongjuxin Limited Company (“Zhongjuxin”) in September 2023 with amount of RMB 30 million ($4,179). The shares held by ACM Shanghai are restricted for sale for a minimum period of twelve months. Zhongjuxin completed its STAR IPO in September 2023.

Pursuant to a Share Purchase Agreement dated January 2024, ACM Shanghai acquired shares of Shanghai Syncrystalline Silicon Materials Co., Ltd. (“Syncrystalline”) in February 2024 with amount of RMB 10 million ($1,409). The shares held by ACM Shanghai are restricted for sale for a minimum period of twelve months. Syncrystalline completed its STAR IPOin February 2024. As of September 30, 2024, the Company's total investment costs in Syncrystalline were RMB 20,000 ($2,818), including RMB 10 million ($1,409) invested by ACM Shanghai in 2021 and RMB 10 million ($1,409) invested by ACM Shanghai in February 2024.

At September 30, 2024 and December 31, 2023, the components of short-term investments were as follows:

For the three and nine months ended September 30, 2024 and 2023, the net gains (losses) recognized on equity securities were as follows:

For the three and nine months ended September 30, 2024, the Company received proceeds of $3,167 and $3,167 from the sale of short-term investments, respectively, including realized gains of $171 and $444, respectively.

For the three and nine months ended September 30, 2023, the Company received $2,205 and $19,914 in proceeds from the sale of short-term investments, respectively, including realized gains of $656 and $8,569, respectively.

NOTE 16 –RELATED PARTY BALANCES AND TRANSACTIONS

Ninebell

Ninebell is an equity investee of ACM (note 14) and is the Company’s principal supplier of robotic delivery system subassemblies used in our single-wafer cleaning equipment. The Company purchases equipment from Ninebell for production in the ordinary course of business. The Company pays for a portion of the equipment in advance and is obligated for the remaining amounts upon receipt of the product.

Shengyi

Shengyi is an equity investee of ACM Shanghai (note 14) and is one of the Company’s component suppliers in mainland China. The Company purchases components from Shengyi for production in the ordinary course of business. The Company incurs a service fee related to installation and hook-up fees which is recorded within cost of revenue on the Company’s condensed consolidated statements of comprehensive income. The Company pays for a portion of the raw materials in advance and is obligated for the remaining amounts upon receipt of the product.

All related party outstanding balances are short-term in nature and are expected to be settled in cash.

The following tables reflect related party transactions in our condensed consolidated financial statements:

NOTE 17 –COMMON STOCK

ACM is authorized to issue 150,000,000 shares of Class A common stock and 5,307,816 shares of Class B common stock, each with a par value of $0.0001. Each share of Class A common stock is entitled toone vote, and each share of Class B common stock is entitled totwenty votes and is convertible at any time intoone share of Class A common stock. Shares of Class A common stock and Class B common stock are treated equally, identically and ratably with respect to any dividends declared by the Board of Directors of ACM unless such Board of Directors declares different dividends to the Class A common stock and Class B common stock, which is subject to approval from a majority of common stockholders.

During the three months ended September 30, 2024, ACM issued 122,266 shares of Class A common stock upon option exercises by employees and non-employees. During the nine months ended September 30, 2024, ACM issued 1,488,347 shares of Class A common stock upon option exercises by employees and non-employees.

During the three months ended September 30, 2023, ACM issued 623,244 shares of Class A common stock upon option exercises by employees and non-employees. During the nine months ended September 30, 2023, ACM issued 919,448 shares of Class A common stock upon option exercises by employees and non-employees

At September 30, 2024 and December 31, 2023, the number of shares of Class A common stock issued and outs tanding was 57,524,519 and 56,036,172, respectively.

At September 30, 2024 and December 31, 2023, the number of shares of Class B common stock issued and outstanding was 5,021,811 and 5,021,811, respectively.

NOTE 18 –STOCK-BASED COMPENSATION

ACM’s stock-based compensation consists of employee and non-employee awards issued under its 1998 Stock Option Plan and its 2016 Omnibus Incentive Plan. The vesting condition may consist of a service period condition and certain performance conditions determined by the Board of Directors. The fair value of the stock options granted with a service period based condition and/or performance condition is estimated at the date of grant using the Black-Scholes option pricing model. The fair value of the stock options granted with a market based condition is estimated at the date of grant using the Monte Carlo simulation model.

Employee Awards

The following table summarizes the Company’s employee share option activities during the nine months ended September 30, 2024:

As of September 30, 2024, $25,929 of total unrecognized employee stock-based compensation expense, net of estimated forfeitures, related to employee stock-based awards for ACM were expected to be recognized over a weighted-average period of 3.5 years, after September 30, 2024. Total recognized compensation cost may be adjusted for future changes in estimated forfeitures.

The aggregate intrinsic value of options exercised in the three and nine months ended September 30, 2024 was $234 and $29,311. The aggregate intrinsic value of options outstanding and exercisable as of September 30, 2024 were $96,975 and $72,321, respectively.

The fair value of options granted to employees is estimated on the grant date using the Black-Scholes valuation with following assumptions:

(1)Fair value of Class A common stock value was closing market price of the Class A common stock on the grant date.

(2)Expected term of share options is based on the average of the vesting period and the contractual term for each grant.

(3)Volatility is calculated based on the historical volatility of ACM in the period equal to the expected term of each grant.

(4)Risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the share options in effect at the time of grant.

(5)Expected dividend is assumed to be 0% as ACM has no history or expectation of paying a dividend on its common stock.

Non-employee Awards

The following table summarizes the Company’s non-employee share option activities during the nine months ended September 30, 2024:

As of September 30, 2024 there is no unrecognized non-employee stock-based compensation expense, net of estimated forfeitures, related to stock-based awards expected to be recognized. Total recognized compensation cost may be adjusted for future changes in estimated forfeitures.

The aggregate intrinsic value of options exercised in the three and nine months ended September 30, 2024 was $2,247 and $6,514, respectively. The aggregate intrinsic value of options outstanding and exercisable as of September 30, 2024 was $16,809.

ACM Shanghai 2019 Option Grants

In January 2020, ACM Shanghai adopted a 2019 Stock Option Incentive Plan (the “2019 Subsidiary Stock Option Plan”) that provides for, among other incentives, the granting to officers, directors, and employees of options to purchase shares of ACM Shanghai’s common stock.

The following table summarizes the stock option activities of the ACM Shanghai 2019 Subsidiary Stock Option Plan during the nine months ended September 30, 2024:

The aggregate intrinsic value of options exercised in the three and nine months ended September 30, 2024 was $$0 and $5,198 . The aggregate intrinsic value of options outstanding and exercisable as of September 30, 2024 was $33,788.

ACM Shanghai 2023 Option Grants

In June 2023, ACM Shanghai adopted a 2023 Stock Option Incentive Plan (the "2023 Subsidiary Stock Option Plan”) that provides for, among other incentives, the granting to officers, directors, and employees of options to purchase shares of

ACM Shanghai’s common stock. The vesting conditions consist of service periods conditions and performance conditions related to certain sales and research and development progress targets determined by the Board of Directors of ACM Shanghai.

The following table summarizes the ACM Shanghai 2023 Subsidiary Stock Option Plan’s stock option activities during the three months ended September 30, 2024:

The fair value of options granted to employees is estimated on the grant date using the Black-Scholes valuation with following assumptions:

(1) Equal to closing value on the grant date.

(2) Expected term of share options is based on the average of the vesting period and the contractual term for each grant.

(3) Volatility is calculated based on the historical volatility of ACM Shanghai in the period equal to the expected term of each grant.

(4) Risk-free interest rate is based on the yields of RMB deposit in mainland China with maturities similar to the expected term of the share options in effect at the time of grant.

(5) Expected dividend is assumed to be 0% as the impact is adjusted on the value of share of common stock.

As of September 30, 2024, there is $50,887 unrecognized non-employee stock-based compensation expense, net of estimated forfeitures, related to ACM Shanghai stock-based awards expected to be recognized over a weighted-average period of 1.5 years. Total recognized compensation cost may be adjusted for future changes in estimated forfeitures.

The aggregate intrinsic value of options exercised in the three and nine months ended September 30, 2024 was $0 as there were no options exercised during the periods. As there were no options exercisable during the periods, the aggregate intrinsic value of options outstanding and exercisable as of September 30, 2024 were $91,501 and $0, respectively.

The following table summarizes the components of stock-based compensation expense included in the condensed consolidated statements of comprehensive income:

NOTE 19 –INCOME TAXES

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period during which such rates are enacted.

The Company considers all available evidence to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carry-forward periods) and projected taxable income in assessing the realizability of deferred tax assets. In making such judgments, significant weight is given to evidence that can be objectively verified.

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. Prior to September 30, 2019, the Company had recorded a valuation allowance for the full amount of net deferred tax assets in the United States, as the realization of deferred tax assets was uncertain. Since September 30, 2019, the Company has not maintained a valuation allowance except for a partial valuation allowance on certain U.S. and foreign deferred tax assets. In order to recognize the remaining U.S. deferred tax assets that continue to be subject to a valuation allowance, the Company will need to generate sufficient U.S. taxable income in future periods before the expiration of the deferred tax assets governed by the tax code.

ACM Shanghai has shown a three-year historical cumulative profit and has projections of future income. As a result, the Company does not maintain a valuation allowance. The Company accounts for uncertain tax positions in accordance with the authoritative guidance on income taxes under which the Company may only recognize or continue to recognize tax positions that meet a more likely than not threshold. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes.

The Company’s effective tax rate differs from statutory rates of 21% for U.S. federal income tax purposes and 15% to 25% for Chinese income tax purposes due to the effects of the valuation allowance and certain permanent differences from book-tax differences, including stock based compensation, deemed dividend income under Subchapter F of the U.S. Internal Revenue Code of 1986, as amended (Subpart F), and global intangible low-taxed income (GILTI) inclusions, and

R&D super deduction. As a result, the Company recorded income tax expense of $17,712 and $11,235 during the nine months ended September 30, 2024 and 2023, respectively. The increase in the Company's effective income tax rate for the nine months ended September 30, 2024 compared to the same period of the prior year was primarily due to a decrease in certain discrete tax benefits.

Under the change in Section 174 made by the Tax Cuts and Jobs Act of 2017 which became effective on January 1, 2022, the Company is required to capitalize, and subsequently amortize R&D expenses over fifteen years for research activities conducted outside of the U.S. The capitalization of overseas R&D expenses results in a significant increase in the Company’s global intangible low-taxed income inclusion.

The Company had total unrecognized tax benefits of $7,600 and $13,026 as of September 30, 2024 and December 31, 2023. If recognized, the net impact to effective rate would be $7,518. The Company did not expect any reversal of unrecognized tax benefits in the next 12 months. The Company will recognize interest and penalties, when they occur, related to uncertain tax provisions as a component of tax expense. For the nine months ended September 30, 2024 and 2023, $995 and $569 ofinterest and penalties was recognized, respectively.

The Company is subject to taxation in the United States, state, and foreign jurisdictions. All tax returns will remain open for examination by the federal and state authorities for three and four years, respectively, from the date of utilization of any net operating loss or credits. Certain tax years are subject to foreign income tax examinations by tax authorities until the statute of limitations expire.

The Company’sfour principal 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, ACM’s mainland China subsidiaries generally would be liable for mainland China corporate income taxes as 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 ofthree 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.

Income tax expense was as follows:

NOTE 20 –Commitments and Contingencies

The Company leases offices under non-cancelable operating lease agreements. See Note 11 for future minimum lease payments under non-cancelable operating lease agreements with initial terms of one year or more.

As of September 30, 2024, the Company had $11,023 of open capital commitments to construction contracts and had additional $16,737 of capital investment commitments to Ninebell in April 2024. As of December 31, 2023, the Company had $30,936 of open commitments to construction contracts and had additional $7,413 of capital investment commitments.

Covenants in ACM Lingang’s Grant Contract for State-owned Construction Land Use Right in Shanghai City (Category of R&D Headquarters and Industrial Projects) with the China (Shanghai) Pilot Free Trade Zone Lingang Special Area Administration require, among other things, that ACM Lingang pay liquidated damages in the event that within 7 years after the land use right is obtained, or prior to July 9, 2027, the Company does not (i) generate a minimum specified amount of annual sales of products manufactured on the granted land or (ii) pay to mainland China at least RMB 157.6 million ($22,000) 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.

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 and expects that it will meet the milestone in 2024. The Company cannot guarantee that ACM Lingang will achieve the 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).

In the normal course of business, the Company is subject to contingencies, including legal proceedings and environmental claims arising out of the normal course of businesses that relate to a wide range of matters, including among others, contracts breach liability. The Company records accruals for such contingencies based upon the assessment of the probability of occurrence and, where determinable, an estimate of the liability. Management may consider many factors in making these assessments including past history, scientific evidence and the specifics of each matter. Some of these contingencies involve claims that are subject to substantial uncertainties and un-estimable damages.

The Company’s management has evaluated all such proceedings and claims that existed as of September 30, 2024 and December 31, 2023. In the opinion of management, no provision for liability nor disclosure was required as of September 30, 2024 related to any claim against the Company because: (a) there is not a reasonable possibility that a loss exceeding amounts already recognized (if any) may be incurred with respect to such claim; (b) a reasonably possible loss or range of loss cannot be estimated; or (c) such estimate is immaterial.

As of September 30, 2024, the Company hadno outstanding legal proceedings.

NOTE 21 –SEGMENT INFORMATION

The Company identifies operating segments according to how the business activities are managed and evaluated. The Company’s chief operating decision maker (“CODM”) has been identified as ACM’s Chief Executive Officer. The Company's operating segments include ACM Research and ACM Shanghai. As the Company is engaged in the developing, manufacture and sale of capital equipment to global semiconductor manufacturers, and each of the operating segments share similar economic and other qualitative characteristics, the results of the Company’s operating segments are aggregated intoone reportable segment.

For geographical reporting, revenue by geographic location is determined by the location of customers’ facilities to which products were shipped. Long-lived assets consist primarily of property, plant and equipment, land use right, and right-of-use assets and are attributed to the geographic location in which they are located.

Long-lived assets by geographic region as of the periods ended were as follows:

NOTE 22 –STATUTORY SURPLUS RESERVE

In accordance with mainland China’s Foreign Enterprise Law, ACM Shanghai, ACM Lingang, and ACM Wuxi are required to make appropriation to reserve funds, comprising the statutory surplus reserve and discretionary surplus reserve, based on after-tax net income in accordance with generally accepted accounting principles of mainland China (“mainland China GAAP”).

Appropriations to the statutory surplus reserve are required to be at least 10% of the after-tax net income determined in accordance with mainland China GAAP until the reserve is equal to 50% of the entities’ registered capital. The amount is calculated annually at the end of each calendar year. The balances of statutory reserve funds was $30,060 as of both September 30, 2024 and December 31, 2023, and is presented as statutory surplus reserve on the Company’s condensed consolidated balance sheets.

NOTE 23 -SUBSEQUENT EVENTS

On October 1, 2024, the Company acquired a commercial facility, comprised of 39,500 square foot total floor space and which includes a 5,200 square foot functional clean room, for a price of $7.75 million. This facility is located in the City of Hillsboro in Oregon, and is intended to further expand ACM’s R&D and demonstration capability in the U.S. market.

ACM Shanghai completed the purchase of additional equity interest of Ninebell (note 16) on October 21, 2024 for the purchase of $16,737. After the purchase, the Company owned 36.4% of Ninebell.