Equibles

6-K

CAMTEK LTD (CAMT)

6-K 2023-09-27 For: 2023-06-30
View Original
Added on April 11, 2026

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 under the Securities Exchange Act of 1934

For the Month of September 2023

CAMTEK LTD.

(Translation of Registrant’s Name into English)

Ramat Gavriel Industrial ZoneP.O. Box 544Migdal Haemek 23150ISRAEL(Address of Principal Corporate Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☒    Form 40-F ☐

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities and Exchange Act of 1934.

Yes ☐    No ☒

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. This Form 6-K, including all exhibits hereto, is hereby incorporated by reference into all effective registration statements filed by the registrant under the Securities Act of 1933.

CAMTEK LTD.<br>(Registrant)<br> <br>By: /s/ Moshe Eisenberg<br>——————————————<br>Moshe Eisenberg,<br>Chief Financial Officer

Dated: September 27, 2023

Exhibit<br><br> <br>Number Description of Exhibit
99.1 Unaudited interim condensed consolidated financial statements as of June 30, 2023.
99.2 Operating and Financial Review and Prospects.
101 The following financial information from Camtek Ltd.’s Report on Form 6-K, formatted in XBRL (eXtensible Business Reporting Language): (i) Unaudited interim condensed consolidated balance sheets on June 30, 2023 and December 31, 2022; (ii) Unaudited interim condensed consolidated statements of operations for the six months ended June 30, 2023 and 2022 and the year ended December 31, 2022; (iii) Unaudited interim condensed consolidated statements of changes in shareholders’ equity for the six months ended June 30, 2023 and 2022 and the year ended December 31, 2022; (iv) Unaudited interim condensed consolidated statements of cash flows for the six months ended June 30, 2023 and 2022 and the year ended December 31, 2022; and (v) notes to the Unaudited interim condensed consolidated financial statements.

CAMTEK LTD - 1109138 - 2023

Exhibit 99.1

Camtek Ltd.<br><br>and its Subsidiaries<br><br>Interim Condensed Consolidated<br><br>Financial Statements<br><br>As of June 30, 2023<br><br>(Unaudited)

Camtek Ltd. and its Subsidiaries

Interim Unaudited Condensed Consolidated Financial Statements as at June 30, 2023

Contents

Page
Interim Unaudited Condensed Consolidated Balance Sheets F-3
Interim Unaudited Condensed Consolidated Statements of Operations F-4 to F-5
Interim Unaudited Condensed Consolidated Statements of Shareholders’ Equity F-6
Interim Unaudited Condensed Consolidated Statements of Cash Flows F-7 to F-8
Notes to the Interim Unaudited Condensed Consolidated Financial Statements F-9 to F-16

F - 2

Camtek Ltd. and its Subsidiaries

Interim Unaudited Condensed Consolidated Balance Sheets

June 30, December 31,
2023 2022
Note U.S. Dollars (in thousands)
Assets
Current assets
Cash and cash equivalents 4A 232,787 148,156
Short-term deposits 198,500 251,500
Trade accounts receivable 79,025 80,611
Inventories 4B 61,207 65,541
Other current assets 4C 14,998 11,156
Total current assets 586,517 556,964
Long term deposits 75,000 79,000
Long term inventory 4B 7,125 5,357
Deferred tax assets 724 1,004
Other assets 2,557 1,024
Property, plant and equipment, net 4D 37,131 33,141
Intangible assets, net 4E 602 597
Total non-current assets 123,139 120,123
Total assets 709,656 677,087
Liabilities and shareholders’ equity
Current liabilities
Trade accounts payable 31,238 31,667
Other current liabilities 4F 45,529 56,833
Total current liabilities 76,767 88,500
Long term liabilities
Other long-term liabilities 10,198 8,748
Convertible notes 4G 196,284 195,737
206,482 204,485
Total liabilities 283,249 292,985
Shareholders’ equity
Ordinary shares NIS 0.01 par value, 100,000,000 shares authorized at June 30, 2023 and at December 31, 2022;
46,811,504 issued shares at June 30, 2023 and 46,505,318 at December 31, 2022;
44,719,128 shares outstanding at June 30, 2023 and 44,412,942 at December 31, 2022; 3 175 175
Additional paid-in capital 193,626 187,105
Retained earnings 234,504 198,720
428,305 386,000
Treasury stock, at cost (2,092,376 shares as of June 30, 2023 and December 31, 2022) (1,898 ) (1,898 )
Total shareholders' equity 426,407 384,102
Total liabilities and shareholders' equity 709,656 677,087

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

F - 3

Camtek Ltd. and its Subsidiaries

Interim Unaudited Condensed Consolidated Statements of Operations

(In thousands, except per share data)

Six months ended<br><br> <br>June 30, Year ended<br><br> <br>December 31,
2023 2022 2022
Note U.S. dollars U.S. dollars
Revenues 146,215 156,744 320,909
Cost of revenues 77,378 76,693 161,053
Gross profit 68,837 80,051 159,856
Research and development costs 15,672 15,199 28,859
Selling, general and<br> administrative expenses 5A 24,037 24,451 49,499
39,709 39,650 78,358
Operating income 29,128 40,401 81,498
Financial income, net 5B 10,864 860 6,690
Income before income taxes 39,992 41,261 88,188
Income tax expense (4,208 ) (3,700 ) (8,239 )
Net income 35,784 37,561 79,949

F - 4

Camtek Ltd. and its Subsidiaries

Interim Unaudited Condensed Consolidated Statements of Operations (contd.)

Net income per ordinary share:

Six months ended<br><br> <br>June 30, Year ended<br><br> <br>December 31,
2023 2022 2022
Note U.S. dollars U.S. dollars
Basic net earnings per share 0.80 0.86 1.81
Diluted net earnings per share 0.74 0.78 1.66
Weighted average number of ordinary shares outstanding<br><br> <br>(in thousands):
Basic 44,562 43,929 44,158
Diluted 48,531 48,150 48,229

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

F - 5

Camtek Ltd. and its Subsidiaries

Interim Unaudited Condensed Consolidated Statements of Shareholders’ Equity

Ordinary Shares Number of Additional Total
NIS 0.01 par value Treasury Treasury paid-in Retained shareholders'
Number of U.S. Dollars Shares Shares earnings earnings equity
Shares Issued (in thousands) U.S. Dollars (in thousands)
Balances at
December 31, 2021 45,939,019 172 (2,092,376 ) (1,898 ) 176,582 118,771 293,627
Share-based
compensation
expense - - - - 5,592 - 5,592
Exercise of share
options and RSUs 416,840 2 - - - - 2
Net income - - - - - 37,561 37,561
Balances at
June 30, 2022 46,355,859 174 (2,092,376 ) (1,898 ) 182,174 156,332 336,782
Share-based
compensation
expense - - - - 4,931 - 4,931
Exercise of share
options and RSUs 149,459 1 - - - - 1
Net income - - - - - 42,388 42,388
Balances at
December 31, 2022 46,505,318 175 (2,092,376 ) (1,898 ) 187,105 198,720 384,102
Share-based
compensation
expense - - - - 6,521 - 6,521
Exercise of share
options and RSUs 306,186 * - - - - -
Net income - - - - - 35,784 35,784
Balances at
June 30, 2023 46,811,504 175 (2,092,376 ) (1,898 ) 193,626 234,504 426,407

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

*Represents an amount less than $1,000

F - 6

Camtek Ltd. and its Subsidiaries

Interim Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)

Six months ended<br><br> <br>June 30, Year ended<br><br> <br>December 31,
2023 2022 2022
U.S. dollars U.S. dollars
Cash flows from operating activities:
Net income 35,784 37,561 79,949
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,406 1,849 4,094
Deferred tax expense 280 110 (777 )
Amortization of debt issuance costs 547 547 1,094
Loss on disposal of fixed assets 233 - -
Share based compensation expense 6,521 5,592 10,523
Change in provision for doubtful debts - - (7 )
Changes in operating assets and liabilities:
Trade accounts receivable 1,829 (14,252 ) (21,984 )
Inventories 171 (13,512 ) (9,518 )
Due from related parties - (2 ) -
Other assets (5,375 ) (2,079 ) (6,337 )
Trade accounts payable (231 ) 1,244 (2,113 )
Other current liabilities (9,449 ) (4,111 ) 2,875
Net cash provided by operating activities 32,716 12,947 57,799
Cash flows from investing activities:
Redemption (investment) of short-term deposits 57,000 (179,000 ) (95,500 )
Investment of long-term deposits - (15,000 ) (47,000 )
Purchase of fixed assets (4,782 ) (3,786 ) (8,197 )
Purchase of intangible assets (60 ) (28 ) (97 )
Net cash provided by (used in) investing activities 52,158 (197,814 ) (150,794 )
Cash flows from financing activities:
--- --- --- --- --- --- ---
Proceeds from exercise of share options - 2 3
Net cash provided by financing activities - 2 3
Effect of change in exchange rate on cash and cash equivalents (243 ) (1,037 ) (795 )
Net increase (decrease) in cash and cash equivalents 84,631 (185,902 ) (93,787 )
Cash and cash equivalents at beginning of the period 148,156 241,943 241,943
Cash and cash equivalents at end of the period 232,787 56,041 148,156

F - 7

Camtek Ltd. and its Subsidiaries

Interim Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)

Six months ended<br><br> <br>June 30, Year ended<br><br> <br>December 31,
2023 2022 2022
U.S. dollars U.S. dollars
Supplementary cash flows information:
Income taxes paid 9,626 454 11,836
Interest received 6,911 1,030 4,293
Lease payments 735 689 1,480
Non-cash transactions:
Fixed assets purchased with supplier credit 371 680 569

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

F - 8

Camtek Ltd. and its Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands, except per share data)

Note 1 - Nature of Operations

A. Camtek Ltd. (“Camtek” or the “Company”), an Israeli corporation, is jointly controlled 21.5% by Priortech Ltd., an Israeli corporation listed on the Tel-Aviv Stock Exchange and 17.5% by Chroma Ate Inc., a Taiwanese company (“Chroma”). Camtek provides automated and technologically advanced solutions dedicated to enhancing production processes, increasing product yield and reliability, and enabling and supporting customers’ latest technologies in the semiconductor fabrication industry.

F - 9

Camtek Ltd. and its Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands, except per share data)

Note 2 - Basis of Preparation

A.          Statement of compliance

Except as described below, the accounting policies applied in these interim financial statements are the same as those applied in the Company’s 2022 annual audited consolidated financial statement for the year ended December 31, 2022.

The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and do not include all of the information required for full annual financial statements. The unaudited condensed consolidated interim statements should be read in conjunction with the Company’s 2022 annual audited consolidated financial statements and footnotes, which were filed with the U.S. Securities and Exchange Commission as part of the Company’s Annual Report on Form 20-F for the year ended December 31, 2022.

In the opinion of management of the Company, the accompanying unaudited condensed financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of June 30, 2023, and its results of operations for the three months and nine months ended June 30, 2023, and 2022, and cash flows for the six months ended June 30, 2023, and 2022. The condensed balance sheet at December 31, 2022, was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements.

F - 10

Camtek Ltd. and its Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands, except per share data)

Note 3 - Shareholders’ Equity

A.          General

The Company’s shares are traded on the NASDAQ Global Market under the symbol “CAMT”, and also listed and traded on the Tel-Aviv stock exchange

B.          Changes in Stock Options and RSUs

The number of stock options exercised in the six-month period ended June 30, 2023, was 306,186.

In the first six months of 2023, 509,231 restricted share units (RSUs) were granted by the Company. The RSUs vest over a four-year period.

C.          Share-based Compensation Expense

The total share-based compensation expense amounted to $6,521, $5,592, and $10,523 for the six-month periods ended June 30, 2023 and 2022 and the year ended December 31, 2022, respectively.

F - 11

Camtek Ltd. and its Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands, except per share data)

Note 4 - Supplementary Financial Statements Information

A.          Cash and cash equivalents

The Company’s cash and cash equivalent balance at June 30, 2023 and December 31, 2022 is denominated in the following currencies:

June 30, December 31,
2023 2022
U.S. Dollars (in thousands)
US Dollars 226,172 139,644
New Israeli Shekels 4,416 4,008
Other currencies 2,199 4,504
232,787 148,156

Short-term deposits are bank deposits in US Dollars with terms at the investment date of 3-12 months with average annual interest rates of 5.05%.

B.          Inventories

June 30, December 31,
2023 2022
U.S. Dollars (in thousands)
Components 34,158 43,017
Work in process 15,444 13,951
Finished products (including systems at customer locations not yet sold) 18,730 13,930
68,332 70,898

Inventories are presented in:

June 30, December 31,
2023 2022
U.S. Dollars (in thousands)
Current assets 61,207 65,541
Long-term assets 7,125 5,357
68,332 70,898

F - 12

Camtek Ltd. and its Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands, except per share data)

Note 4 - Supplementary Financial Statements Information (cont’d)

C.          Other Current Assets

June 30, December 31,
2023 2022
U.S. Dollars (in thousands)
Interest receivable 7,048 3,979
Prepaid expenses 4,315 3,832
Due from Government institutions 2,875 2,598
Other 760 747
14,998 11,156

D.          Property, Plant and Equipment, Net

June 30, December 31,
2023 2022
U.S. Dollars (in thousands)
Land 863 863
Building 20,345 18,490
Machinery and equipment 22,590 19,121
Office furniture and equipment 997 934
Computer equipment and software 6,218 6,256
Automobiles 396 396
Leasehold improvements 2,080 1,894
Right of use assets 5,845 6,087
59,334 54,041
Less accumulated depreciation 22,203 20,900
37,131 33,141

F - 13

Camtek Ltd. and its Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands, except per share data)

Note 4 - Supplementary Financial Statements Information (cont’d)

E.          Intangible Assets, Net

June 30, December 31,
2023 2022
U.S. Dollars (in thousands)
Patent registration costs 2,195 2,135
Accumulated amortization and impairment 1,593 1,538
Total intangible assets, net 602 597

F.          Other Current Liabilities

June 30, December 31,
2023 2022
U.S. Dollars (in thousands)
Commissions 18,789 18,048
Advances from customers and deferred revenues 7,199 12,825
Accrued employee compensation and related benefits 10,506 11,941
Accrued warranty costs (1) 3,041 3,161
Government institutions and income tax payable 2,844 7,991
Accrued expenses 1,884 1,570
Operating lease obligations 1,266 1,297
45,529 56,833

(1)          Changes in the accrued warranty costs are as follows:

June 30, December 31,
2023 2022
U.S. Dollars (in thousands)
Beginning of year 3,161 3,265
Accruals 2,721 5,823
Usage (2,841 ) (5,927 )
Balance at end of year 3,041 3,161

F - 14

Camtek Ltd. and its Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands, except per share data)

Note 4 - Supplementary Financial Statements Information (cont’d)

G.          C****onvertible Notes

The Convertible Senior Notes consisted of the following:

June 30, December 31,
2023 2022
U.S. Dollars (in thousands)
Liability:
Principle: 200,000 200,000
Unamortized issuance costs 3,716 4,263
Net carrying amount 196,284 195,737

As of June 30, 2023, the debt issuance costs of the Notes will be amortized over the remaining term of approximately 3.5 years.

The annual effective interest rate of the Notes is 0.56%. In the six-months ended June 30, 2023, $547 was recorded as amortization of debt issuance costs (In the year ended December 31, 2022 - $1,094).

As of June 30, 2023, the estimated fair value of the Notes, which the Company has classified as Level 2 financial instruments, is $179,154 (December 31, 2022 - $152,565). The estimated fair value was determined based on the quoted bid price of the Notes in an over-the-counter market on the last trading day of the reporting period.

As of June 30, 2023, the principal amount exceeded the if-converted value of the Notes by $20,846 (December 31, 2022, the principal amount exceeded the if-converted value of the Notes by $47,435).

F - 15

Camtek Ltd. and its Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands, except per share data)

Note 5 - Statements of Operations

A. Selling, general and administrative expenses
Six months ended<br><br> <br>June 30, Year ended<br><br> <br>December 31,
--- --- --- --- --- --- ---
2023 2022 2022
U.S. Dollars (in thousands)
Selling (1) 17,910 18,840 38,249
General and administrative 6,127 5,611 11,250
24,037 24,451 49,499
(1)         Including shipping and handling costs 1,025 980 2,294

B.          Financial income (expenses), net

Six months ended<br><br> <br>June 30, Year ended<br><br> <br>December 31,
2023 2022 2022
U.S. Dollars (in thousands)
Interest income 11,838 2,488 8,648
Amortization of issuance costs of convertible notes (547 ) (547 ) (1,094 )
Other, net (1) (427 ) (1,081 ) (864 )
10,864 860 6,690
(1)         Including foreign currency expense resulting from transactions not denominated in U.S. Dollars (172 ) (871 ) (351 )

Note 6 – Subsequent Events

On September 18, 2023, the Company announced it has entered into an agreement to acquire the FRT Metrology business of FormFactor, Inc. The acquisition is expected to close during the fourth quarter of 2023, subject to the satisfaction of customary closing conditions. The purchase price is $100 million in cash, subject to customary purchase price adjustments.

F - 16

Exhibit 99.2

Operating and Financial Review and Prospects.

A. Operating Results

General

The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes to those statements included therein, which have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP.

Overview

We design, develop, manufacture and market automated solutions dedicated for enhancing production processes and yield for the semiconductor fabrication market, principally based on core AOI technology.

We sell our systems worldwide. The vast majority of our sales are to manufacturers in the Asia Pacific region, including China, South East Asia, Korea and Taiwan, due to, among other factors, the migration of the electronic manufacturers into this region.

In the first half of 2023, our sales to customers in the Asia Pacific region accounted for approximately 86% of our total revenues with sales to China being 55% of our total revenues.

In addition to revenues derived from the sale of systems and related products, we generate revenues from providing maintenance and support services for our products. We generally provide a one-year warranty with our systems. Accordingly, service revenues are not earned during the warranty period.

Critical Accounting Policies

Critical accounting policies are those that are, in management’s view, most important to the portrayal of a company’s financial condition and results of operations and most demanding judgment calls, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. We believe our most critical accounting policies relate to:

Revenue Recognition. The Company’s contracts with its customers include performance obligations to provide its products or to service the installed products. A product sale contract may include an extended warranty (that is, for longer than the twelve-month standard warranty) as well as installation, both of which are considered separate performance obligations.

The Company recognizes revenue from contracts for sales of products when the Company transfers control of the product to the customer. This generally occurs upon shipment as pre-shipment calibration and testing processes ensure simplified and streamlined installation at the customer site. Revenues from the contract are recognized in an amount that reflects the consideration the Company expects to be entitled to receive once the product is operating in accordance with its specifications and signed documentation of the arrangement, such as a signed contract or purchase order, has been received. Payment terms with customers may vary, but are generally based on milestones within the delivery process such as shipping and installation. Payment terms do not include significant financing components.

The Company does not incur costs in obtaining a contract except for agents’ commissions, which are incurred upon the recognition of revenues. Revenues are recognized over a period of less than a year and as such, there are no underlying sales commissions to be capitalized.

Service revenues consist mainly of contracts charged under time and material arrangements. Service revenues from maintenance contracts are recognized ratably over the contract period.

Contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on the prices charged to customers.

The Company’s multiple performance obligations consist of product sales, installation services and non-standard warranties. A fixed amount is deferred in respect of installation services for machines that have been recognized but not installed as of the balance sheet date. A non-standard warranty is one that is for a period longer than 12 months. Accordingly, income from a non-standard warranty is deferred as unearned revenue and is recognized ratably as revenue commencing with and over the applicable warranty term.

The Company records contract liabilities when the customer has been billed in advance of the Company completing its performance obligations. These amounts are recorded as deferred revenue in the Consolidated Balance Sheets.

Valuation of Accounts Receivable.  We review accounts receivable to determine which are doubtful of collection. In making this determination of the appropriate allowance for doubtful accounts, we consider information at hand regarding specific customers, including aging of the receivable balance, evaluation of the security received from customers, our history of write-offs, relationships with our customers and the overall credit worthiness of our customers. Changes in the credit worthiness of our customers, the general economic environment and other factors may impact the level of our future write-offs.

Valuation of Inventory.  Inventories consist of completed systems, partially completed systems and components, and are recorded at the lower of cost, determined by the moving – average basis, or market. We review inventory for obsolescence and excess quantities to determine that items deemed obsolete or excess inventory are appropriately reserved. In making the determination, we consider forecasted future sales or service/maintenance of related products and the quantity of inventory at the balance sheet date, assessed against each inventory item’s past usage rates and future expected usage rates. Changes in factors such as technology, customer demand, competing products and other matters could affect the level of our obsolete and excess inventory in the future.

In the first half of 2023 there were no write-offs of inventory. In the year 2022 we wrote-off inventory in the amount of approximately $0.3 million. The write-off amounts are included in the line item called "Cost of products sold", in the consolidated statements of operations. The write-offs create a new cost basis and are a permanent reduction of inventory cost. The write-offs in in 2022 were made against damaged, obsolete, excess and slow-moving inventory. Inventory that is not expected to be converted or consumed in the following 12 months is classified as non-current. As of June 30, 2023, a $7.1 million portion of our inventory was classified as non-current. Management periodically evaluates our inventory composition, giving consideration to factors such as the probability and timing of anticipated usage and the physical condition of the items, and then estimates a charge (reducing the inventory) to be provided for slow moving, technologically obsolete or damaged inventory. These estimates could vary significantly from actual requirements based upon future economic conditions, customer inventory levels or competitive factors that were not foreseen or did not exist when the inventory write-offs were established.

Intangible assets. Patent registration costs are capitalized at cost and amortized, beginning with the first year of utilization, over its expected life of ten years.

We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the long lived asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized as computed by subtracting the fair market value of the asset from its carrying value.

Provisions for contingent liabilities. A contingency (provision) in accordance with ASC Topic 450-10-05, Contingencies, is an existing condition or situation involving uncertainty as to the range of possible loss to the entity. A provision for claims is recognized if it is probable (likely to occur) that a liability has been incurred and the amount can be estimated reasonably. Provisions in general are highly judgmental, especially in cases of legal disputes. We assess the probability of an adverse event and if the probability is evaluated to be probable, we are required to fully provide for the total amount of the estimated contingent liability. We continually evaluate our pending provisions to determine if accruals are required. It is often difficult to accurately estimate the ultimate outcome of a contingent liability. Different variables can affect the timing and amount we provide for certain contingent liabilities. Our assessments are therefore subject to estimates made by us and our legal counsel, adverse revision in our estimates of the potential liability could materially impact our financial condition, results of operations or liquidity.

Valuation of Long Lived Assets. We apply ASC Subtopic 360-10, "Property, Plant and Equipment".  This Statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future cash flows expected to be generated by the asset.  If the carrying amount of the long lived asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized as computed by subtracting the fair market value of the asset from its carrying value. We prepare future cash flows based on our best estimates including projections and financial statements, future plans and growth estimates.

Income Taxes. We account for income taxes under ASC Subtopic 740-10 Income Taxes – Overall.  Deferred tax assets or liabilities are recognized in respect of temporary differences between the tax bases of assets and liabilities and their financial reporting amounts as well as in respect of tax losses and other deductions which may be deductible for tax purposes in future years, based on tax rates applicable to the periods in which such deferred taxes will be realized. The rates applied are those enacted in law as of June 30, 2023. In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not 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 deductible and during which the carry-forwards are available. Valuation allowances are established when necessary to reduce deferred tax assets to the amount considered more likely than not to be realized.

Our financial statements include deferred tax assets, net, which are calculated according to the above methodology. If there is an unexpected critical deterioration in our operating results and forecasts, we would have to increase the valuation allowance with respect to those assets. We believe that it is more likely than not that those net deferred tax assets included in our financial statements will be realized in subsequent years.

Stock Option and Restricted Share Plans. We account for our employee stock-based compensation awards in accordance with ASC Topic 718, Compensation - Stock Compensation. ASC Topic 718 requires that all employee stock‑based compensation is recognized as a cost in the financial statements and that for equity-classified awards such cost is measured at the grant date fair value of the award. We estimate grant date fair value using the Black‑Scholes-Merton option‑pricing model. Forfeitures are recognized when they occur.

Leases. On January 1, 2019, we adopted Accounting Standards Update No. 2016-02, Leases (Topic 842) (ASU 2016-02) using the modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application. Results and disclosure requirements for reporting periods beginning after January 1, 2019 are presented under Topic 842.

The adoption did not impact our beginning retained earnings, or prior year consolidated statements of income and statements of cash flows.

Under Topic 842, we determine if an arrangement is a lease at inception. ROU assets and lease liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, we consider only payments that are fixed and determinable at the time of commencement. As most of our leases do not provide an implicit rate, we use its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Our incremental borrowing rate is a hypothetical rate based on its understanding of what our credit rating would be (7.0% in 2023). Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. When determining the probability of exercising such options, we consider contract-based, asset-based, entity-based, and market-based factors. Lease agreements may contain variable costs such as common area maintenance, insurance, real estate taxes or other costs. Variable lease costs are expensed as incurred on the consolidated statements of income. Our lease agreements generally do not contain any residual value guarantees or restrictive covenants.

Operating lease ROU assets are presented as property, plant and equipment on the consolidated balance sheet. The current portion of operating lease liabilities is included in other current liabilities and the long-term portion is presented within long-term liabilities on the consolidated balance sheet.

For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

ROU assets for operating leases are periodically reduced by impairment losses. We use the long-lived assets impairment guidance in ASC Subtopic 360-10, Property, Plant, and Equipment – Overall, to determine whether an ROU asset is impaired, and if so, the amount of the impairment loss to recognize.

Comparison of Period to Period Results of Operations

The following table presents consolidated statement of operations data for the periods indicated as a percentage of total revenues from continuing operations:

Six Months Ended June 30,
2023 2022
Revenues 100.0 % 100.0 %
Cost of revenues 52.9 % 48.9 %
Gross profit 47.1 % 51.1 %
Operating expenses:
Research and development, net 10.7 % 9.7 %
Selling, general and administrative expenses 16.4 % 15.6 %
Total operating expenses 27.2 % 25.3 %
Operating income 19.9 % 25.8 %
Financial income, net 7.4 % 0.5 %
Income tax (expenses) benefit (2.9 )% (2.4 )%
Net income 24.5 % 24.0 %

Six months Ended June 30, 2023 compared to Six months ended June 30, 2022

Revenues. Revenues decreased by 6.7% to $146.2 million in 2023 from $156.7 million in 2022. The increase is mainly due to the sale of a lower number of tools due to decreased demand in the semiconductor market.

Gross Profit. Gross profit consists of revenues less cost of revenues, which includes the cost of components, production materials, labor, service related expenses, depreciation, factory and overhead expenses and provisions for warranties. These expenditures are partially affected by sales volume. Our total gross profit decreased to $68.8 million in 2023 from $80.1 million in 2022, a decrease of $11.3 million, or 14%. Our gross margin reduced to 47.1% in 2023, compared to a gross margin of 51.1% in 2022.

Research and Development Costs. Research and development expenses consist primarily of salaries, materials consumption and costs associated with subcontracting certain development efforts. Total research and development expenses for 2023 increased to $15.7 million from $15.2 million in 2022 due to increased activity for improving capabilities and developing additional features and products.

Selling, General and Administrative Expenses. Selling, general and administrative expenses consist primarily of expenses associated with salaries, commissions, promotion and travel, professional services and rent costs. Our selling, general and administrative expenses decreased by 1.7% to $24.0 million in 2023 from $24.5 million in 2022, mainly due to a decrease in sales channels activity on decreased revenues.

Financial Income (Expenses), Net. Financial income/expenses consist of interest, revaluation and other bank fees. We had net financial income of $10.9 million in 2023, compared to net financial income of $0.9 million in 2022. These changes relate to interest income from higher interest rates on increased short- and long-term deposits, offset by losses from changes in the exchange rate.

Provision for Income Taxes. Income tax expense was $4.2 million in 2023 compared to expense of $3.7 million in 2022, mainly due to tax on increased financial income from increased cash and cash equivalents.

Net Income. We realized net income of $35.8 million in 2023 compared to net income of $37.6 million in 2022, in light of the factors discussed above.

B. Liquidity<br> and Capital Resources

Our cash and cash equivalent and short-term deposit balances totalled approximately $431.3 million on June 30, 2023 and $399.7 million on December 31, 2022. In addition, there was $75 million and $79 million, respectively, in long-term deposits. Our cash is invested in bank deposits spread among several banks, primarily in Israel.

Our working capital was approximately $509.8 million at June 30, 2023 and $468.5 million at December 31, 2022. The increase is mainly attributed to the increase in cash and cash equivalents and the decrease in other current liabilities, offset by the decrease in short-term deposits.

Our capital expenditures during the first half of 2023 were approximately $4.8 million, mainly in support of our operating activities.

Cash flow from operating activities

Net cash and cash equivalents provided by operating activities for the six months ended June 30, 2023, totalled $32.7 million. Net cash and cash equivalents provided by operating activities for the six months ended June 30, 2022 totalled $12.9 million.

During the first half of 2023, cash provided by operating activities was primarily attributed to the positive net income and the increase in trade accounts receivable, offset by the increase in other current assets and the decrease in other current liabilities.

Cash flow from investing activities

Cash flow used in investing activities in the first half of 2023 was $52.2 million, primarily due to the redemption of short- and long-term deposits, compared to $197.8 million in the first half of 2022.

Cash flow from financing activities

Cash flow provided by financing activities the first half of 2023 and 2022 was zero.

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