What changed in this filing

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Item 1A. Risk Factors

2022-11-08 compared with 2022-08-09 · 261 added, 319 removed, 20 unchanged (97% of the section changed)

Except as set forth below, there were no material changes to the risk factors discussed in Item 1A, “Risk Factors” of Part I in our Annual

Report and in Item1A, “Risk Factors” of Part II in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.

In addition to the other information set forth in this report, you should carefully consider those risk factors, which

could materially affect our business, financial condition and future operating results.

Except as set forth below, there were no material changes to the risk factors discussed in Item 1A.

“Risk Factors” of

Part I in our Annual Report and in Item 1A.

“Risk Factors” of Part II in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022.

In addition to the other information set forth in this report, you

should carefully consider those risk factors, which could materially affect our business, financial condition and future operating results.

Those risk factors are not the only risks facing our company.

Additional risks and uncertainties not currently known to us or that we currently deem to be

immaterial also may have a material adverse effect on our business, financial condition and operating results.

risks and uncertainties not currently known to us or that we currently deem to be immaterial also may have a material adverse effect on our business, financial condition and operating results.

Risks Related to International Aspects of Our Business

If any PRC central government authority were to determine that existing PRC laws or regulations require

that ACM Shanghai obtain the authority’s permission or approval to continue the listing of ACM Research’s Class A common stock in the United States or if those existing PRC laws and regulations, or interpretations thereof, were to change to

require such permission or approval, ACM Shanghai may be unable to obtain the required permission or approval or may only be able to obtain such permission or approval on terms and conditions that impose material new restrictions and limitations

on operation of ACM Shanghai, either of which could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects and on the trading price of ACM Research Class A common stock.

We could be adversely affected if we are unable to comply with recent and proposed legislation and regulations regarding

improved access to audit and other information and audit inspections of accounting firms, including registered public accounting firms, such as our audit firm since our initial public offering in 2017, operating in

We are one of the companies named in the SEC’s “Conclusive list of issuers identified under the HFCAA.” BDO China had been our independent registered public

accounting firm in recent years, including for the year ended December 31, 2021, and is not inspected by the PCAOB.

The HFCA Act, which became law in December 2020, includes requirements for the SEC to identify issuers whose audit work is performed by auditors that the PCAOB

is unable to inspect or investigate completely because of a restriction imposed by a non-U.S.

authority in the auditor’s local jurisdiction.

The HFCA Act also requires that, to the extent that the PCAOB has been

unable to inspect an issuer’s auditor for three consecutive years since 2021, the SEC shall prohibit the issuer’s securities registered in the United States from being traded on any national securities exchange or

over-the-counter market in the United States.

On March 24, 2021, the SEC adopted interim final amendments to implement congressionally mandated submission and disclosure required of the HFCA Act, and on December 2, 2021,

the SEC adopted final amendments to finalize rules implementing the submission and disclosures in the HFCA Act.

These final amendments apply to registrants that the SEC identifies as having filed an Annual

Report on Form 10-K (or certain other forms) with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB has determined it is unable to

inspect or investigate completely because of a position taken by an authority in that jurisdiction.

Any such identified registrant will be required to submit documentation to the SEC establishing that it is

not owned or controlled by a governmental entity in that foreign jurisdiction, and will also require disclosure in the registrant’s annual report regarding the audit arrangements of, and governmental

influence on, such a registrant.

Furthermore, on June 22, 2021, the U.S.

Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if enacted, would amend the HFCA Act to require the

SEC to prohibit an issuer’s securities from trading on any national securities exchange or over-the-counter market in the United States if the PCAOB has been unable to inspect an issuer’s auditor for two,

rather than three, consecutive years.

On September 22, 2021, the PCAOB adopted a final rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining, as contemplated under

the HFCA Act, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in

that jurisdiction.

On December 16, 2021, the PCAOB designated China and Hong Kong as jurisdictions where the PCAOB is not allowed to conduct full and complete audit inspections and has

identified firms registered in such jurisdictions, including BDO China.

Pursuant to each annual determination by the PCAOB, the SEC will, on an annual basis, identify issuers that have used non-inspected

On March 8, 2022, the SEC published its first “Provisional list of issuers identified under the HFCAA.” Our company was identified on the SEC’s provisional list after we

filed the Annual Report, which included an audit report issued by BDO China.

According to current SEC guidelines, a trading prohibition on our Class A common stock could be invoked as early as 2024.

On March 30, 2022, our company was transferred to the SEC’s “Conclusive list of issuers identified under the HFCAA.”

On August 26, 2022, the PCAOB signed a Statement of Protocol, or SOP, Agreement with the CSRC and China’s Ministry of Finance.

The SOP, together with two protocol agreements

governing inspections and investigation, establishes a specific, accountable framework to make possible complete inspections and investigations by the PCAOB of audit firms based in China and Hong Kong, as

required under U.S.

Pursuant to the fact sheet with respect to the SOP disclosed by the SEC, the PCAOB has sole discretion to select the audit firms, engagements and potential violations that it

inspects or investigates and has the ability to transfer information to the SEC in the normal course.

PCAOB inspectors and investigators can view all audit documentation without redaction, and the PCAOB can

retain any audit information it reviews as needed to support the findings of its inspections and investigations.

In addition, the SOP allows the PCAOB to interview and take testimony of personnel associated

with the audits that the PCAOB inspects or investigates.

However, uncertainties still exist as to whether and how the SOP will be implemented and whether the PCAOB can make a determination that it is able

to inspect and investigate completely audit firms based in mainland China and Hong Kong.

When the PCAOB reassesses its determinations by the end of 2022, it could determine that it is still unable to

inspect and investigate completely audit firms based in mainland China and Hong Kong.

Per current regulations, if ACM Research were to appear three consecutive times on the “Conclusive list of issuers identified under the HFCAA”, which could occur

should our independent auditor that signs our 2022 and 2023 annual report be located in a jurisdiction that does not allow for PCAOB inspections, the value of our securities may significantly decline or become

worthless, and our securities may eventually be delisted.

If enacted, the Accelerating Holding Foreign Companies Accountable Act could reduce the threshold to two consecutive appearances on the “Conclusive List of

issuers identified under the HFCAA”, and thus could trigger a de-listing should our independent auditor that signs our 2022 annual report be located in a jurisdiction that does not allow for PCAOB inspections.

Our independent registered public accounting firm for the year ended December 31, 2022 is Armanino LLP, which is registered with the PCAOB.

On June 30, 2022,

stockholders of ACM Research ratified the appointment of Armanino LLP as our independent auditor for the fiscal year ending December 31, 2022.

Armanino LLP is neither headquartered in the PRC or Hong Kong nor is it

subject to the determinations announced by the PCAOB.

It remains unclear what further actions the SEC, the PCAOB or Nasdaq may take to address these issues and what impact those actions will have on U.S.

such as ours, that have significant operations in the PRC and have securities listed on a U.S.

stock exchange.

Any such actions could materially affect our operations and stock price, including by resulting in our

being de-listed from Nasdaq or being required to engage a new audit firm, which would require significant expense and management time.

If any PRC central government authority were to determine that existing PRC laws or regulations require that ACM Shanghai

obtain the authority’s permission or approval to continue the listing of ACM Research’s Class A common stock in the United States or if those existing PRC laws and regulations, or interpretations thereof, were to

change to require such permission or approval, or if we inadvertently conclude that permissions or approvals are not required, ACM Shanghai may be unable to obtain the required permission or approval or may only be

able to obtain such permission or approval on terms and conditions that impose material new restrictions and limitations on operation of ACM Shanghai, either of which could have a material adverse effect on our

business, financial condition, results of operations, reputation and prospects and on the trading price of ACM Research Class A common stock, which could decline in value or become worthless.

PRC central government authorities have taken steps to preclude, or significantly discourage, certain PRC companies from listing on U.S.

and other exchanges outside the PRC.

Investments activities in the PRC by

non-PRC investors are principally governed by the Encouraged Industries Catalog for Foreign Investment (2020 version) and the Special Administrative Measures for Foreign Investment Access (Negative List 2021), both of which were promulgated by the

PRC’s Ministry of Commerce, or MOFCOM, and National Development and Reform Commission.

These regulations set forth the industries in which foreign investments are encouraged, restricted and prohibited.

Industries that are not listed in any of

these three categories are generally open to foreign investment unless otherwise specifically restricted by other PRC rules and regulations.

We believe that our operations do not fall within any industry that is restricted or prohibited under

these regulations and that the regulations therefore do not apply to us.

PRC-based companies that seek to list their shares in the United States but are subject to PRC restrictions on investments by non-PRC investors sometimes use a special purpose vehicle known as a variable interest

entity, or VIE, created in an off-shore jurisdiction such as the Cayman Islands.

In these structures, a VIE enters into a series of contractual arrangements with the PRC-based operating company and its PRC-based shareholders that afford those

shareholders, rather than the shareholders of the VIE, effective control over the finances and operations of the operating company.

The VIE, effectively a shell company, issues shares that are listed for trading on a U.S.

exchange, but the

enterprise is controlled by the legacy PRC-based shareholders and is subject to PRC laws and regulations.

ACM Research is not a VIE or other special purpose, or shell, company, and its relationship with ACM Shanghai does not involve the types of

contractual arrangements existing between a VIE and a PRC-based operating company.

and other exchanges

outside the PRC.

Investments activities in the PRC by non-PRC investors are principally governed by the Encouraged Industries Catalog for Foreign Investment (2020 version) and the Special Administrative Measures for

Foreign Investment Access (Negative List 2021), both of which were promulgated by the PRC’s Ministry of Commerce, or MOFCOM, and National Development and Reform Commission.

These regulations set forth the industries

in which foreign investments are encouraged, restricted and prohibited.

Industries that are not listed in any of these three categories are generally open to foreign investment unless otherwise specifically restricted by other PRC

rules and regulations.

We believe that our operations do not fall within any industry that is restricted or prohibited under these regulations and that the regulations therefore do not apply to us.

PRC-based companies that seek to list their shares in the United States but are subject to PRC restrictions on investments by non-PRC investors sometimes use a

special purpose vehicle known as a variable interest entity, or VIE, created in an off-shore jurisdiction such as the Cayman Islands.

In these structures, a VIE enters into a series of contractual arrangements with

the PRC-based operating company and its PRC-based shareholders that afford those shareholders, rather than the shareholders of the VIE, effective control over the finances and operations of the operating company.

VIE, effectively a shell company, issues shares that are listed for trading on a U.S.

exchange, but the enterprise is controlled by the legacy PRC-based shareholders and is subject to PRC laws and regulations.

Research is not a VIE or other special purpose, or shell, company, and its relationship with ACM Shanghai does not involve the types of contractual arrangements existing between a VIE and a PRC-based operating

ACM Research is a Delaware corporation founded in California in 1998 that formed ACM Shanghai to conduct business operations in the PRC.

ACM Research controls the

operations of ACM Shanghai through its direct ownership of ACM Shanghai shares, and it also conducts sales and marketing activities focused on sales of ACM Shanghai products in North America, Europe and certain regions in Asia outside mainland

We do not believe that our corporate structure or any other matters relating to our business operations currently require that ACM Shanghai

obtain any permissions or approvals from the China Securities Regulatory Commission, or CSRC, or any other PRC central government authority in connection with ACM’s listing, or

offering for sale in the future, shares of Class A common stock in the United States.

We, including ACM Shanghai, therefore have never solicited any permission or approval from any PRC central government authority in connection with ACM

Research’s seeking and maintaining the listing of Class A common stock in the United States.

In the event that either the CSRC or another PRC central government authority were to determine that existing PRC laws or regulations require that ACM

Shanghai obtain the authority’s permission or approval to continue ACM Research’s listing of Class A common stock in the United States or if those existing PRC laws and regulations, or interpretations thereof, were to change to require such

permission or approval, ACM Shanghai could be unable to obtain any such permission or approval or could be able to obtain such permission or approval only on terms and conditions that impose material new operating or other restrictions and

limitations on ACM Shanghai.

In such circumstances, it would materially and adversely affect the value of Class A common stock.

In addition, ACM Shanghai could face sanctions by the CSRC or other PRC central government authorities or pressure

from the PRC government in various business matters for failure to obtain such permission or approval.

Such potential sanctions or pressure may include fines and penalties on ACM Shanghai’s operations in the PRC, limitations on its operating

privileges in the PRC, delays in or restrictions on the transfer of proceeds from a public offering of ACM Research securities in the United States to ACM Shanghai, restrictions on or prohibition of the payments or remittance of dividends by ACM

Shanghai to ACM Research, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of ACM Research Class A common stock.

PRC central government authorities may intervene in, or influence, ACM Shanghai’s PRC-based operations at any time, and those authorities’ rules and regulations in the PRC can

change quickly with little or no advance notice.

ACM Research controls the operations of ACM Shanghai through its

direct ownership of ACM Shanghai shares, and it also conducts sales and marketing activities focused on sales of ACM Shanghai products in North America, Europe and certain regions in Asia outside mainland China.

We do not believe that our corporate structure or any other matters relating to our business operations currently require that ACM Shanghai obtain any permissions

or approvals from the China Securities Regulatory Commission, or CSRC, or any other PRC central government authority in connection with ACM’s listing, or offering for sale in the future, shares of our Class A common

stock in the United States.

We, including ACM Shanghai, therefore have never solicited any permission or approval from any PRC central government authority in connection with ACM Research’s seeking and maintaining

the listing of our Class A common stock in the United States.

In the event that we inadvertently conclude that permissions or approvals are not required, or either the CSRC or another PRC central government authority

were to determine that existing PRC laws or regulations require that ACM Shanghai obtain the authority’s permission or approval to continue ACM Research’s listing of Class A common stock in the United States or if

those existing PRC laws and regulations, or interpretations thereof, were to change to require such permission or approval, ACM Shanghai could be unable to obtain any such permission or approval or could be able to

obtain such permission or approval only on terms and conditions that impose material new operating or other restrictions and limitations on ACM Shanghai.

In such circumstances, it would materially and adversely

affect the value of our Class A common stock, which may decline in value or become worthless.

In addition, ACM Shanghai could face sanctions by the CSRC or other PRC central government authorities or pressure from

the PRC government in various business matters for failure to obtain such permission or approval.

Such potential sanctions or pressure may include fines and penalties on ACM Shanghai’s operations in the PRC,

limitations on its operating privileges in the PRC, delays in or restrictions on the transfer of proceeds from a public offering of ACM Research securities in the United States to ACM Shanghai, restrictions on or

prohibition of the payments or remittance of dividends by ACM Shanghai to ACM Research, or other actions that could have a material and adverse effect on our business, financial condition, results of operations,

reputation and prospects, as well as the trading price of ACM Research Class A common stock, which could decline in value or become worthless.

PRC central government authorities may intervene in, or influence, ACM Shanghai’s PRC-based operations at any time, and

those authorities’ rules and regulations in the PRC can change quickly with little or no advance notice.

The business of ACM Shanghai is subject to complex laws and regulations in the PRC that can change quickly with little or no advance notice.

date, beyond the COVID-19-related restrictions in 2022, we have not experienced such intervention or influence by PRC central government authorities or a change in those authorities’ rules and regulations that have had a material impact of ACM

Shanghai or ACM Research.

To date, beyond the

COVID-19-related restrictions in 2022, we have not experienced such intervention or influence by PRC central government authorities or a change in those authorities’ rules and regulations that have had a material

impact of ACM Shanghai or ACM Research.

We cannot assure you, however, that future changes in PRC laws and regulations will not materially and adversely affect our PRC-based operations.

Intellectual Property .

Our commercial success depends in part on our ability to obtain and maintain patent and trade secret protection for our intellectual property, including our SAPS, TEBO, Tahoe, ECP, furnace and other

technologies and the design of our Ultra C equipment.

See “Risks Related to Our Intellectual Property and Data Security ¾ Our success depends

on our ability to protect our intellectual property, including our SAPS, TEBO, Tahoe, ECP, furnace and other technologies .” in Item 1A, “Risk Factors” of Part I of our Annual Report.

The significant majority of our intellectual

property has been developed in the PRC and is owned by ACM Shanghai.

Implementation and enforcement of intellectual property-related laws in the PRC has historically been lacking due primarily to ambiguities in PRC intellectual property

See “Risks Related to Our Intellectual Property and Data Security ¾ We may not be able to protect our intellectual property rights

throughout the world, including the PRC, which could materially, negatively affect our business .” in Item 1A, “Risk Factors” of Part I of our Annual Report.

In the event PRC central government authorities were to significantly

revise or revamp the current scope and structure of intellectual property protection in the PRC, our ability to protect and enforce our intellectual property rights for our key proprietary technologies may be adversely impacted and

competitors may be able to match our technologies and tools in order to compete with us.

Our commercial success depends in part on our ability to obtain and maintain patent and trade secret protection for our intellectual property,

including our SAPS, TEBO, Tahoe, ECP, furnace and other technologies and the design of our Ultra C equipment.

See “Risks Related to Our Intellectual Property and Data Security ¾ Our success depends on our ability to protect our intellectual property, including our SAPS, TEBO, Tahoe, ECP, furnace and other technologies .”

in Item 1A, “Risk Factors” of Part I of our Annual Report.

The significant majority of our intellectual property has been developed in the PRC and is owned by ACM Shanghai.

Implementation and enforcement of

intellectual property-related laws in the PRC has historically been lacking due primarily to ambiguities in PRC intellectual property law.

See “Risks Related to Our Intellectual Property and Data Security ¾ We may not be able to protect our intellectual property rights throughout the world, including the PRC, which could materially,

negatively affect our business .” in Item 1A, “Risk Factors” of Part I of our Annual Report.

In the event PRC central government authorities were to significantly revise or revamp the current scope

and structure of intellectual property protection in the PRC, our ability to protect and enforce our intellectual property rights for our key proprietary technologies may be adversely impacted and competitors

may be able to match our technologies and tools in order to compete with us.

Title Defect in Leased Premises .

We conduct research and development, service support operations, and a portion of our manufacturing at ACM Shanghai’s headquarters located in the Zhangjiang Hi Tech Park in Shanghai, which ACM

Shanghai leases from Zhangjiang Group.

Zhangjiang Group has not obtained a certificate of property title for the premises, although it has represented to ACM Shanghai that it has the right to rent the premises to ACM Shanghai.

adjustment in local regional overall planning of Shanghai, or any other reason, results in the demolition of such premises, the premises could not continue to be leased to ACM Shanghai and the day-to-day production and operation of ACM

Shanghai would be materially and adversely affected.

See Item 2, “Properties” of Part I of our Annual Report.

We conduct research and development, service support operations, and a portion of our manufacturing at ACM Shanghai’s headquarters located in

the Zhangjiang Hi Tech Park in Shanghai, which ACM Shanghai leases from Zhangjiang Group.

Zhangjiang Group has not obtained a certificate of property title for the premises, although it has represented to ACM

Shanghai that it has the right to rent the premises to ACM Shanghai.

If any adjustment in local regional overall planning of Shanghai, or any other reason, results in the demolition of such premises, the

premises could not continue to be leased to ACM Shanghai and the day-to-day production and operation of ACM Shanghai would be materially and adversely affected.

See Item 2, “Properties” of Part I of our

Annual Report.

COVID-19 Pandemic .

We conduct substantially all of our

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, including implementation by PRC

government authorities of “spot” and full-city quarantines in the city of Shanghai, where substantially all of our operations are located.

Furthermore, a number of our key customers have substantial operations based in operations areas

of the PRC, including in the City of Shanghai, which required us to defer, in the first quarter of 2022, shipments of finished products to those customers.

Protective measures taken by PRC government authorities in upcoming months could

result in closures or reductions of PRC operations or production, whether of ACM Shanghai or of some of its key customers, or other business interruptions, any of which could materially adversely affect our operations.

See “ Substantially all of our operations, as well as significant operations of a number of our key customers, are located in areas of the PRC impacted by the

COVID‑19 pandemic, and our operations have been, and may continue to be, adversely affected by the effects of PRC restrictions imposed as the result of COVID‑19.

We conduct substantially all of our 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, including implementation by PRC government authorities of “spot” and full-city quarantines in the city of Shanghai, where

substantially all of our operations are located.

Furthermore, a number of our key customers have substantial operations based in operations areas of the PRC, including in the City of Shanghai, which required

us to defer, in the first quarter of 2022, shipments of finished products to those customers.

Protective measures taken by PRC government authorities in upcoming months could result in closures or reductions

of PRC operations or production, whether of ACM Shanghai or of some of its key customers, or other business interruptions, any of which could materially adversely affect our operations.

See “ Substantially all of our operations, as well as significant operations of a number of our key customers, are located in areas of the PRC impacted by the COVID‑19 pandemic, and

our operations have been, and may continue to be, adversely affected by the effects of PRC restrictions imposed as the result of COVID‑19.

” in Item 1A, “Risk Factors” of Part II of this report.

Data Security .

The Standing Committee of the National People’s Congress, or the Standing Committee, has promulgated the Cyber Security Law, which imposes requirements on entities who build and operate the PRC’s internet

architecture or provide services in the PRC over the internet, and the Data Security Law, which imposes data security and privacy obligations on entities and individuals carrying out data activities.

The Data Security Law also provides for

a national security review procedure for data activities that may affect national security and imposes export restrictions on certain data an information.

ACM Shanghai is not subject to the existing restrictions imposed by the Cyber

Security Law or the Data Security Law, in part because its business operations do not involve the collection, processing or use of data or information involving personal privacy or private information of customers.

In addition, ACM Shanghai

is subject to oversight by the Cyberspace Administration of China, or the CAC, regarding data security.

ACM Shanghai does not collect or maintain personal information except for routine personal information necessary to process payroll

payments and other benefits and emergency contact information, and as a result, ACM Shanghai is not currently subject to significant restrictions or limitations in addressing and managing data security issues and complying with CAC

To date, ACM Shanghai has not been involved in any investigations on cybersecurity review initiated by the CAC or any related PRC central government authority and has not received any inquiry, notice, warning, or sanction in

such respect.

Cybersecurity is increasingly a focus of the PRC central government, however, and the CAC or other PRC central government authorities could require ACM Shanghai to comply with additional, and more restrictive, PRC

cybersecurity regulations, which could cause ACM Shanghai to make changes to its operations that could materially harm our business, financial condition, results of operations, reputation and prospects.

Committee of the National People’s Congress, or the Standing Committee, has promulgated the Cyber Security Law, which imposes requirements on entities who build and operate the PRC’s internet architecture

or provide services in the PRC over the internet, and the Data Security Law, which imposes data security and privacy obligations on entities and individuals carrying out data activities.

The Data Security

Law also provides for a national security review procedure for data activities that may affect national security and imposes export restrictions on certain data an information.

ACM Shanghai is not subject

to the existing restrictions imposed by the Cyber Security Law or the Data Security Law, in part because its business operations do not involve the collection, processing or use of data or information

involving personal privacy or private information of customers.

In addition, ACM Shanghai is subject to oversight by the Cyberspace Administration of China, or the CAC, regarding data security.

does not collect or maintain personal information except for routine personal information necessary to process payroll payments and other benefits and emergency contact information, and as a result, ACM

Shanghai is not currently subject to significant restrictions or limitations in addressing and managing data security issues and complying with CAC regulations.

To date, ACM Shanghai has not been involved

in any investigations on cybersecurity review initiated by the CAC or any related PRC central government authority and has not received any inquiry, notice, warning, or sanction in such respect.

cybersecurity is increasingly a focus of the PRC central government.

If the CAC or other PRC central government authorities should in the future require ACM Shanghai to comply with these or additional, or

more restrictive, PRC cybersecurity regulations, it could require ACM Shanghai to make changes to its operations, and any failure to satisfy or delay in meeting such requirements may subject ACM Shanghai to

restrictions and penalties imposed by the CAC or other PRC regulatory authorities, which may include regulatory actions, fines and penalties on our operations in the PRC, which could materially harm our

business, financial condition, results of operations, reputation and prospects.

Anti-Monopoly .

A number of PRC laws and regulations have established procedures and requirements that could make merger and acquisition activities in China by foreign investors more time consuming and complex.

These laws and

regulations, which include the Anti-Monopoly Law and the Rules of the Ministry of Commerce on Implementation of Security Review System of Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, impose requirements that in

some instances that MOFCOM be notified in advance of, for example, any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise.

In addition, such Rules specify that mergers and acquisitions by

foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to

strict review by MOFCOM.

In February 2021 the Anti-Monopoly Committee of the State Council published the Anti-Monopoly Guidelines for the Internet Platform Economy Sector, which stipulate that any concentration of undertakings involving

VIEs is subject to anti-monopoly review.

A number of PRC laws and regulations have established procedures and requirements that could make merger and acquisition activities in China by foreign

investors more time consuming and complex.

These laws and regulations, which include the Anti-Monopoly Law and the Rules of the Ministry of Commerce on Implementation of Security Review System of Mergers and

Acquisitions of Domestic Enterprises by Foreign Investors, impose requirements that in some instances that MOFCOM be notified in advance of, for example, any change-of-control transaction in which a foreign

investor takes control of a PRC domestic enterprise.

In addition, such Rules specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and

acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by MOFCOM.

In February 2021, the

Anti-Monopoly Committee of the State Council published the Anti-Monopoly Guidelines for the Internet Platform Economy Sector, which stipulate that any concentration of undertakings involving VIEs is subject

to anti-monopoly review.

Those Guidelines provide more stringent rules for Internet platform operators, including regulations on the use of data and algorithms, technology and platform to commit abusive acts.

for the Security Review for Foreign Investment, which was promulgated jointly by National Development and Reform Commission and MOFCOM effective January 18, 2021, and the Standing Committee on Amending the Anti-Monopoly Law of the People’s

Republic of China, which was promulgated by the Standing Committee effective August 1, 2022, delineated provisions concerning the security review procedures on foreign investment, including the types of investments subject to review and the

scopes and procedures of the review.

ACM Shanghai does not have the concentration of business operators stipulated in the Anti-Monopoly Law, and our operations and activities to date have not otherwise subjected us to restrictive provisions

or limitations set forth inapplicable PRC laws and regulations govern merger and acquisition activities.

Among other things, ACM Shanghai’s business operations do not constitute identified “national defense and security” concerns associated

with the arms industry, any industry ancillary to the arms industry, or any other field related to national defense security.

We cannot assure you, however, that future changes in PRC laws and

regulations governing mergers and acquisitions, including activities in the PRC by foreign investors, will not extend or otherwise modify existing requirements, which could materially and adversely affect our PRC-based operations or our

ability to expand by investments or acquisitions.

The Measures for the Security Review for Foreign Investment, which was promulgated jointly by National Development and Reform Commission and MOFCOM effective January 18, 2021, and the Standing Committee on

Amending the Anti-Monopoly Law of the People’s Republic of China, which was promulgated by the Standing Committee effective August 1, 2022, delineated provisions concerning the security review procedures on

foreign investment, including the types of investments subject to review and the scopes and procedures of the review.

ACM Shanghai does not have the concentration of business operators stipulated in the

Anti-Monopoly Law, and our operations and activities to date have not otherwise subjected us to restrictive provisions or limitations set forth in applicable PRC laws and regulations govern merger and

acquisition activities.

Among other things, ACM Shanghai’s business operations do not constitute identified “national defense and security” concerns associated with the arms industry, any industry ancillary

to the arms industry, or any other field related to national defense security.

We cannot assure you, however, that future changes in PRC laws and regulations governing mergers and acquisitions, including

activities in the PRC by foreign investors, will not extend or otherwise modify existing requirements, which could materially and adversely affect our PRC-based operations or our ability to expand by

investments or acquisitions.

In the ordinary course of business, ACM Shanghai has obtained all of the permits and licenses it believes are necessary for it to operate in the PRC.

ACM Shanghai may be adversely affected, however, by the complexity,

uncertainties and changes in PRC laws and regulations applicable to, or otherwise affecting, the semiconductor equipment industry and related businesses, and any lack of requisite approvals, licenses or permits applicable to ACM Shanghai’s

business may have a material adverse effect on its business and results of operations.

may be adversely affected, however, by the complexity, uncertainties and changes in PRC laws and regulations applicable to, or otherwise affecting, the semiconductor equipment industry and related businesses,

and any lack of requisite approvals, licenses or permits applicable to ACM Shanghai’s business may have a material adverse effect on its business and results of operations.

Trade Policies .

Since 2018, general trade tensions between the United States and the PRC have escalated.

See “Regulatory Risks — Changes in government trade policies could limit the demand for our

tools and increase the cost of our tools.” in Item 1A, “Risk Factors” of Part I of our Annual Report.

See “Regulatory Risks — Changes in

government trade policies could limit the demand for our tools and increase the cost of our tools.” in Item 1A, “Risk Factors” of Part I of our Annual Report.

The imposition of tariffs by the U.S.

and PRC governments and the surrounding economic uncertainty may negatively impact the

semiconductor industry, including reducing the demand of fabricators for capital equipment such as our tools.

Further changes in trade policy, tariffs, additional taxes, restrictions on exports or other trade barriers, or restrictions on

supplies, equipment, and raw materials including rare earth minerals, may limit the ability of our customers to manufacture or sell semiconductors or to make the manufacture or sale of semiconductors more expensive and less profitable,

which could lead those customers to fabricate fewer semiconductors and to invest less in capital equipment such as our tools.

In addition, if the PRC were to impose additional tariffs on raw materials, subsystems or other supplies that we

source from the United States, our cost for those supplies would increase.

As a result of any of the foregoing events, the imposition or new or additional tariffs may limit our ability to manufacture tools, increase our selling and/or

manufacturing costs, decrease margins, or inhibit our ability to sell tools or to purchase necessary equipment and supplies, which could have a material adverse effect on our business, results of operations, or financial conditions.

Moreover, by imposing industrial policies and other economic measures, such as control of foreign exchange, taxation and foreign investment, the PRC central government exerts considerable direct and indirect

influence on the development of the PRC economy.

Other political, economic and social factors may also lead to further legal and regulatory changes and reforms, which may adversely effect our operations and business development.

The PRC central government may determine to exert additional control over offerings conducted overseas or foreign investment in PRC-based issuers, which could result in a

material change in operations of ACM Shanghai and the value of ACM Research Class A common stock.

The PRC central government may determine to exert additional control over securities offerings conducted overseas and/or foreign investment in

PRC-based issuers, which could result in a material adverse change in operations of ACM Shanghai and the cause the value of ACM Research Class A common stock to significantly decline.

See also “ ¾ If any PRC central government authority were to determine that existing PRC laws or regulations require that ACM Shanghai obtain the

authority’s permission or approval to continue the listing of ACM Research’s Class A common stock in the United States or if those existing PRC laws and regulations, or interpretations thereof, were to change to require such permission or

approval, ACM Shanghai may be unable to obtain the required permission or approval or may only be able to obtain such permission or approval on terms and conditions that impose material new restrictions and limitations on operation of ACM

Shanghai, either of which could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects and on the trading price of ACM Research Class A common stock.

It may be difficult for overseas regulators to conduct investigations or collect evidence within the PRC.

Stockholder claims or regulatory investigations that are common in the United States generally are difficult to pursue as a matter of law or practicality in the PRC.

For example, in the PRC, there are significant

legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside of the PRC.

Although the authorities in the PRC may establish a regulatory cooperation mechanism with the securities regulatory

authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical

cooperation mechanism.

Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection

activities within the territory of the PRC.

While detailed interpretation of or implementing rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence

collection activities within the PRC may further increase difficulties faced by you in protecting your interests.

Because certain of our assets are located outside of the United States and certain of our directors and officers reside outside of the United States, it may be difficult for you

to enforce your rights based on the U.S.

federal securities laws against such assets or officers and directors or to enforce a judgment of a United States court against assets or officers and directors in the PRC.

While ACM Research is a Delaware corporation, certain of our officers and directors are nonresidents of the United States, and certain of our assets are located in the PRC, and the operations of ACM Shanghai are

conducted in the PRC.

It may, therefore, not be possible to effect service of process on such persons in the United States, and it may be difficult to enforce any judgments rendered against them or any of our assets that are located overseas.

Moreover, there is doubt whether courts in the PRC would enforce (a) judgments of United States courts against ACM Shanghai, our directors or officers based on the civil liability provisions of the securities laws of the United States or any state,

or (b) in original actions brought in the PRC, liabilities against us or any nonresidents based upon the securities laws of the United States or any state.

Risks Related to the COVID–19 Pandemic

Substantially all of our operations, as well as significant operations of a number of our key customers, are located in areas of the PRC impacted by the

COVID‑19 pandemic, and our operations have been, and may continue to be, adversely affected by the effects of PRC restrictions imposed as the result of COVID‑19.

We conduct substantially all of our 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 quarantines,” under which a positive polymerase chain reaction, or PCR, or other tests would result in the quarantining of individual buildings, groups of buildings, or even full

neighborhoods.

The policies were later expanded to full-city restrictions, including in the City of Shanghai, where substantially all of our operations are located.

COVID-19 related restrictions in Shanghai began to limit employee access to, and

logistics activities of, our offices and production facilities in the Pudong district of Shanghai during in the first quarter of 2022, and therefore limited our ability to ship finished products to customers and to produce new products.

quarantines in mid-March 2022 began to impact a number of our employees and led to a closure of our administrative and R&D offices in Zhangjiang in the Pudong district.

A subsequent restriction that encompassed the entire Pudong region of

Shanghai was imposed in late March 2022 and impacted the operation of our Chuansha production facility.

Furthermore, a number of our key customers have substantial operations based in operations areas of the PRC, including in the City of Shanghai, subject to the full-city restrictions, which have

been limiting the operations of those customers since the first quarter of 2022, including inhibiting their ability to receive, implement, operate and evaluate new tools for their manufacturing facilities.

As a result, in some cases, we have been

required to defer shipments of finished products to these customers because of operational and logistics limitations affecting our customers rather than, or in addition to, us.

We anticipate that the effects of the PRC restrictions may continue for several months, with a gradual return of PRC operations and global logistics as Shanghai and other areas in

the PRC begin to reopen.

We cannot assure that closures or reductions of PRC operations or production, whether of our company or of some of our key customers,

will not be extended or re-introduced in the second half of 2022 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, which would

continue to affect our operations adversely.

As the result of administrative delays in the PRC related to the COVID-19 pandemic, ACM Research’s indirect subsidiary ACM Shengwei has not been able to

obtain the right certificate of property in Lingang, Shanghai as required by its Loan and Mortgage Contract, and our liquidity, financial position and business would be adversely affected if the lender bank were to assert successfully that the

failure to obtain the right certificate is a breach of the Loan and Mortgage Contract.

In connection with its financing of the purchase of housing units in Lingang, Shanghai, or the Property, in November 2020 ACM Shengwei, a direct

subsidiary of ACM Shanghai and indirect subsidiary of ACM Research, entered into a Loan and Mortgage Contract, or the Loan Agreement, with China Merchants Bank Co., Ltd., Shanghai Pilot Free Trade Zone Lin-Gang Special Area Sub-branch, or the

Lender, pursuant to which the ACM Shengwei obtained a loan in the aggregate amount of $19.6 million.

The loan under the Loan Agreement is secured by a pledge of the Property, which ACM Shangwei’s subsidiary received ownership of in January 2022,

and guaranteed by ACM Shanghai.

Under the Loan Agreement, ACM Shengwei must deliver the right certificate of the Property within sixty days of the execution of the Loan Agreement or the Lender has the right to, among other things, declare a

breach of contract and enforce its remedies under the Loan Agreement, which remedies include the ability to declare any borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable.

As of the date

of this report, ACM Shengwei and its developer have been unable to obtain the required right certificate of the Property due to administrative difficulties related to the COVID‑19 pandemic and, as a result, the procedures of the formal pledge

registration by the Lender have not been completed.

The Lender has acknowledged that it is aware of the cause of the delay in ACM Shengwei’s delivery of the right certificate of the Property and has not taken any action to date as a result of the

delay, but the Lender could at any time assert that the delay is a breach of contract and, among other remedies, could seek to declare the amounts owing under the Loan Agreement to be due and payable.

Any such assertion would require that we

incur legal fees and spend management time in responding and could result in uncertainties with respect to ownership and management of the Property.

Moreover, if we were to be unsuccessful in defending against such assertion and the amounts

outstanding under the Loan Agreement were to be accelerated, ACM Shengwei, and ACM Shanghai as guarantor, may not have sufficient cash or be able to obtain refinancing, or may need to divert funds from other planned projects and uses, in order to

repay the amounts due, which would harm our liquidity, financial position and business.

As the result of COVID-19 related restrictions in Shanghai,ACM Research’s indirect subsidiary ACM Shengwei

may be unable to achieve certain performance milestones required by its Grant Contract for State-owned Construction Land Use Right in Shanghai City, and our liquidity, financial position and business would be adversely affected if ACM Shengwei

is subject to penalties or loses its rights to the use of the granted land and any partially completed facilities on the land.

In 2020 ACM Shanghai, through its wholly-owned subsidiary ACM Shengwei, entered into a Grant Contract for State-owned Construction Land Use Right

in Shanghai City (Category of R&D Headquarters and Industrial Projects), or the Grant Agreement, with the China (Shanghai) Pilot Free Trade Zone Lin-gang Special Area Administration, or the Grantor in connection with ACM Shengwei’s

obtaining of rights to use approximately 43,000 square meters (10.6 acres) of land in the Lingang Heavy Equipment Industrial Zone of Lin-gang Special Area of China (Shanghai) Pilot Free Trade Zone, or the Land Use Right, for a period of fifty

years, commencing on the date of delivery of the land in July 2020, or the Delivery Date.

In connection with the land use rights, ACM Shengwei paid a performance deposit of RMB 12.3 million ($1.9 million) to secure its achievement of

certain milestones, consisting of:

(a) the start of construction within 6 months after the Delivery Date (60% of the performance deposit); (b) the completion of construction within 30 months after the Delivery Date (20% of the performance

deposit), or Construction Completion Milestone; and (c) the start of production within 42 months after the Delivery Date (20% of the performance deposit), or Production Start Milestone.

If the achievement the Construction Completion Milestone

or the Production Start Milestone is delayed or abandoned, ACM Shengwei may be subject to penalties and may lose its rights to both the use of the granted land and any partially completed facilities on that land.

As a result of COVID-19 related restrictions, ACM Shengwei has experienced delays and does not expect to timely meet the Construction Completion

Milestone and intends to file an extension request with respect to both the Consturction Completion Milestone and the Production Start Milestone.

There is no guarantee that an extension will be granted, and if granted, that ACM Shengwei will be

able to meet any subsequently agreed to timeline, in which the portion of the performance deposit related to achieving the Construction Completion Milestone or the performance deposit related to achieving the Production Start Milestone may be

subject to forfeiture.

Additionally, if achievement of the Construction Completion Milestone is delayed is more than one year, the Grantor is entitled to terminate the Grant Agreement and take back the Land Use Right, in exchange for a refund

of the grant fees for the remaining land use term after deducting the deposit agreed under the Grant Agreement and refund the deposit related to the Production Start Milestone.

We cannot guarantee that the refund of the fees will reflect fair

market value of the Land Use Right or that they would cover the expended costs of ACM Shengwei with respect to the Grant Agreement and the Land Use Right.

Moreover, loss of the deposit, or more significantly, the Land Use Right could

significantly negatively impact our liquidity, financial position and business.

The exacerbation or further continuation of currently challenging global systemic economic and financial conditions could adversely affect our business, results of operations

and financial condition.

Any prolonged slowdown in the PRC, United States or global economy may have a negative impact on our business, results of operations and financial condition.

Market reactions to the global outbreak of COVID-19 have

negatively affected the world’s financial markets since March 2020, and a continuation of those reactions may cause a potential slowdowns of the local, regional and global economy.

Financial and other markets in the United States and worldwide have

experienced significant volatility reflecting uncertainty over, among other things, (a) the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading

economies, including the United States and the PRC, (b) unrest in Ukraine, the Middle East and Africa, and (c) the rising level of inflation in major industrial countries, including the United States, and worries that efforts to curb inflation may

result in an economic recession.

General inflation, including rising energy prices, interest rates and wages, could adversely impact our business by increasing our operating and borrowing costs as well as limiting the amount of capital available

for customers to purchase our products.

This economic turmoil has had, and could continue to have, a number of repercussions on our business, including significant decreases in orders from our customers, business slowdowns or cessations at key

suppliers resulting in delays in our product deliveries, increased raw material prices leading to increased production costs that we may not be able to pass onto customers, and business challenges at customers resulting in the inability to obtain

credit to finance purchases of our products or even insolvency, and counterparty failures negatively impacting our operations and sales.

Any systemic economic or financial crisis could cause revenues for the semiconductor industry as a whole to

decline dramatically, which could materially and adversely affect our results of operations.

We rely on third parties to manufacture and transport significant portions of our tools and our failure to manage our relationships with these parties could harm our

relationships with our customers, increase our costs, decrease our sales and limit our growth.

Our tools are complex and require components and subassemblies having a high degree of reliability, accuracy and performance.

We rely on third

parties to manufacture and deliver most of the subassemblies and supply most of the components used in our tools.

Accordingly, we cannot directly control our delivery schedules and quality assurance.

This reliance on third parties could result in

shortages or quality assurance problems.

In addition, supply chain constraints have intensified due to a variety of factors, including the ongoing COVID-19 pandemic and the June 2022 truck driver strike in South Korea, where certain of our

operations and customers are located.

What changed 10-Q

Item 1A. Risk Factors