Background
We currently conduct the majority of our product development, support and services, and substantially all of our manufacturing, through our subsidiary ACM Research (Shanghai), Inc., or ACM Shanghai, in
the People’s Republic of China or PRC. Our Shanghai operations position us to be near many of our current and potential new customers in the PRC (including Taiwan), Korea and throughout Asia, providing convenient access and reduced shipping and
manufacturing costs. All of our tools are built to order at two manufacturing facilities in the Pudong Region of Shanghai, which encompass a total of 86,000 square feet of floor space for production capacity.
As we previously announced, in November 2019 ACM Shanghai entered into an agreement initiating a bidding process to acquire land rights to build a development and production center in the Lingang
region of Shanghai. The land is located approximately thirty miles from ACM Shanghai’s headquarters in Zhangjiang. We believe that building and owning, rather than leasing, our development and production facilities will reduce our facility costs at
scale and provide us with the stability necessary to make the long-term development and manufacturing investments in operations that will be needed to support our growing customer base.
Grant Agreement
In the following summary, amounts in Renminbi, or RMB, have been translated into U.S. dollars solely for the convenience of the reader. The translations have been made at the
conversion rate of RMB 7.100 to U.S. $1.00 effective as of May 11, 2020, as published by the PRC’s State Administration of Foreign Exchange.
On May 13, 2020, we announced that ACM Shanghai, through its wholly owned subsidiary ACM Research (Lingang), Inc., or ACM Lingang, had entered into, as of May 7, 2020, 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. ACM Lingang obtained 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 for a period of fifty years commencing on the date of delivery of the land,
which we refer to as the Delivery Date and which is to occur by no later than July 9, 2020. ACM Lingang may apply, by no later than one year before the scheduled end of the usage period, to extend the grant term.
In exchange for its land use rights, ACM Lingang will be obligated to pay aggregate grant fees of RMB 61.7 million ($8.7 million) within 30 business days after execution of the Grant Agreement. In
addition, within five business days after execution of the Grant Agreement, ACM Lingang must fund a performance deposit of RMB 12.3 million ($1.7 million), which is equal to 20% of the aggregate grant fees, to secure its achievement of the following
performance milestones:
Upon satisfaction of a milestone, the portion of the performance deposit attributable to that milestone will be repayable to ACM Lingang within ten business days. If the achievement of any of the above
milestones is delayed or abandoned, ACM Lingang may be subject to additional penalties and may lose its rights to both the use of the granted land and any partially completed facilities on that land.
Covenants in the Grant Agreement require that, among other things, ACM Lingang will be required to pay liquidated damages in the event that (a) it does not make a total
investment (including the costs of construction, fixtures, equipment and grant fees) of at least RMB 450.0 million ($63.4 million) or (b) within six years after the Delivery Date, we do not (i) generate a minimum specified amount of annual sales
of products manufactured on the granted land or (ii) pay to the PRC at least RMB 157.6 million ($22.2 million) in annual total taxes (including value-added taxes, corporate income tax, personal income taxes, urban maintenance and construction
taxes, education surcharges, stamp taxes, and vehicle and shipping taxes) as a result of operations in connection with the granted land.
The foregoing summary of the Grant Agreement is qualified in its entirety by reference to the text of the Grant Agreement, which is being filed as Exhibit 10.01 to this report and
is incorporated in this report by reference.
Press Release
On May 13, 2020, we issued a press release announcing the execution of the Grant Agreement. The full text of the press release is furnished as Exhibit 99.01 hereto and is incorporated herein by
reference.