10-Q 1 brhc10037091_10q.htm 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _____________

Commission file number: 001-38273

graphic

ACM Research, Inc.
(Exact Name of Registrant as Specified in Its Charter)

Delaware
 
94-3290283
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
 
 
 
42307 Osgood Road, Suite I
Fremont, California
 
94539
(Address of Principal Executive Offices)
 
(Zip Code)

Registrant’s telephone number, including area code: (510) 445-3700

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class
 
Trading Symbol
 
Name of Each Exchange on which Registered
Class A Common Stock, $0.0001 par value
 
ACMR
 
The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 
Large accelerated filer 
Accelerated filer
 
Non-accelerated filer   
Smaller reporting company
 
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Class
Number of Shares Outstanding
Class A Common Stock, $0.0001 par value
54,074,653 shares outstanding as of May 3, 2022
Class B Common Stock, $0.0001 par value
5,086,812 shares outstanding as of May 3, 2022




TABLE OF CONTENTS

PART I.
4
 
Item 1.
4
   
4
   
5
   
6
   
7
   
8
 
Item 2.
26
 
Item 3.
40
 
Item 4.
41
PART II.
41
 
Item 1.
41
 
Item 1A.
41
 
Item 2.
43
 
Item 5.
Other Information
 46
 
Item 6.
43
45

We conduct our business operations principally through ACM Research (Shanghai), Inc., or ACM Shanghai, a subsidiary of ACM Research, Inc., or ACM Research. Unless the context requires otherwise, references in this report to “our company,” “our,” “us,” “we” and similar terms refer to ACM Research, Inc. and its subsidiaries, including ACM Shanghai, collectively.

For purposes of this report, certain amounts in Renminbi, or RMB, have been translated into U.S. dollars solely for the convenience of the reader. The translations have been made based on the conversion rates published by the State Administration of Foreign Exchange of the People’s Republic of China.

SAPS, TEBO, ULTRA C and ULTRA FURNACE are our trademarks. For convenience, these trademarks appear in this report without ™ symbols, but that practice does not mean that we will not assert, to the fullest extent under applicable law, our rights to the trademarks. This report also contains other companies’ trademarks, registered marks and trade names, which are the property of those companies.

FORWARD-LOOKING STATEMENTS AND STATISTICAL DATA

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this report regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “anticipate,” “project,” “target,” “design,” “estimate,” “predict,” “potential,” “plan” or the negative of these terms, and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors, including those described or incorporated by reference in “Item 1A. Risk Factors” of Part II of this report, that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.

The information included under the heading “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview,” of Part I of this report contains statistical data and estimates, including forecasts, that are based on information provided by Gartner, Inc., or Gartner, in “Forecast: Semiconductor Wafer Fab Equipment, Worldwide, 4Q21 Update” (December 2021), or the Gartner Report. The Gartner Report represents research opinions or viewpoints that are published, as part of a syndicated subscription service, by Gartner and are not representations of fact. The Gartner Report speaks as of its original publication date (and not as of the date of this report), and the opinions expressed in the Gartner Report are subject to change without notice. While we are not aware of any misstatements regarding any of the data presented from the Gartner Report, estimates, and in particular forecasts, involve numerous assumptions and are subject to risks and uncertainties, as well as change based on various factors, that could cause results to differ materially from those expressed in the data presented below.

Any forward-looking statement made by us in this report speaks only as of the date on which it is made. Except as required by law, we assume no obligation to update these statements publicly or to update the reasons actual results could differ materially from those anticipated in these statements, even if new information becomes available in the future.

You should read this report, and the documents that we reference in this report and have filed as exhibits to this report, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

PART I.
FINANCIAL INFORMATION

Item 1.
Financial Statements

ACM RESEARCH, INC.
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
 
 
March 31,
2022
   
December 31,
2021
 
Assets
           
Current assets:
           
Cash and cash equivalents
 
$
380,311
   
$
563,067
 
Short-term time deposits     74,025       -  
Trading securities (note 15)
   
25,772
     
29,498
 
Accounts receivable, less allowance for doubtful accounts of $0 as of March 31, 2022 and December 31, 2021 (note 4)
   
106,351
     
105,553
 
Income tax recoverable     1,607       1,082  
Other receivables
   
23,602
     
18,979
 
Inventories (note 5)
   
271,538
     
218,116
 
Prepaid expenses
   
21,771
     
16,639
 
Total current assets
   
904,977
     
952,934
 
Property, plant and equipment, net (note 6)
   
57,680
     
14,042
 
Land use right, net (note 7)
   
9,661
     
9,667
 
Operating lease right-of-use assets, net (note 11)
   
4,028
     
4,182
 
Intangible assets, net
   
748
     
477
 
Long-term time deposits     78,750       -  
Deferred tax assets (note 19)
   
15,303
     
13,166
 
Long-term investments (note 14)
   
12,666
     
12,694
 
Other long-term assets (note 8)
   
3,559
     
45,017
 
Total assets
   
1,087,372
     
1,052,179
 
Liabilities and Stockholders’ Equity
               
Current liabilities:
               
Short-term borrowings (note 9)
   
9,600
     
9,591
 
Current portion of long-term borrowings (note 12)
   
2,441
     
2,410
 
Accounts payable
   
108,494
     
101,350
 
Advances from customers
   
82,036
     
52,824
 
Deferred revenue
   
2,699
     
3,180
 
Income taxes payable (note 19)
   
(1,744
)
   
254
 
FIN-48 payable (note 19)
   
2,292
     
2,282
 
Other payables and accrued expenses (note 10)
   
36,555
     
31,735
 
Current portion of operating lease liability (note 11)
   
2,076
     
2,313
 
Total current liabilities
   
244,449
     
205,939
 
Long-term borrowings (note 12)
   
22,344
     
22,957
 
Long-term operating lease liability (note 11)
   
1,952
     
1,869
 
Deferred tax liability (note19)
   
1,308
     
1,302
 
Other long-term liabilities (note 13)
   
8,545
     
8,447
 
Total liabilities
   
278,598
     
240,514
 
Commitments and contingencies (note 20)
           
Stockholders’ equity:
               
Common stock (1) – Class A, par value $0.0001: 150,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 54,035,280 shares issued and outstanding as of March 31, 2022 and 53,608,929 shares issued and outstanding as of December 31, 2021 (note 17)
   
5
     
5
 
Common stock (1) –Class B, par value $0.0001: 5,307,816 shares authorized as of March 31, 2022 and December 31, 2021; 5,086,812 shares issued and outstanding as of March 31, 2022 and 5,087,814 shares issued and outstanding as of December 31, 2021 (note 17)
   
1
     
1
 
Additional paid in capital
   
597,143
     
595,045
 
Accumulated surplus
   
66,258
     
72,044
 
Accumulated other comprehensive income
   
10,979
     
9,109
 
Total ACM Research, Inc. stockholders’ equity
   
674,386
     
676,204
 
Non-controlling interests
   
134,388
     
135,461
 
Total stockholders’ equity
   
808,774
     
811,665
 
Total liabilities and stockholders’ equity
 
$
1,087,372
   
$
1,052,179
 
 
(1)
Prior period results have been adjusted to reflect the three-for-one stock split effected in the form of a stock dividend in March 2022. See Note 1 for details

The accompanying notes are an integral part of these condensed consolidated financial statements.

ACM RESEARCH, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(In thousands, except per share data)
(Unaudited)
 
 
 
Three Months Ended March 31,
 
 
 
2022
   
2021
 
Revenue (note 3)
 
$
42,186
   
$
43,732
 
Cost of revenue
   
22,500
     
25,687
 
Gross profit
   
19,686
     
18,045
 
Operating expenses:
               
Sales and marketing
   
6,697
     
5,308
 
Research and development
   
17,346
     
5,504
 
General and administrative
   
4,949
     
3,783
 
Total operating expenses, net
   
28,992
     
14,595
 
Income (loss) from operations
   
(9,306
)
   
3,450
 
Interest income
   
1,805
     
49
 
Interest expense
   
(261
)
   
(189
)
Unrealized loss on trading securities
   
(3,858
)
   
(1,047
)
Other income, net
   
237
     
469
 
Equity income (loss) in net income (loss) of affiliates
   
(71
)
   
320
 
Income (loss) before income taxes
   
(11,454
)
   
3,052
 
Income tax benefit (note 19)
   
4,011
   
2,770
 
Net income (loss)
   
(7,443
)
   
5,822
 
Less: Net income (loss) attributable to non-controlling interests
   
(1,657
)
   
352
 
Net income (loss) attributable to ACM Research, Inc.
 
$
(5,786
)
 
$
5,470
 
Comprehensive income:
               
Net income (loss)
   
(7,443
)
   
5,822
 
Foreign currency translation adjustment
   
2,454
     
(1,332
)
Comprehensive Income (loss)
   
(4,989
)
   
4,490
 
Less: Comprehensive income (loss) attributable to non-controlling interests
   
(1,073
)
   
(83
)
Comprehensive income (loss) attributable to ACM Research, Inc.
 
$
(3,916
)
 
$
4,573
 
 
               
Net income (loss) attributable to ACM Research, Inc. per common share (note 2):
               
Basic
 
$
(0.10
)
 
$
0.10
 
Diluted
 
$
(0.09
)
 
$
0.08
 
 
               
Weighted average common shares outstanding used in computing per share amounts (note 2):
         
Basic (1)
   
58,827,390
     
56,360,610
 
Diluted (1)
   
65,950,922
     
65,604,840
 

(1)
Prior period results have been adjusted to reflect the three-for-one stock split effected in the form of a stock dividend in March 2022. See Note 1 for details

The accompanying notes are an integral part of these condensed consolidated financial statements.

ACM RESEARCH, INC.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
 (In thousands, except per share data)
(Unaudited)
 
 
 
Common
Stock Class A
   
Common
Stock Class B
                               
 
 
Shares (1)
   
Amount (1)
   
Shares (1)
   
Amount (1)
   
Additional Paid-
in Capital (1)
   
Accumulated
Surplus
   
Accumulated
Other
Comprehensive
Income
   
Non-controlling interests
   
Total
Stockholders’
Equity
 
Balance at December  31, 2020
   
50,690,079
   
$
5
     
5,407,818
   
$
1
    $
102,000
   
$
34,287
     $
4,857
    $
67,020
    $
208,170
 
Net income
   
-
     
-
     
-
     
-
     
-
     
5,470
     
-
     
352
     
5,822
 
Foreign currency translation adjustment
   
-
     
-
     
-
     
-
     
-
     
-
     
(896
)
   
(436
)
   
(1,332
)
Exercise of stock options
   
929,820
     
-
     
-
     
-
     
1,377
     
-
     
-
     
-
     
1,377
 
Stock-based compensation
   
-
     
-
     
-
     
-
     
1,210
     
-
     
-
     
-
     
1,210
 
Conversion of Class B common
stock to Class A common stock
   
100,002
     
-
     
(100,002
)
   
-
     
-
     
-
     
-
     
-
     
-
 
Balance at March 31, 2021
   
51,719,901
   
$
5
     
5,307,816
   
$
1
   
$
104,587
   
$
39,757
   
$
3,961
   
$
66,936
   
$
215,247
 

 
 
Common
Stock Class A
   
Common
Stock Class B
                               
 
 
Shares (1)
   
Amount (1)
   
Shares (1)
   
Amount (1)
   
Additional Paid-
in Capital (1)
   
Accumulated
Surplus
   
Accumulated
Other
Comprehensive
Income
    Non-controlling interests    
Total
Stockholders’
Equity
 
Balance at December 31, 2021
   
53,608,929
   
$
5
     
5,087,814
   
$
1
   
$
595,045
   
$
72,044
   
$
9,109
    $
135,461    
$
811,665
 
Net loss
   
-
     
-
     
-
     
-
     
-
     
(5,786
)
   
-
      (1,657 )    
(7,443
)
Foreign currency translation adjustment
   
-
     
-
     
-
     
-
     
-
     
-
     
1,870
      584
     
2,454
 
Exercise of stock options
   
425,349
     
-
     
-
     
-
     
724
     
-
     
-
      -      
724
 
Stock-based compensation
   
-
     
-
     
-
     
-
     
1,374
     
-
     
-
      -      
1,374
 
Conversion of Class B common stock to Class A common stock     1,002       -       (1,002 )     -       -       -       -       -       -  
Balance at March 31, 2022
   
54,035,280
   
$
5
     
5,086,812
   
$
1
   
$
597,143
   
$
66,258
   
$
10,979
    $ 134,388    
$
808,774
 

(1)
Prior period results have been adjusted to reflect the three-for-one stock split effected in the form of a stock dividend in March 2022. See Note 1 for details

The accompanying notes are an integral part of these condensed consolidated financial statements.

ACM RESEARCH, INC.
Condensed Consolidated Statements of Cash Flows
 (In thousands)
(Unaudited)
 
 
 
Three Months Ended March 31,
 
 
 
2022
   
2021
 
Cash flows from operating activities:
           
Net income (loss)
 
$
(7,443
)
 
$
5,822
 
Adjustments to reconcile net income from operations to net cash used in operating activities
               
Depreciation and amortization
   
1,213
     
546
 
Loss on disposals of property, plant and equipment
   
-
     
26
 
Equity (income) loss in net (income) loss of affiliates
   
71
     
(320
)
Unrealized loss on trading securities
   
3,858
     
1,047
 
Deferred income taxes
   
(2,081
)
   
(2,929
)
Stock-based compensation
   
1,374
     
1,210
 
Net changes in operating assets and liabilities:
               
Accounts receivable
   
(284
)
   
(4,602
)
Other receivables
   
(4,893
)
   
(1,850
)
Inventory
   
(52,503
)
   
(15,276
)
Prepaid expenses
   
(5,015
)
   
(83
)
Other long-term assets
   
(119
)
   
21
 
Accounts payable
   
6,681
     
9,492
 
Advances from customers
   
29,273
     
14,932
 
Income tax payable
   
(1,999
)
   
75
 
FIN-48 payable
    10       -  
Other payables and accrued expenses
   
1,274
     
3,181
 
Deferred revenue
   
2,699
     
1,315
 
Other long-term liabilities
   
155
     
(1,865
)
Net cash flow (used in) provided by operating activities
   
(27,729
)
   
10,742
 
 
               
Cash flows from investing activities:
               
Purchase of property and equipment
   
(3,176
)
   
(1,466
)
Purchase of intangible assets
   
(408
)
   
(112
)
Increase of short-term time deposits
    (74,025 )     -  
Increase of long-term time deposits
    (78,750 )     -
 
Net cash used in investing activities
   
(156,359
)
   
(1,578
)
 
               
Cash flows from financing activities:
               
Proceeds from short-term borrowings
   
-
     
4,211
 
Repayments of short-term borrowings
   
-
     
(6,744
)
Repayments of long-term borrowings
   
(696
)
   
(224
)
Proceeds from stock option exercise to common stock
   
724
     
1,377
 
Net cash (used in) provided by financing activities
   
28
     
(1,380
)
 
               
Effect of exchange rate changes on cash and cash equivalents
 
$
1,304
   
$
(754
)
Net increase (decrease) in cash and cash equivalents
 
$
(182,756
)
 
$
7,030
 
 
               
Cash and cash equivalents at beginning of period
   
563,067
     
71,766
 
Cash and cash equivalents at end of period
 
$
380,311
   
$
78,796
 
 
               
Supplemental disclosure of cash flow information:
               
Interest paid, net of capitalized interest
 
$
261
   
$
189
 
Cash paid for income taxes
 
$
-
   
$
63
 
 
               
Non-cash financing activities:
               
Cashless exercise of stock options
 
$
39
   
$
83
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

ACM RESEARCH, INC.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)

NOTE 1 – DESCRIPTION OF BUSINESS

ACM Research, Inc. (“ACM”) and its subsidiaries (collectively with ACM, the “Company”) develop, manufacture and sell single-wafer wet cleaning equipment used to improve the manufacturing process and yield for advanced integrated chips. The Company markets and sells its single-wafer wet-cleaning equipment, which are based on the Company’s proprietary Space Alternated Phase Shift (“SAPS”) and Timely Energized Bubble Oscillation (“TEBO”) technologies, under the brand name “Ultra C.” These tools are designed to remove random defects from a wafer surface efficiently, without damaging the wafer or its features, even at increasingly advanced process nodes.

ACM was incorporated in California in 1998, and it initially focused on developing tools for manufacturing process steps involving the integration of ultra low-K materials and copper. The Company’s early efforts focused on stress-free copper-polishing technology, and it sold tools based on that technology in the early 2000s.

In 2006 the Company established its operational center in Shanghai in the People’s Republic of China (the “PRC”), where it operates through ACM’s subsidiary ACM Research (Shanghai), Inc. (“ACM Shanghai”). ACM Shanghai was formed to help establish and build relationships with integrated circuit manufacturers in the PRC, and the Company initially financed its Shanghai operations in part through sales of non-controlling equity interests in ACM Shanghai.

In 2007 the Company began to focus its development efforts on single-wafer wet-cleaning solutions for the front-end chip fabrication process. The Company introduced its SAPS megasonic technology, which can be applied in wet wafer cleaning at numerous steps during the chip fabrication process, in 2009. It introduced its TEBO technology, which can be applied at numerous steps during the fabrication of small node two-dimensional conventional and three-dimensional patterned wafers, in March 2016. The Company has designed its equipment models for SAPS and TEBO solutions using a modular configuration that enables it to create a wet-cleaning tool meeting the specific requirements of a customer, while using pre-existing designs for chamber, electrical, chemical delivery and other modules. In August 2018, the Company introduced its Ultra-C Tahoe wafer cleaning tool, which can deliver high cleaning performance with significantly less sulfuric acid than typically consumed by conventional high-temperature single-wafer cleaning tools. Based on its electro-chemical plating (“ECP”) technology, the Company introduced in March 2019 its Ultra ECP AP, or “Advanced Packaging,” tool for bumping, or applying copper, tin and nickel to semiconductor wafers at the die-level, and its Ultra ECP MAP, or “Multi-Anode Partial Plating,” tool to deliver advanced electrochemical copper plating for copper interconnect applications in front-end wafer fabrication processes. The Company also offers a range of custom-made equipment, including cleaners, coaters and developers, to back-end wafer assembly and packaging factories, principally in the PRC.

In 2011 ACM Shanghai formed a wholly owned subsidiary in the PRC, ACM Research (Wuxi), Inc. (“ACM Wuxi”), to manage sales and service operations.

In November 2016 ACM re-domesticated from California to Delaware pursuant to a merger in which ACM Research, Inc., a California corporation, was merged into a newly formed, wholly owned Delaware subsidiary, also named ACM Research, Inc.

In June 2017 ACM formed a wholly owned subsidiary in Hong Kong, CleanChip Technologies Limited (“CleanChip”), to act on the Company’s behalf in Asian markets outside the PRC by, for example, serving as a trading partner between ACM Shanghai and its customers, procuring raw materials and components, performing sales and marketing activities, and making strategic investments.

In August 2017 ACM purchased 18.77% of ACM Shanghai’s equity interests held by Shanghai Science and Technology Venture Capital Co., Ltd. On November 8, 2017, ACM purchased the remaining 18.36% of ACM Shanghai’s equity interests held by third parties, Shanghai Pudong High-Tech Investment Co., Ltd. and Shanghai Zhangjiang Science & Technology Venture Capital Co., Ltd. At December 31, 2017, ACM owned all of the outstanding equity interests of ACM Shanghai, and indirectly through ACM Shanghai, owned all of the outstanding equity interests of ACM Wuxi.

On September 13, 2017, ACM effectuated a 1-for-3 reverse stock split of Class A and Class B common stock.

On November 2, 2017, the Registration Statement on Form S-1 (File No. 333-220451) for ACM’s initial public offering of Class A common stock was declared effective by the U.S. Securities and Exchange Commission. Shares of Class A common stock began trading on the Nasdaq Global Market on November 3, 2017, and the closing for the offering was held on November 7, 2017.

In December 2017 ACM formed a wholly owned subsidiary in the Republic of Korea, ACM Research Korea CO., LTD. (“ACM Korea”), to serve customers based in Republic of Korea and perform sales, marketing, research and development activities for new products and solutions.

8

ACM RESEARCH, INC.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)

In March 2019 ACM Shanghai formed a wholly owned subsidiary in the PRC, Shengwei Research (Shanghai), Inc. (“ACM Shengwei”), to manage activities related to addition of future long-term production capacity.

In June 2019 CleanChip formed a wholly owned subsidiary in California, ACM Research (CA), Inc. (“ACM California”), to provide procurement services on behalf of ACM Shanghai.
 
In June 2019 ACM announced plans to complete over the next three years a listing (the “STAR Listing”) of shares of ACM Shanghai on the Shanghai Stock Exchange’s Sci-Tech innovAtion boaRd, known as the STAR Market, and a concurrent initial public offering (the “STAR IPO”) of ACM Shanghai shares in the PRC. ACM Shanghai is currently ACM’s primary operating subsidiary, and at the time of announcement, was wholly owned by ACM. To meet a STAR Listing requirement that it have multiple independent stockholders in the PRC, ACM Shanghai completed private placements of its shares in June and November 2019, following which, as of September 30, 2020, the private placement investors held a total of 8.3% of the outstanding shares of ACM Shanghai and ACM Research held the remaining 91.7%. As part of the STAR Listing process, in June 2020 the ownership interests held by the private investors were reclassified from redeemable non-controlling interests to non-controlling interests as the redemption feature was terminated.

In preparation for the STAR IPO, ACM completed a reorganization in December 2019 that included the sale of all of the shares of CleanChip by ACM to ACM Shanghai for $3,500. The reorganization and sale had no impact on ACM’s consolidated financial statements.

In August 2021 ACM formed a wholly owned subsidiary in Singapore, ACM Research (Singapore) PTE, Ltd. to perform sales, marketing, and other business development activities.

In November 2021 ACM Shanghai completed its STAR Listing and STAR IPO and its shares began trading on the STAR Market.  In the STAR IPO, ACM Shanghai issued 43,355,753 shares, representing 10% of the total 433,557,100 shares outstanding after the issuance. The shares were issued at a public offering price of RMB 85.00 per share, and the net proceeds of the STAR IPO, after issuance costs, totaled $545,512. Upon completion of the STAR IPO, ACM owned 82.5% of the outstanding ACM Shanghai shares.

In February 2022 ACM Shanghai formed a wholly owned subsidiary in China, ACM Research (Beijing), Inc. (“ACM Beijing”), to perform sales, marketing and other business development activities.

In March 2022 ACM formed a wholly owned subsidiary in South Korea, Hanguk ACM CO., LTD, to perform business development and other related activities.

In March 2022 the Board of Directors of ACM declared a 3-for-1 stock split of Class A and Class B common stock effected in the form of a stock dividend (the “Stock Split”). Each stockholder of record at the close of business on March 16, 2022, received a dividend of two additional shares of Class A common stock for each then-held share of Class A common stock and two additional shares of Class B common stock for each then-held share of Class B common stock, which were distributed after the close of trading on March 23, 2022. Unless otherwise indicated, all share numbers, per share amount, share prices, exercise prices and conversion rates set forth in these notes and the accompanying consolidated financial statements have been adjusted retrospectively to reflect the Stock Split.

The Company has direct or indirect interests in the following subsidiaries:
 
 
     
 
Effective interest held as at
 
Name of subsidiaries
Place and date of incorporation
 
March 31,
2022
   
December 31,
2021
 
ACM Research (Shanghai), Inc.
PRC, May 2005
   
82.5
%
   
82.5
%
ACM Research (Wuxi), Inc.
PRC, July 2011
   
82.5
%
   
82.5
%
CleanChip Technologies Limited
Hong Kong, June 2017
   
82.5
%
   
82.5
%
ACM Research Korea CO., LTD.
Korea, December 2017
   
82.5
%
   
82.5
%
Shengwei Research (Shanghai), Inc.
PRC, March 2019
   
82.5
%
   
82.5
%
ACM Research (CA), Inc.
USA, April 2019
   
82.5
%
   
82.5
%
ACM Research (Cayman), Inc.
Cayman Islands, April 2019
   
100.0
%
   
100.0
%
ACM Research (Singapore) PTE. Ltd.
Singapore, August 2021     100.0 %     100.0 %
ACM Research (Beijing), Inc. PRC, February 2022     82.5 %      
Hanguk ACM CO., LTD. Korea, March 2022     100.0 %      

9

ACM RESEARCH, INC.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)

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, including ACM Shanghai and its subsidiaries, which include ACM Wuxi, ACM Shengwei, ACM Beijing, and CleanChip (the subsidiaries of which include ACM California and ACM Korea). 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 accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission 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, 2021 included in ACM’s Annual Report on Form 10-K for the year ended December 31, 2021.

The accompanying condensed consolidated balance sheet as of March 31, 2022, condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2022 and 2021, condensed consolidated statements of changes in stockholders’ equity for the three months ended March 31, 2022 and 2021, and condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 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 March 31, 2022 and the results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for any future period.

Common Stock Split

Unless otherwise indicated, all prior period share and per share amounts, common stock, other capital, and retained earnings information presented in the accompanying financial statements and these notes thereto has been retroactively adjusted to reflect the impact of the Stock Split (Note 1). Proportional adjustments were also made to outstanding awards under the Company’s stock-based compensation plans.

COVID-19 Assessment

The outbreak of COVID-19, the coronavirus, has grown both in the United States and globally, and related government and private sector responsive actions have adversely affected the Company’s business operations. In December 2019 a series of emergency quarantine measures taken by the PRC government disrupted domestic business activities during the weeks after the initial outbreak of COVID-19. Since that time, an increasing number of countries, including the United States, have imposed restrictions on travel to and from the PRC and elsewhere, as well as general movement restrictions, business closures and other measures imposed to slow the spread of COVID-19. The situation continues to develop, however, and it is impossible to predict the effect and ultimate impact of the COVID-19 pandemic on the Company’s business operations and results. While the quarantine, social distancing and other regulatory measures instituted or recommended in response to COVID-19 are expected to be temporary, the duration or future repetitions of the business disruptions, and related financial impacts, cannot be estimated at this time. COVID-19 has been declared a worldwide health pandemic that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn and changes in global economic policy that could reduce demand for the Company’s products and its customers’ chips and have a material adverse impact on the Company’s business, operating results and financial condition.

10

ACM RESEARCH, INC.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)

The Company conducts substantially all of its product development, manufacturing, support and services in the PRC, and those activities have been directly impacted by COVID-19 and related restrictions on transportation and public appearances. In March 2022, several regions in China began to experience elevated levels of COVID-19 infections, and the PRC government instituted policies to restrict the spread of the virus. The policies began with an increase of spot lockdowns,” under which a positive polymerase chain reaction (PCR) or other test would result in the quarantining of individual buildings, groups of buildings, or even full neighborhoods. The policies were later expanded to full-city lockdowns, including in the City of Shanghai, where substantially all of ACM Shanghai’s operations are located. COVID-19 related restrictions in Shanghai began to limit employee access to, and logistics activities of, ACM Shanghai’s offices and production facilities in the Pudong district of Shanghai during the first quarter of 2022, and therefore limited ACM Shanghai’s ability to ship finished products to customers and to produce new products. Spot lockdowns in mid-March 2022 began to impact a number of ACM Shanghai’s employees and led to a closure of ACM Shanghai’s administrative and R&D offices in Zhangjiang in the Pudong district. A subsequent lockdown of the entire Pudong region of Shanghai was imposed in late March 2022 and impacted the operation of ACM Shanghai’s Chuansha production facility. Furthermore, a number of the Company’s customers have substantial operations based in operations areas of the PRC, including in the City of Shanghai, subject to the full-city lockdown restrictions, which have been limiting the operations of those customers since the first quarter of 2022, including inhibiting their ability to receive, implement and operate new tools for their manufacturing facilities. As a result, in some cases, ACM Shanghai has been required to defer shipments of finished products to these customers because of operational and logistics limitations affecting customers rather than, or in addition to, ACM Shanghai. The Company has begun to resume some operations using the “closed loop method,” in which a limited collection of workers remains together as a group between a single hotel, the ACM Shanghai facility, and a dedicated bus transportation route, also referred to as “two spots and one line.” The Company anticipates that the lockdowns and their effects will be temporary but may continue for several months, with a gradual return of  PRC operations, production capacity, and global logistics as Shanghai and other areas in the PRC begin to reopen. The Company cannot assure that closures or reductions of PRC operations or production, whether of ACM Shanghai or of some of its key customers, may not be extended in upcoming months as the result of business interruptions arising from protective measures being taken by the PRC and other governmental agencies or of other consequences of COVID-19.

The Company’s corporate headquarters are located in San Mateo County in the San Francisco Bay Area. The effects of actions taken by local governmental agencies in the future may negatively impact productivity, disrupt the business of the Company and delay timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on the Company’s ability to conduct its business in the ordinary course.

The prolonged and broad-based shift to remote working environments resulting from COVID-19 continues to create inherent productivity, connectivity, and oversight challenges and could affect the Company’s ability to enhance, develop and support existing products and services, detect and prevent spam and problematic content, hold product sales and marketing events, and generate new sales leads. In addition, the changed environment under which the Company is operating could have an effect on its internal controls over financial reporting as well as its ability to meet a number of its compliance requirements in a timely or quality manner. Additional or extended governmental lockdowns, restrictions or regulations could significantly impact the ability of the Company’s employees and vendors to work productively. Governmental restrictions have been inconsistent globally and it remains unclear when a return to worksite locations or travel will be permitted or what restrictions will be in place in those environments. As the Company prepares to return its workforce to the office in more locations in 2022, it may experience increased costs as it prepares its facilities for a safe return to work environment and experiments with hybrid work models and may suffer additional adverse effects on its ability to compete effectively and maintain its corporate culture.

Extended periods of interruption to the Company’s corporate, development or manufacturing facilities due to COVID-19 could cause the Company to lose revenue and market share, which would depress its financial performance and could be difficult to recapture. The Company’s business may also be harmed if travel to or from the PRC or the United States continues to be restricted or inadvisable or if members of management and other employees are absent because they contract COVID-19, they elect not to come to work due to the illness affecting others in the Company’s office or laboratory facilities, or they are subject to quarantines or other governmentally imposed restrictions.
 
Use of Estimates

The preparation of the 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 consolidated financial statements and accompanying notes. The Company’s significant accounting estimates and assumptions include, but are not limited to, those used for the valuation and recognition of fair value of trading securities, stock-based compensation arrangements and warrant liability, realization of deferred tax assets, assessment for impairment of long-lived assets, allowance for doubtful accounts, inventory valuation for excess and obsolete inventories, lower of cost and market value or net realizable value of inventories, depreciable lives of property and equipment and useful life of intangible assets.

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

11

ACM RESEARCH, INC.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)

Basic and Diluted Net Income per Common Share

Basic and diluted net income per common share are calculated as follows, as adjusted to give effect to the Stock Split:
 
 
 
Three Months Ended March 31,
 
 
 
2022
   
2021
 
Numerator:
           
Net income (loss)
 
$
(7,443
)
 
$
5,822
 
Less: Net income (loss) attributable to non-controlling interests
   
(1,657
)
   
352
 
Net income (loss) available to common stockholders, basic
 
$
(5,786
)
 
$
5,470
 
Less:  Dilutive effect arising from share-based awards by ACM Shanghai
    (86 )     -  
Net income (loss) available to common stockholders, diluted   $ (5,700 )   $
5,470  
 
               
Weighted average shares outstanding, basic
   
58,827,390
     
56,360,610
 
Effect of dilutive securities
   
7,123,532
     
9,244,230
 
Weighted average shares outstanding, diluted
   
65,950,922
     
65,604,840
 
 
               
Net income (loss) per common share:
               
Basic
   
(0.10
)
   
0.10
 
Diluted
 
$
(0.09
)
 
$
0.08
 

ACM has been authorized to issue Class A and Class B common stock since redomesticating in Delaware in November 2016. The two classes of common stock are substantially identical in all material respects, except for voting rights. Since ACM did not declare any cash dividends during the three months ended March 31, 2022 or 2021, the net income per common share attributable to each class is the same under the “two-class” method. As such, the two classes of common stock have been presented on a combined basis in the consolidated statements of operations and comprehensive income and in the above computation of net income per common share.

Diluted net income per common share reflects the potential dilution from securities, including stock options and issued warrants, that could share in ACM’s earnings. Certain potential dilutive securities were excluded from the net income per share calculation because the impact would be anti-dilutive. ACM’s potential dilutive securities consist of warrants and stock options for the three months ended March 31, 2022 and 2021.

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 with financial institutions that management believes are creditworthy.

The Company is potentially subject to concentrations of credit risks in its accounts receivable. For the three months ended March 31, 2022 and 2021, the Company’s three largest customers in total accounted for 62.6% and 60.1%, respectively, of revenue. As of March 31, 2022 and December 31, 2021, the Company’s two largest customers in total accounted for 53.2% and 53.8%, 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.

Recent Accounting Pronouncements Not Yet Adopted

In June 2016 the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 replaced the pre-existing incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 requires use of a forward-looking expected credit loss model for accounts receivables, loans and other financial instruments. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted.

In November 2019 the FASB issued ASU 2019-10, Financial Instruments Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which defers the effective date for public filers that are considered small reporting companies (“SRC”) as defined by the U.S. Securities and Exchange Commission (“SEC”) to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Since the Company was eligible to be an SRC based on its SRC determination as of November 15, 2019 (which is the issuance date of ASU 2019-10) in accordance with SEC regulations, the Company will adopt the standards for the year beginning January 1, 2023. Adoption of the standard requires using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date to align existing credit loss methodology with the new standard. The Company is evaluating the impact of this standard on its consolidated financial statements, including accounting policies, processes and systems and expects the standard will have a minor impact on its consolidated financial statements.

12

ACM RESEARCH, INC.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)

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 related businesses. The following tables present disaggregated revenue information:


 
Three Months Ended March 31,
 
   
2022
   
2021
 
Single wafer cleaning, Tahoe and semi-critical cleaning equipment
 
$
26,033
   
$
32,413
 
ECP (front-end and packaging), furnace and other technologies
   
12,248
     
5,550
 
Advanced packaging (excluding ECP), services & spares
   
3,905
     
5,769
 
Total Revenue By Product Category
 
$
42,186
   
$
43,732
 
                 
Wet cleaning and other front-end processing tools
 
$
31,702
   
$
31,900
 
Advanced packaging, other processing tools, services and spares
   
10,484
     
11,832
 
Total Revenue Front-end and Back-End
 
$
42,186
   
$
43,732
 

   
Three Months Ended March 31,
 
   
2022
   
2021
 
Mainland China
 
$
42,130
   
$
43,696
 
Other Regions
   
56
     
36
 
   
$
42,186
   
$
43,732
 

NOTE 4 – ACCOUNTS RECEIVABLE

At March 31, 2022 and December 31, 2021, accounts receivable consisted of the following:
 
 
 
March 31,
2022
   
December 31,
2021
 
Accounts receivable
 
$
106,351
   
$
105,553
 
Less: Allowance for doubtful accounts
   
-
     
-
 
Total
 
$
106,351
   
$
105,553
 

The Company reviews accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. No allowance for doubtful accounts was considered necessary at March 31, 2022 or December 31, 2021.

NOTE 5 – INVENTORIES

At March 31, 2022 and December 31, 2021, inventory consisted of the following:
 
 
 
March 31,
2022
   
December 31,
2021
 
Raw materials
 
$
108,157
   
$
90,552
 
Work in process
   
56,755
     
35,840
 
Finished goods
   
106,626
     
91,724
 
Total inventory
 
$
271,538
   
$
218,116
 

At March 31, 2022 and December 31, 2021, the Company held an inventory reserve of $1,826 and $1,215, respectively. At March 31, 2022 and December 31, 2021, finished goods inventory included system shipments of first-tools to existing or prospective customers, for which ownership does not transfer until customer acceptance or customer purchase, of $97,887, and $91,724, respectively. At March 31, 2022 and December 31, 2021, the value of finished goods inventory for which customers were contractually obligated to take ownership upon acceptance totaled $79,422 and $71,889, respectively.

13

ACM RESEARCH, INC.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)

NOTE 6 – PROPERTY, PLANT AND EQUIPMENT, NET

At March 31, 2022 and December 31, 2021, property, plant and equipment consisted of the following:
 
 
 
March 31,
2022
   
December 31,
2021
 
Buildings and plants
  $ 41,577     $ -  
Manufacturing equipment
   
8,738
     
7,973
 
Office equipment
   
2,559
     
2,012
 
Transportation equipment
   
217
     
217
 
Leasehold improvement
   
4,821
     
4,134
 
Total cost
   
57,912
     
14,336
 
Less: Total accumulated depreciation
   
(6,837
)
   
(5,900
)
Construction in progress
   
6,605
     
5,606
 
Total property, plant and equipment, net
 
$
57,680
   
$
14,042
 

Depreciation expense was $1,083 and $439 for the three months ended March 31, 2022 and 2021, respectively. Buildings and plants represents Lingang Housing transferred to ACM Shengwei in January 2022 at a value of $41,497 (RMB 263,979), including the purchase price and accumulated interest, and with estimated useful lives of 30-year (note 8). Buildings and plants are pledged as security for loans from China Merchants Bank (note 12).

NOTE 7 – LAND USE RIGHT, NET

A summary of land use right is as follows:

 
 
March 31,
2022
   
December 31,
2021
 
Land use right purchase amount
 
$
10,011
   
$
9,966
 
Less: accumulated amortization
   
(350
)
   
(299
)
Land use right, net
 
$
9,661
   
$
9,667
 

In 2020 ACM Shanghai, through its wholly owned subsidiary ACM Shengwei, entered into an agreement for a 50-year land use right in the Lingang region of Shanghai. In July 2020 ACM Shengwei began a multi-year construction project for a new 1,000,000 square foot development and production center that will incorporate new manufacturing systems and automation technologies and will provide floor space to support significantly increased production capacity and related research and development activities.

The amortization for the three months ended March 31, 2022 and 2021 was $50 and $49, respectively.

The annual amortization of land use right for each of the next five years is as follows:

Year ending December 31,
     
2022
  $
200
 
2023
   
200
 
2024
   
200
 
2025
   
200
 
2026
   
200
 

14

ACM RESEARCH, INC.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)

NOTE 8 – OTHER LONG-TERM ASSETS

At March 31, 2022 and December 31, 2021, other long-term assets consisted of the following:

 
 
March 31,
2022
   
December 31,
2021
 
Prepayment for property - Lingang
 
$
-
   
$
42,111
 
Prepayment for property, plant and equipment and other non-current assets
   
1,159
     
440
 
Prepayment for property - lease deposit
   
718
     
429
 
Security deposit for land use right
   
776
     
773
 
Others
   
906
     
1,264
 
Total other long-term assets
 
$
3,559
   
$
45,017
 

Prepayment for property – Lingang is for the housing in Lingang, Shanghai and consists of (1) the contractual amount to acquire the property and (2) capitalized interest charges on the long-term loan related to acquisition of the property, which amounted to $1,048 at the time of transfer and $986 as of December 31, 2021. Pursuant to contractual agreements, ownership of the housing in Lingang, Shanghai was transferred to ACM Shengwei in January 2022 at a value of $41,497 at the time of transfer, and $42,111 as of December 31, 2021, which reflected the purchase price and cumulative capitalized interest charges related to the long-term loan from China Merchants Bank (note 12). Subsequent to the transfer of ownership, Prepayment for property – Lingang, was reclassed to property plant and equipment (note 6).

NOTE 9 – SHORT-TERM BORROWINGS

At March 31, 2022 and December 31, 2021, short-term borrowings consisted of the following:
 
 
 
March 31,
2022
   
December 31,
2021
 
Line of credit up to RMB 100,000 from Bank of Shanghai Pudong Branch,
           
1)due on June 7,2022 with an annual interest rate of 2.7%. (1)
 
$
4,617
   
$
4,616
 
Line of credit up to RMB 150,000 from China Everbright Bank,
               
1)due on October 21,2022 with annual interest rate of 1.95%.
   
3,408
     
3,407
 
Line of credit up to RMB 60,000 from Bank of Communications,
               
1)due on October 25,2022 with an annual interest rate of 3.85%.
   
1,575
     
1,568
 
Total
 
$
9,600
   
$
9,591
 
(1) Guaranteed by CleanChip

For the three months ended March 31, 2022 and 2021, interest expense related to short-term borrowings amounted to $63 and $189, respectively.

15

ACM RESEARCH, INC.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)

NOTE 10 – OTHER PAYABLE AND ACCRUED EXPENSES

At March 31, 2022 and December 31, 2021, other payable and accrued expenses consisted of the following:

 
 
March 31,
2022
   
December 31,
2021
 
Accrued commissions
  $
11,648
    $
12,507
 
Accrued warranty
   
6,914
     
6,631
 
Accrued payroll
   
8,317
     
5,684
 
Accrued professional fees
   
601
     
785
 
Accrued machine testing fees
   
1,094
     
149
 
Others
   
7,981
     
5,979
 
Total
 
$
36,555
   
$
31,735
 

NOTE 11 – LEASES

The Company leases space under non-cancelable operating leases for several office 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 include one or more options to renew. The exercise of lease renewal options is typically at the Company’s sole discretion; therefore, the majority of renewals to extend the lease terms are not included in the Company’s right-of-use assets and lease liabilities as they are not reasonably certain of exercise. 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.

As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. The Company has a centrally managed treasury function; therefore, based on the applicable lease terms and the current economic environment, it applies a portfolio approach for determining the incremental borrowing rate.

The components of lease expense were as follows:
 
 
 
Three Months Ended March 31,
 
 
 
2022
   
2021
 
Operating lease cost
 
$
647
   
$
515
 
Short-term lease cost
   
175
     
79
 
Lease cost
 
$
822
   
$
594
 

Supplemental cash flow information related to operating leases was as follows for the three months ended March 31, 2022 and 2021:
 
 
 
Three Months Ended March 31,
 
 
 
2022
   
2021
 
Cash paid for amounts included in the measurement of lease
liabilities:
           
Operating cash outflow from operating leases
 
$
822
   
$
594
 

16

ACM RESEARCH, INC.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)

As of March 31, 2022, maturities of outstanding lease liabilities for all operating leases were as follows:

 
 
December 31,
 
2022
  $
1,858
 
2023
   
1,265
 
2024
   
1,018
 
2025
   
56
 
2026
   
37
 
2027
    4  
Total lease payments
  $
4,238
 
Less: Interest
   
(210
)
Present value of lease liabilities
 
$
4,028
 

The weighted average remaining lease terms and discount rates for all operating leases were as follows as of March 31, 2022 and December 31, 2021:

 
 
March 31,
2022
   
December 31,
2021
 
Remaining lease term and discount rate:
           
Weighted average remaining lease term (years)
   
1.68
     
1.37
 
Weighted average discount rate
   
4.37
%
   
4.54
%

NOTE 12 – LONG-TERM BORROWINGS

At March 31, 2022 and December 31, 2021, long-term borrowings consisted of the following:

 
March 31,
2022
   
December 31,
2021
 
Loan from China Merchants Bank
 
$
18,051
   
$
18,390
 
Loans from Bank of China
 

6,734
   

6,977
 
Less: Current portion
   
(2,441
)
   
(2,410
)
   
$
22,344
   
$
22,957
 

The loan from China Merchants Bank is for the purpose of purchasing 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 4.65%. The loan is pledged by the property of ACM Shengwei and guaranteed by ACM Shanghai. As of March 31, 2022, the right certificate of the pledged property has not been obtained and the procedures of the formal pledge registration in the bank had not been completed.

Scheduled principal payments for the outstanding long-term loan as of March 31, 2022 are as follows:

Year ending December 31
     
2022
 
$
1,724
 
2023
   
2,502
 
2024
   
7,470
 
2025
   
1,968
 
2026 and onwards
   
11,121
 
   
$
24,785
 

For the three months ended March 31, 2022 and 2021, respectively, interest related to long-term borrowings of $258 and $317 was incurred, of which $198 and $0 was charged to interest expenses and $60 and $317 was capitalized as property plant and equipment and other long-term assets, respectively.

17

ACM RESEARCH, INC.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)

NOTE 13 – OTHER LONG-TERM LIABILITIES

Other long-term liabilities represent government subsidies received from PRC governmental authorities for development and commercialization of certain technology but not yet recognized. As of March 31, 2022 and December 31, 2021, other long-term liabilities consisted of the following unearned government subsidies:

 
 
March 31,
2022
   
December 31,
2021
 
Subsidies to Stress Free Polishing project, commenced in 2008 and 2017
 
$
737
   
$
791
 
Subsidies to Electro Copper Plating project, commenced in 2014
   
153
     
160
 
Subsidies to other cleaning tools,commenced in 2020
   
979
     
1,014
 
Subsidies to SW Lingang R&D development in 2021
   
5,985
     
5,958
 
Other
   
691
     
524
 
Total
 
$
8,545
   
$
8,447
 

NOTE 14 – LONG-TERM INVESTMENT

On September 6, 2017, ACM and Ninebell Co., Ltd. (“Ninebell”), a Korean company that is one of the Company’s principal material suppliers, entered into an ordinary share purchase agreement, effective as of September 11, 2017, pursuant to which Ninebell issued to ACM ordinary shares representing 20% of Ninebell’s post-closing equity for a purchase price of $1,200, and