United States securities and exchange commission logo
July 12, 2022
Mark McKechnie
Chief Financial Officer, Executive Vice President and Treasurer
ACM Research, Inc.
42307 Osgood Road, Suite I
Fremont , California 94539
Re: ACM Research, Inc.
Form 10-K for the
Fiscal Year Ended December 31, 2021
Form 10-Q for
Fiscal Quarter Ended March 31, 2022
File No. 001-38273
Dear Mr. McKechnie:
We have reviewed your filings and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 10-K for Fiscal Year Ended December 31, 2021
Item 1A. Risk Factors, page 19
1. Revise your risk
factors to acknowledge that if the PRC government determines that your
structure does not
comply with PRC regulations, or if these regulations change or are
interpreted differently
in the future, your securities may decline in value or become
worthless if the
determinations, changes, or interpretations result in your inability to assert
control over the assets
of your PRC subsidiaries that conduct all or substantially all of
your operations.
2. Given the Chinese
government s significant oversight and discretion over the conduct of
your business, please
revise to highlight separately the risk that the Chinese government
may intervene or
influence your operations at any time, which could result in a material
change in your
operations and/or the value of your securities. Also, given recent
statements by the
Chinese government indicating an intent to exert more oversight and
control over offerings
that are conducted overseas and/or foreign investment in China-
Mark McKechnie
FirstName LastNameMark McKechnie
ACM Research, Inc.
Comapany
July NameACM Research, Inc.
12, 2022
July 12,
Page 2 2022 Page 2
FirstName LastName
based issuers, acknowledge the risk that any such action could
significantly limit or
completely hinder your ability to offer or continue to offer
securities to investors and
cause the value of such securities to significantly decline or be
worthless.
3. In light of recent events indicating greater oversight by the
Cyberspace Administration of
China (CAC) over data security, particularly for companies seeking to
list on a foreign
exchange, please revise your disclosure to explain how this oversight
impacts your
business and your securities and to what extent you believe that you
are compliant with
the regulations or policies that have been issued by the CAC to date.
4. We note that one or more of your officers or directors are located in
China. Please revise
to include both risk factor disclosure as well as a separate
Enforceability section to
address the difficulty of bringing actions against these individuals
and enforcing
judgments against them.
Item 7. Management s Discussion and Analysis of Financial Condition and
Results of
Operations
Sales and Marketing, page 60
5. Please clarify why travel and entertainment expenses associated with
the installation of
tools is included in sales and marketing expenses.
Research and Development, page 60
6. Please clarify why travel expenses associated with customer support
are included in
research and development expense.
How We Evaluate Our Operations, page 63
7. Disclose why you believe "shipments" is a useful measure for investors
given that it
includes items for which you may not receive revenue. Disclose what
portion of
shipments were not accepted and revenue was not recognized. Disclose
what portion
relates to (a) a "repeat" delivery to a customer of a type of tool
that the customer has
previously accepted, for which you recognize revenue upon delivery,
and what portion
relates to (b) a first-time delivery of a first tool to a
customer on an approval basis, for
which you may recognize revenue in the future if contractual
conditions are met, or if a
purchase order is received.
8. You discuss and analyze the fluctuation in Adjusted EBITDA, Free Cash
Flow, and
Adjusted Operating Income before discussing the fluctuation of Net
Income, Cash Flow
from Operations, and Income from Operations, the most directly
comparable GAAP
measures. Please revise to give greater or equal prominence to the
GAAP measures.
Refer to Item 10(e)(1)(i)(A) of Regulation S-K and Question 102.10 of
the Division of
Corporation Finance C&DIs on Non-GAAP Financial Measures. Apply this
comment to
your Form 10-Q for the fiscal quarter ended March 31, 2022,
accordingly.
Mark McKechnie
FirstName LastNameMark McKechnie
ACM Research, Inc.
Comapany
July NameACM Research, Inc.
12, 2022
July 12,
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9. Your calculation of free cash flow differs from the typical
calculation of this measure (i.e.,
cash flows from operations less capital expenditures). In order to
avoid potential
confusion, please revise the title of your non-GAAP measure to
adjusted free cash flow or
something similar. Refer to Question 102.07 of the Non-GAAP Compliance
and
Disclosure Interpretations. Apply this comment to your Form 10-Q for
the fiscal quarter
ended March 31, 2022, accordingly.
Critical Accounting Policies and Estimates
Revenue Recognition , page 67
10. You state, "All of our products were sold in stand-alone arrangements,
we do not have
observable SSPs for most performance obligations as they are not
regularly sold on a standalone basis. Production, delivery and
installation of a product,
together with provision of a warranty, are a single unit of
accounting." Aspects of your
disclosure appear contradictory, please clarify. Disclose each
specific performance
obligation and how transaction price was determined.
Results of Operations, page 71
11. Please expand your results of operations discussion and analysis to
describe the
underlying reasons for material changes in quantitative and
qualitative terms. For
example, you disclose the increase and decrease in revenue for product
types, but do not
discuss the underlying reasons for the change. This disclosure should
be expanded for
each line item that materially changed from period-to-period. We refer
to guidance in
Item 303 of Regulation S-K. As applicable, also apply this comment to
your Form 10-Q
for the fiscal quarter ended March 31, 2022.
Liquidity and Capital Resources, page 76
12. Please clarify this statement, "We do not expect that our anticipated
cash needs for the
next twelve months will require our receipt of any PRC government
subsidies."
Specifically, disclose the relationship between you, your
subsidiaries, and the PRC
government. Disclose how it is decided if you or your subsidiaries
should receive PRC
government subsidies.
13. Expand your liquidity discussion to analyze your ability to generate
and obtain adequate
amounts of cash to meet your requirements and your plans for cash in
the long-term (i.e.,
beyond the next 12 months). We refer to guidance in Item 303(b)(1) of
Regulation S-K.
Mark McKechnie
FirstName LastNameMark McKechnie
ACM Research, Inc.
Comapany
July NameACM Research, Inc.
12, 2022
July 12,
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FirstName LastName
14. With regard to the Shengwei's Grant Contract for State-owned
Construction Land Use
Right in Shanghai City of the "Grant Agreement," disclose if the
milestones noted on page
76 have been achieved and whether penalties were charged. In addition:
disclose if you were in compliance with the Grant Agreement
covenants;
disclose potential liquidating damages associated with breaking
the covenants; and
if true, disclose the specific covenants broken and the
liquidating damages paid or
payable.
As applicable, also apply this comment to your Form 10-Q for the
fiscal quarter ended
March 31, 2022.
15. Please expand your liquidity discussion to explain and analyze
material changes from
period-to-period in one or more line items. The analysis should
describe the underlying
reasons for these material changes in quantitative and qualitative
terms. We refer to
guidance in Item 303 of Regulation S-K. As applicable, also apply this
comment to your
Form 10-Q for the fiscal quarter ended March 31, 2022.
Notes to Consolidated Financial Statements
Note 2 - Summary of Significant Accounting Policies
Cash and Cash Equivalents, page 91
16. Disclose the jurisdiction that holds your cash and cash equivalents
and address the
following.
To what extent financial institutions in those jurisdictions
insure your cash and cash
equivalents.
Disclose any restrictions associated with the transfer of cash
outside its current
jurisdiction.
How cash is transferred through your organization.
Intentions to distribute earnings or settle amounts owed to the
parent holding
company located in the United States.
State whether any transfers, dividends, or distributions have been
made to date
between the holding company and its subsidiaries or to investors,
and quantify the
amounts where applicable.
Apply this comment to your Form 10-Q for the fiscal quarter ended
March 31, 2022,
accordingly.
Accounts Receivable , page 92
17. We note your accounts receivable balance increased from $54.4 million
to $105.6
million from December 31, 2020 to December 31, 2021 and further
increased to $106.4
million at March 31, 2022, while your allowance for doubtful accounts
remained at zero.
Please disclose how you determined an allowance for doubtful accounts
was not necessary
for the periods presented, including significant assumptions and
factors considered.
Provide us with your detailed analysis. Apply this comment accordingly
to your Form 10-
Q for the fiscal quarter ended March 31, 2022.
Mark McKechnie
FirstName LastNameMark McKechnie
ACM Research, Inc.
Comapany
July NameACM Research, Inc.
12, 2022
July 12,
Page 5 2022 Page 5
FirstName LastName
Property, Plant and Equipment, Net, page 92
18. We note your statement that, "ACM s subsidiaries follow regulations
for depreciation of
fixed assets implemented under the PRC s Enterprise Income Tax Law,
which state that
the minimum useful lives used for calculating depreciation for fixed
assets are as
follows." Please clarify for us how the useful lives of your assets
are determined and
why you believe it is appropriate to follow PRC's Enterprise Income
Tax Law. Refer to
your basis in accounting literature.
Intangible Assets, Net, page 93
19. Regarding the amortization of intangible assets you state, "If the
contract does not specify
a beneficial period, then the intangible asset is amortized over a
term not exceeding the
valid period specified by local law. If neither the contract nor local
law specifies a
beneficial period, then the intangible asset is amortized over a
period of up to 10 years."
Please clarify this statement and tell why you believe this policy is
in accordance US
GAAP. Refer to your basis in the accounting literature.
Revenue Recognition, page 94
20. Please expand your revenue recognition disclosure to include:
the contract asset and the contract liability balances in
accordance with ASC 650-10-
50-10;
information about your remaining performance obligations in
accordance with ASC
650-10-50-13; and
information regarding your long-term contracts in accordance with
Rule 5-02(3)
and 5-02(6) of Regulation S-X.
Statutory Reserves, page 99
21. We note the disclosure here and in Note 24. Please disclose restricted
paid-in capital
and statutory reserves funds as separate line items in your
Consolidated Balance Sheets
and Consolidated Statement of Changes in Stockholders Equity. We
refer you to Rule 5-
02.30(a)(2) and (3) of Regulation S-X.
Recent Accounting Pronouncements Not Yet Adopted, page 102
22. You state that on "October 2019, the FASB issued ASU 2019-10,
Financial Instruments
Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and
Leases (Topic 842),
which defers the effective date for public filers that are considered
small reporting
companies ( SRC ) as defined by the U.S. Securities and Exchange
Commission ( SEC )
to fiscal years beginning after December 15, 2022, including interim
periods within those
fiscal years." In this regard, please tell us why you believe
Derivatives and Hedging
(Topic 815) and Leases (Topic 842) is deferred for small reporting
companies ( SRC ).
Refer to specific guidance in ASU 2019-10.
Mark McKechnie
FirstName LastNameMark McKechnie
ACM Research, Inc.
Comapany
July NameACM Research, Inc.
12, 2022
July 12,
Page 6 2022 Page 6
FirstName LastName
Note 5 - Inventories, page 104
23. We note your inventory increased from $88.6 million to $218.1 million
from December
31, 2020 to December 31, 2021. It further increased to $271.5 million
at March 31, 2022.
We also note a decrease in revenue from March 31, 2021 to March 31,
2022. Please
enhance your disclosure to explain the significant increase in the
inventory balances.
Your disclosure should include specific judgements and assumptions
made, and factors
considered in determining whether inventory is at risk of impairment.
Disclose whether
any portion of the inventory is at risk of impairment. Provide us with
your impairment
analysis. Apply this comment to your Form 10-Q for the fiscal quarter
ended March 31,
2022, accordingly.
Note 12 - Long-Term Borrowings, page 108
24. You disclose that you have a loan from China Merchants Banks and its
purpose is for
purchasing property in Lingang, Shanghai. The loan is pledged by the
property of ACM
Shengwei and guaranteed by ACM Shanghai. As of December 31, 2021 and
March 31,
2022, the right certificate of the pledged property has not been
obtained and the
procedures of the formal pledge registration in the bank had not been
completed. Please
disclose this prominently in the the Liquidity section of your MD&A.
Disclose the timing
of when you believe you will be able to obtain the right certificate
of the pledged property
and the risks associated with not obtaining the certificate. Include a
discussion regarding
your inability to obtain these certificates in your Risk Factors. As
applicable, please also
apply this comment to your Form 10-Q for the fiscal quarter ended
March 31, 2022.
Note 17 - Related Party Balances and Transactions, page 112
25. Enhance your related party footnote to disclose all information
required by ASC 850-10-
50, including:
the nature of the related party relationship(s),
a description of the transactions, including transactions to which
no amounts or
nominal amounts were ascribed, and
information deemed necessary to understand the effects of the
transactions on the
financial statements.
Also, state separately amounts of related party transactions on the
face of the balance
sheet, income statement and cash flow statement. Refer to guidance in
Item 4-08(k) of
Regulation S-X. As applicably, apply this comment to your Form 10-Q
for the fiscal
quarter ended March 31, 2022.
Note 21 - Income Taxes, page 118
26. Tell us why there was a significant increase in unrecognized tax
benefits related to the
current year. Disclose substantive information regarding the
unrecognized tax position in
critical accounting policies and estimates. Your disclosure should
discuss specific
judgments made and assumptions and factors considered.
Mark McKechnie
FirstName LastNameMark McKechnie
ACM Research, Inc.
Comapany
July NameACM Research, Inc.
12, 2022
July 12,
Page 7 2022 Page 7
FirstName LastName
Note 22 - Segment Information, page 120
27. Disclose entity-wide information required by ASC 280-10-50-38 to 42.
General
28. At the forefront of your filing, prominently disclose that you are not
a Chinese operating
company but a United States holding company with operations conducted
by your
subsidiaries in China and that this structure involves unique risks to
investors. Explain
whether this structure is used to provide investors with exposure to
foreign investment in
China-based companies where Chinese law prohibits direct foreign
investment in the
operating companies, and disclose that investors may never hold equity
interests in the
Chinese operating company. Your disclosure should acknowledge that
Chinese regulatory
authorities could disallow this structure, which would likely result
in a material change in
your operations and/or a material change in the value of the
securities, including that it
could cause the value of such securities to significantly decline or
become worthless.
Provide a cross-reference to your detailed discussion of risks facing
the company and its
securities as a result of this structure.
29. At the forefront of your filing, prominently provide disclosure about
the legal and
operational risks associated with having the majority of the company
s operations in
China. Your disclosure should make clear whether these risks could
result in a material
change in your operations and/or the value of the securities or could
significantly limit or
completely hinder your ability to offer or continue to offer
securities to investors and
cause the value of such securities to significantly decline or be
worthless. Your disclosure
should address how recent statements and regulatory actions by China
s government, such
as those related to data security or anti-monopoly concerns, have or
may impact the
company s ability to conduct its business, accept foreign
investments, or list on a U.S. or
other foreign exchange. Please disclose that your auditor is subject
to the determinations
announced by the PCAOB on December 16, 2021. Provide a discussion of
the rules
adopted by the SEC relating to the Holding Foreign Companies
Accountable Act and how
the related regulations will affect your company. Your disclosure
should state
prominently that you have been added to the list of issuers identified
under the HFCAA.
Disclose all the risks and consequences of being added to the list
including that the value
of your securities may significantly decline or become worthless, and
that your securities
may eventually be delisted. Your other disclosure should address, but
not necessarily be
limited to, the risks highlighted is this disclosure.
30. At the forefront of your filing, clearly disclose how you will refer
to the holding company
and subsidiaries when providing the disclosure throughout the document
so that it is clear
to investors which entity the disclosure is referencing and which
subsidiaries or entities
are conducting the business operations. Refrain from using terms such
as we or our
when describing activities or functions of a subsidiary. For example,
disclose, if true, that
your subsidiaries conduct operations in China and that the holding
company does not
Mark McKechnie
FirstName LastNameMark McKechnie
ACM Research, Inc.
Comapany
July NameACM Research, Inc.
12, 2022
July 12,
Page 8 2022 Page 8
FirstName LastName
conduct operations. Disclose clearly the entity (including the
domicile) in which investors
hold an interest.
31. At the forefront of your filing prominently disclose a clear
description of how cash is
transferred through your organization. Disclose your intentions to
distribute earnings or
settle amounts owed between you and your subsidiaries. Quantify any
cash flows and
transfers of other assets by type that have occurred between the
holding company and its
subsidiaries, and direction of transfer. Quantify any dividends or
distributions that a
subsidiary have made to the holding company and which entity made such
transfer, and
their tax consequences. Similarly quantify dividends or distributions
made to U.S.
investors, the source, and their tax consequences. Your disclosure
should make clear if no
transfers, dividends, or distributions have been made to date.
Describe any restrictions on
foreign exchange and your ability to transfer cash between entities,
across borders, and to
U.S. investors. Describe any restrictions and limitations on your
ability to distribute
earnings from the company, including your subsidiaries to the parent
company and U.S.
investors. Also, prominently disclose this information in the
liquidity section of your
MD&A.
32. At the forefront of your filing, disclose clearly that the company
uses a structure that
involves subsidiaries based in China and what that entails, and
disclose prominently a
diagram of the company s corporate structure, identifying the person
or entity that owns
the equity in each depicted entity. Identify clearly the entity in
which investors own their
interest and the entity(ies) in which the company s operations are
conducted. Describe
how this type of corporate structure may affect investors and the
value of their
investment.
33. At the forefront of your filings, provide a summary of risk factors
regarding your
corporate structure and being based in or having the majority of the
company s operations
in China poses to investors. In particular, describe the significant
regulatory, liquidity, and
enforcement risks with cross-references to the more detailed
discussion of these risks in
the filing. For example, specifically discuss risks arising from the
legal system in China,
including risks and uncertainties regarding the enforcement of laws
and that rules and
regulations in China can change quickly with little advance notice;
and the risk that the
Chinese government may intervene or influence your operations at any
time, or may exert
more control over offerings conducted overseas and/or foreign
investment in China-based
issuers, which could result in a material change in your operations
and/or the value of
your securities. Acknowledge any risks that any actions by the Chinese
government to
exert more oversight and control over offerings that are conducted
overseas and/or foreign
investment in China-based issuers could significantly limit or
completely hinder your
ability to offer or continue to offer securities to investors and
cause the value of such
securities to significantly decline or be worthless.
34. At the forefront of your filing, prominently disclose each permission
or approval that you
or your subsidiaries are required to obtain from Chinese authorities
to operate your
business and to offer the securities to foreign investors. State
whether you or your
Mark McKechnie
FirstName LastNameMark McKechnie
ACM Research, Inc.
Comapany
July NameACM Research, Inc.
12, 2022
July 12,
Page 9 2022 Page 9
FirstName LastName
subsidiaries are covered by permissions requirements from the China
Securities
Regulatory Commission (CSRC), Cyberspace Administration of China (CAC)
or any
other governmental agency that is required to approve your
subsidiaries operations, and
state affirmatively whether you have received all requisite
permissions or approvals and
whether any permissions or approvals have been denied. Please also
describe the
consequences to you and your investors if you or your subsidiaries:
(i) do not receive or
maintain such permissions or approvals, (ii) inadvertently conclude
that such permissions
or approvals are not required, or (iii) applicable laws, regulations,
or interpretations
change and you are required to obtain such permissions or approvals in
the future.
35. Prominently disclose in your MD&A and financial statements that
trading in your
securities will be prohibited under the Holding Foreign Companies
Accountable Act since
the PCAOB determined that it cannot inspect or investigate completely
your auditor, and
that as a result an exchange may determine to delist your securities.
Disclose that your
auditor is subject to the determinations announced by the PCAOB on
December 16,
2021. Include a discussion of the rules adopted by the SEC relating to
the Holding
Foreign Companies Accountable Act and how those rules affect your
company.
Form 10-Q for Fiscal Quarter Ended March 31, 2022
Notes to Consolidated Financial Statements
Note 6 - Property Plant and Equipment, Net, page 14
36. You state that buildings and plants represents Lingang Housing
transferred to ACM
Shengwei in January 2022 at a value of $41,497 (RMB 263,979),
including the purchase
price and accumulated interest, and with estimated useful lives of 30
year. However, on
page 17 you disclose that the right certificate of the pledged
property has not been
obtained with regards to the purchased property in Lingang, Shanghai.
Please disclose
your basis for recognizing the assets given that right certificates
have not been obtained.
Tell us the accounting literature considered.
Item 2. Management s Discussion and Analysis of Financial Condition and
Results of
Operations
COVID-19, page 29
37. Please expand your COVID-19 disclosure to provide a more detailed
analysis in both
quantitative and qualitative terms as to how COVID-19 has affected
your results of
operations and liquidity. This analysis should address revenue, cost
of revenue, operating
expenses, cash flows, and any other financial statement category
effected. In addition,
expand your supplier discussion to disclose in both quantitative and
qualitative terms
how the supply issues have effected your results of operations and
liquidity. Updated
your Form 10-K for the fiscal year ended December 31, 2021,
accordingly.
Mark McKechnie
ACM Research, Inc.
July 12, 2022
Page 10
General
38. We note your disclosure on page 43, that On March 30, 2022, your
company was
transferred to the SEC s Conclusive list of issuers identified
under the HFCA. Please
revise to prominently disclose this at the forefront of your filing.
Disclose the risks and
consequences of being added to the list. For example, you should
disclose that the value
of your securities may significantly decline or become worthless, and
that your securities
may eventually be delisted.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Inessa Kessman, Senior Staff Accountant at 202-551-3371
or Robert
Littlepage at 202-551-3361 if you have questions regarding the comments or any
other questions.
FirstName LastNameMark McKechnie Sincerely,
Comapany NameACM Research, Inc.
Division of
Corporation Finance
July 12, 2022 Page 10 Office of
Technology
FirstName LastName