ACM Research Inc

(In thousands, except share, percentage and per share data)

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:

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, 2024 included in ACM’s Annual Report on Form 10-K.

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 March 31, 2025 and the results of operations for the three months ended March 31, 2025 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 long-term investments, stock-based compensation arrangements, realization of deferred tax assets, uncertain tax position, 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 March 31, 2025 and December 31, 2024:

The amounts in mainland China do not include short-term and long-term time deposits which in aggregate totaled $30,595 and $30,552 at March 31, 2025 and December 31, 2024, 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 March 31, 2025 and 2024, cash payments from ACM Shanghai and ACM Lingang to ACM California for the procurement of goods and services was $2,674 and $4,648, 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 three months ended March 31, 2025 and 2024, with the exception of sales and services-related transfer-pricing payments in the ordinary course of business, 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.

For the three months ended March 31, 2025 and 2024, interest income related to time deposits was $284 and $624, respectively.

Restricted Cash

As of March 31, 2025, all of the Group’s restricted cash was held by financial institutions located in mainland China, Hong Kong and Korea, and mainly represents cash secured to guarantee delivery of tools.

Fair Value Measurement

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:

The Company did not have any assets and liabilities measured at fair value on a non-recurring basis as of March 31, 2025, 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 three months ended March 31, 2025 and 2024.

Refer to Note 11 for fair value information related to the Company’s outstanding long-term borrowings as of March 31, 2025 and December 31, 2024.

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 months ended March 31, 2025 and 2024.

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 three months ended March 31, 2025 or 2024, 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 1,298,408 and 728,575 stock options for the three months ended March 31, 2025 and 2024, 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 March 31, 2025 and 2024, four customers accounted for 53.6% and two customers accounted for 55.9% of revenue, respectively.

•Accounts receivable concentration. As of March 31, 2025 and December 31, 2024, four customers accounted for 52.4% and four customers accounted for 57.1%, 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 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.

In December 2024, the FASB issued ASU 2024-03: Income Statement--Reporting Comprehensive Income--Expense Disaggregation Disclosures (Subtopic 220-40), which requires additional disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. In January 2025, the FASB issued ASU 2025-01, which clarifies the effective date of ASU 2024-03. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. This ASU should be applied prospectively with the option to apply the standard retrospectively. 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 receivable and contract liabilities balances as of:

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

NOTE 4 –ACCOUNTS RECEIVABLE, NET

At March 31, 2025 and December 31, 2024, accounts receivable consisted of the following:

The movement of the allowance for credit losses for the three months ended March 31, 2025 is as follows:

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, NET

At March 31, 2025 and December 31, 2024, inventories consisted of the following:

At March 31, 2025 and December 31, 2024, 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 $195,107 and $206,018, respectively.

During the three months ended March 31, 2025 and 2024, provision for inventory of $4,523 and $1,025 were recognized in cost of revenue, respectively.

NOTE 6 –PROPERTY, PLANT AND EQUIPMENT, NET

At March 31, 2025 and December 31, 2024, property, plant and equipment consisted of the following:

Depreciation expense for the three months ended March 31, 2025 and 2024 was $2,385 and $2,475, respectively.

At March 31, 2025, land, buildings and plants comprised of $34,790 for the Lingang housing property, $49,764 for the Lingang development and production center, $49,292 for ACM Shanghai's corporate headquarters, and $7,757 for ACM's Oregon facilities, as compared to $34,740, $49,693, $49,221, and $7,757, respectively, at December 31, 2024. The Lingang housing property is pledged as security for loans from China Merchants Bank (Note 11).

Construction in progress primarily reflects costs incurred for certain facilities related to the construction of ACM Shanghai’s Lingang development and production center.

NOTE 7 –OTHER LONG-TERM ASSETS

At March 31, 2025 and December 31, 2024, other long-term assets consisted of the following:

NOTE 8 –SHORT-TERM BORROWINGS

At March 31, 2025 and December 31, 2024, short-term borrowings consisted of the following:

For the three months ended March 31, 2025 and 2024, interest expense related to short-term borrowings amounted to$193 and $213, respectively.

NOTE 9 –OTHER PAYABLES AND ACCRUED EXPENSES

At March 31, 2025 and December 31, 2024, 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 10 –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 Company’s leases also include a right to use state-owned land in mainland China with lease terms of 50 years expiring in 2070, for which an upfront lump-sum payment was made during the year ended December 31, 2022.

The components of lease expense were as follows:

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

As of March 31, 2025, 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, excluding land-use rights, were as follows:

NOTE 11 –LONG-TERM BORROWINGS

At March 31, 2025 and December 31, 2024, long-term borrowings consistedof the following:

In January 2025, the Company entered into a long-term loan facility, amounted $27,860 from China CITIC Bank, of which we drew down the full amount. The loan carries interest at 50 basis points above the one-year People’s Bank of China ("PBOC") benchmark rate, resulting in an effective rate of 3.6% for the three months ended March 31, 2025. Principal repayment shall be made in 6 installments, with final maturity in January 2028.

In August 2024, ACM Shanghai entered into a long-term loan facility, amou nted $139,300, from China Merchants Bank for project expenditures. In January 2025, ACM Shanghai drew down$2,996 under this facility. The loan carries interest at 65 basis points below the five-year PBOC benchmark rate, resulting in an effective rate of 3.0%, for the three months ended March 31, 2025, and will be fully repaid in August 2034. Certain covenants for the facility require ACM Shanghai to either repay 50% of the outstanding principal withintwo months, or repay the loan in accordance with revised payment schedule, if ACM Shanghai does not complete, within three years after then initial drawdown, or before January 2028, a Private Offering with more than RMB 900,000 of proceeds.

In November 2024, the Company entered into a long-term loan facility, amounted $41,790 from Industrial and Commercial Bank of China for the purpose of funding ACM Shanghai's working capital. In February 2025, the Company drew down $20,909 under this facility. The loan carries interest at 75 basis points below the one-year PBOC benchmark rate, resulting in an effective rate of 2.4% for the three months ended March 31, 2025. Principal repayment shall be made in 6 installments, with final maturity in November 2027.

In November 2024, the Company entered into a long-term loan facility, amounted $139,300 from Bank of China for ACM Shanghai project expenditures. In February 2025, the Company drew down $950 under this facility. The loan carries interest at 90 basis points below the five-year PBOC benchmark rate, resulting in an effective rate of 2.7% for the three months ended March 31, 2025. Principal repayment shall be made in 12 installments, with final maturity in June 2034. Certain covenants for the facility require ACM Shanghai’s year-end outstanding interest-bearing notto exceed five timesofits annual EBITDA, and to comply with other non-financial covenants, or Bank of China has the right to suspend the facility, or request ACM Shanghai to accelerate repayment or provide credit enhancement.

As of March 31, 2025 and December 31, 2024, the total carrying amount of long-term loans was $202,475 and $149,997, compared with an estimated fair value of $189,779 and $141,264, 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 March 31, 2025 are as follows:

For the three months ended March 31, 2025 and 2024, interest expense related to long-term borrowings was $1,365 and $570, respectively.

NOTE 12 –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 March 31, 2025 and December 31, 2024, other long-term liabilities consisted of the following unearned government subsidies:

NOTE 13 –LONG-TERM INVESTMENTS

On April 22, 2024, ACM Shanghai entered into an investment agreement with Ninebell Co., Ltd. (“Ninebell”) to invest $16,737 which represented 20% of Ninebell’s total equity interest. In the three months ended December 31, 2024, ACM Shanghai paid the consideration of $16,737 to Ninebell, which was recorded in other long-term assets in the consolidated balance sheet as of December 31, 2024. The share certificate was issued on January 1, 2025. After the share purchase transaction closed on January 1, 2025, the Company owned 36.2% of Nine bell.

For the three months ended March 31, 2025 and 2024, the Company’s share of equity investees’ net income (loss) was $952 and $(520), respectively. For the three months ended March 31, 2025 and 2024, the Company received $0 and $600 dividends from equity investee.

NOTE 14 –SHORT-TERM INVESTMENTS

At March 31, 2025 and December 31, 2024, the components of short-term investments were as follows:

For the three months ended March 31, 2025 and 2024, the net gains (losses) recognized on equity securities were as follows:

For the three months ended March 31, 2025 and 2024 the Company received $0 proceeds from the sale of short-term investments.

NOTE 15 –RELATED PARTY BALANCES AND TRANSACTIONS

Ninebell

Ninebell is an equity investee of ACM and ACM Shanghai (note 13) and is the Company’s principal supplier of robotic delivery system subassemblies used in 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 13) 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 16 –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 March 31, 2025, ACM issued 894,040 shares of Class A common stock upon option exercises by employees. During the three months ended March 31, 2024, ACM issued 950,605 shares of Class A common stock upon option exercises by employees and non-employees.

At March 31, 2025 and December 31, 2024, the number of shares of Class A common stock issued and outstanding was 58,832,925 and 57,938,885, respectively.

At March 31, 2025 and December 31, 2024, the number of shares of Class B common stock issued and outstanding was 5,021,811 and 5,021,811, respectively.

NOTE 17 –STOCK-BASED COMPENSATION

During the three months ended March 31, 2025, the Company issued option grants for 32,000 shares to employees and board members under 2016 Omnibus Incentive Plan. The share-based awards are accounted for as equity awards, are only subject to service vesting conditions, and vest over a period of 4 years for employees and 0.25 year for board members. The Company did not grant any non-employee stock options during the three months ended March 31, 2025.

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 Class A common stock.

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

NOTE 18 –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 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 $2,153 and $4,369 during the three months ended March 31, 2025 and 2024, respectively. The decrease in the Company's effective income tax rate for the three months ended March 31, 2025 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 $16,774 as of March 31, 2025 and December 31, 2024. If recognized, the net impact to effective rate would be $16,638. 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 three months ended March 31, 2025 and 2024, $404 and $339 ofinterest and penalties was recognized, respectively.

We file income tax returns in the United States and 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.

Our effective tax rate differs from statutory rates of 21% for U.S. federal income tax purposes and 25% for mainland China income tax purposes due to the effects of the valuation allowance and certain permanent differences as it pertains to book-tax differences in the treatment of stock-based compensation and non-U.S. research expenses. Our four mainland China subsidiaries, ACM Shanghai, ACM Wuxi, ACM Beijing, and ACM Lingang, are liable for mainland China corporate income taxes at the rates of 15%,25%,25% and 25%, respectively. Pursuant to the Corporate Income Tax Law of mainland China, our mainland China subsidiaries generally would be liable for mainland China corporate income taxes at a rate of 25%. According to Guoshuihan 2009 No. 203, an entity certified as an “advanced and new technology enterprise” is entitled to a preferential income tax rate of 15%. ACM Shanghai was certified as an “advanced and new technology enterprise” in 2012 and again in 2016, 2018, 2021, and 2024 effective until December 31, 2026.

Income tax expense was as follows:

NOTE 19 –COMMITMENTS AND CONTINGENCIES

The Company leases offices under non-cancelable operating lease agreements. See Note 10 for future minimum lease payments under non-cancelable operating lease agreements with initial terms of one year or more.

As of March 31, 2025, the Company had $6,510 of open capital commitments to construction contracts.

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 6 years after the land use right is obtained, 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.

In the normal course of business, the Company is subject to contingencies, including legal proceedings, investigations, 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 March 31, 2025 and December 31, 2024. In the opinion of management, no provision for liability nor disclosure was required as of March 31, 2025 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 March 31, 2025, the Company hadno outstanding legal proceedings.

NOTE 20 –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.

The CODM assesses financial performance for the Company and decides how to allocate resources based on consolidated revenue, gross margin and income from operations. The CODM considers forecasts and actual results on a regular basis when assessing the operating results and making resource decisions. The allocation decisions include top down targets for research and development, sales and marketing, and general and administration expenses, and also for specific budgets for research and development on new product initiatives, or sales and marketing to targeted at specific customer or geographic regions.

Significant expenses within income from operations, as well as within net income, include consolidated cost of revenue, sales and marketing, research and development, and general and administrative, and which are each separately presented on the Condensed Consolidated Statements of Comprehensive Income. Other segment items within net income include interest income, interest expense, income (loss) from equity method investments and other expense (income), net, which are each separately presented on the Condensed Consolidated Statements of Comprehensive Income.

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 21 –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 $30,514 as of both March 31, 2025 and December 31, 2024, and is presented as statutory surplus reserve on the Company’s condensed consolidated balance sheets.