6-K

UNITED STATES
SECURITIES 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 November 2021

CAMTEK LTD.
(Translation of Registrant’s Name into English)

Ramat Gavriel Industrial Zone
P.O. Box 544
Migdal Haemek 23150
ISRAEL
(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 ☒

Camtek Ltd.

EXPLANATORY NOTE

On November 17, 2021, Camtek Ltd. (Nasdaq: CAMT; TASE: CAMT) (the “Company”) issued a press release announcing a proposed offering of $140 million principal amount of convertible senior notes (the “Offering”) in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). A copy of the press release is attached as Exhibit 99.1 to this Report on Form 6-K.

The unaudited financial statements of the Company for the nine months ended September 30, 2021 and September 30, 2020 and as of September 30, 2021 are furnished herewith as Exhibit 99.2 to this Report on Form 6-K, and the Operating and Financial Review and Prospects are furnished herewith as Exhibit 99.3 to this Report on Form 6-K.

In connection with the offering of the Notes, the Company provided certain information to prospective investors in a preliminary offering memorandum dated November 17, 2021. Certain excerpts from that preliminary offering memorandum are attached hereto as Exhibit 99.4. The preliminary offering memorandum disclosed certain information that supplements or updates certain prior disclosures of the Company, including updated risk factor disclosure.

The information in this Form 6-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act.

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.
(Registrant)

By: /s/ Moshe Eisenberg
——————————————
Moshe Eisenberg,
Chief Financial Officer

Dated: November 17, 2021

Exhibits

Exhibit Number	Description of Exhibit
99.1	Press Release Dated November 17, 2021
99.2	Unaudited financial statements of the Company for the nine months ended September 30, 2021 and September 30, 2020 and as of September 30, 2021.
99.3	Operating and Financial Review and Prospects.
99.4	Excerpts from preliminary offering memorandum of Camtek Ltd., November 17, 2021.

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

Camtek Announces Proposed Private Offering of $140 Million of Convertible Senior Notes due 2026

MIGDAL HAEMEK, Israel, November 17, 2021 /PRNewswire/ Camtek Ltd. (NASDAQ: CAMT; TASE: CAMT), a leading developer and manufacturer of high-end inspection and metrology equipment for the semiconductor industry, announced today its intention to offer, subject to market conditions and other factors, $140 million aggregate principal amount of Convertible Senior Notes due 2026 (the “Notes”) in a proposed private offering (the “Offering”) to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). In addition, Camtek expects to grant the initial purchasers of the Notes an option to purchase, for settlement within a 13-day period beginning on, and including, the date on which the Notes are first issued, up to an additional $20 million aggregate principal amount of the Notes.

The final terms of the Notes, including the initial conversion price, the interest rate and certain other terms, will be determined at the time of pricing of the Offering. When issued, the Notes will be senior, unsecured obligations of Camtek. The Notes will mature on December 1, 2026, unless earlier repurchased, redeemed or converted in accordance with their terms prior to such date. Prior to the close of business on the business day immediately preceding August 1, 2026, the Notes will be convertible at the option of the holders of Notes only upon the occurrence of certain events, the satisfaction of certain conditions and during certain periods. On or after August 1, 2026 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their notes at any time irrespective of the foregoing conditions. The Notes will be convertible into cash, ordinary shares of Camtek or a combination thereof, with the form of consideration determined at Camtek’s election.

Camtek may not redeem the Notes prior to December 6, 2024, except in the event of certain tax law changes. On or after December 6, 2024, Camtek may any time and from time to time redeem for cash all or part of the Notes (subject to certain partial redemption limitations), at Camtek’s option, if the last reported sale price of Camtek’s ordinary shares has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which Camtek provides notice of redemption, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. Holders of the Notes will have the right to require Camtek to repurchase all or a portion of their Notes upon the occurrence of a fundamental change (as defined in the indenture governing the Notes) at a cash repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus any accrued and unpaid interest to, but excluding the fundamental change repurchase date.

Camtek intends to use the net proceeds from the offering for general corporate purposes, including, but not limited to, potential acquisitions, working capital, capital expenditures, investments, research and development and product development. Camtek has not determined the amount of net proceeds to be used specifically for the foregoing purposes and has no agreements or understandings with respect to any acquisition or investment at this time.

The Notes will be offered only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act. The offer and sale of the Notes and the ordinary shares of Camtek potentially issuable upon conversion of the Notes, if any, have not been, and will not be, registered under the Securities Act, any state securities laws or the securities laws of any other jurisdiction, and unless so registered, the Notes and such shares, if any, may not be offered or sold in the United States except pursuant to an applicable exemption from such registration requirements. 

This press release does not constitute an offer to sell or the solicitation of an offer to buy the Notes described herein, nor shall there be any sale of the Notes (or any ordinary shares of Camtek issuable upon conversion of the Notes, if any) in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state or other jurisdiction.

About Camtek

Camtek is a leading developer and manufacturer of high-end inspection and metrology equipment for the semiconductor industry. Camtek’s systems inspect IC and measure IC features on wafers throughout the production process of semiconductor devices, covering the front and mid-end, and up to the beginning of assembly (Post Dicing). Camtek’s systems inspect wafers for the most demanding semiconductor market segments, including Advanced Interconnect Packaging, Memory, CMOS Image Sensors, MEMS and RF, serving the industry’s leading global IDMs, OSATs and foundries. Camtek’s world-class sales and customer support infrastructure is organized around eight subsidiaries based in the US, Europe, Japan, China, Hong Kong, Taiwan, Korea and Singapore.

Forward-Looking Statements

This press release contains statements that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on the current beliefs, expectations and assumptions of Camtek Ltd. (“we,” “us” and “our”). Forward-looking statements can be identified by the use of words including “believe,” “anticipate,” “should,” “intend,” “plan,” “will,” “may,” “expect,” “estimate,” “project,” “positioned,” “strategy,” and similar expressions that are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements involve known and unknown risks and uncertainties that may cause the actual results, performance or achievements of Camtek to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements, including but not limited to whether Camtek will offer and issue the Notes and the terms of the Notes, the anticipated use of proceeds from the Offering, any related effects on the trading price of Camtek’s ordinary shares prior to, concurrently with, or shortly after the pricing of the Notes, and the conversion price of the Notes. Our actual results and performance could differ materially from those projected in the forward-looking statements as a result of many factors, including as a result of the effect of the COVID-19 crisis on the global markets and on the markets in which we operate, including the risk of the continuation of disruptions to our and our customers’, providers’, business partners and contractors’ businesses as a result of the COVID-19 pandemic; our dependency upon the semiconductor industry and the risk that unfavorable economic conditions or low capital expenditures may negatively impact our operating results; anticipated trends and impacts related to industry component and substrate shortages; the future purchase, use, and availability of components supplied by third parties; impurities and other disruptions to our customers’ operations, which could lower production yields or interrupt manufacturing, and could result in the cancellation or delay of purchase of our products; the highly competitive nature of the markets we serve, some of which have dominant market participants with greater resources than us; the rapid evolvement of technology in the markets in which we operate, and our ability to adequately predict these changes or keep pace with emerging industry standards; the risks relating to the concentration of a significant portion of our business in certain countries in the Asia Pacific Region, particularly China (which is our largest territory), Taiwan and Korea; changing industry and market trends; reduced demand for our products; the timely development of our new products and their adoption by the market; increased competition in the industry; price reductions; and those other factors discussed in our Annual Report on Form 20-F and other documents filed by the Company with the SEC as well as other documents that may be subsequently filed by Camtek from time to time with the SEC.

While we believe that we have a reasonable basis for each forward-looking statement contained in this press release, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. In addition, any forward-looking statements represent Camtek’s views only as of the date of this press release and should not be relied upon as representing its views as of any subsequent date. Camtek does not assume any obligation to update any forward-looking statements unless required by law.

EX-99.2

Exhibit 99.2

Camtek Ltd.

and its Subsidiaries

Interim Condensed Consolidated

Financial Statements

As of September 30, 2021

 (Unaudited)

Camtek Ltd. and its Subsidiaries

Interim Unaudited Condensed Consolidated Financial Statements as at September 30, 2021

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 to F-7
Interim Unaudited Condensed Consolidated Statements of Cash Flows	F-8 to F-9
Notes to the Interim Unaudited Condensed Consolidated Financial Statements	F-10 to F-16

Camtek Ltd. and its Subsidiaries

Interim Unaudited Condensed Consolidated Balance Sheets

		September 30,			December 31,
		2021			2020
	Note	U.S. Dollars (in thousands)
Assets
Current assets
Cash and cash equivalents	5A		117,852			105,815
Short-term deposits			87,000			72,000
Trade accounts receivable, net			61,178			41,001
Inventories	5B		56,968			39,736
Other current assets	5C		4,681			3,366
Total current assets			327,679			261,918
Long term deposits			10,000			-
Long term inventory	5B		4,832			4,416
Deferred tax assets			-			482
Other assets, net			119			85
Property, plant and equipment, net	5D		22,414			20,398
Intangible assets, net	5E		590			609
Total non-current assets			37,955			25,990
Total assets			365,634			287,908
Liabilities and shareholders’ equity
Current liabilities
Trade accounts payable			29,784			27,180
Other current liabilities	5F		52,888			30,204
Total current liabilities			82,672			57,384
Long term liabilities
Deferred tax liabilities, net			222			-
Other long-term liabilities			3,507			3,260
Total non-current liabilities			3,729			3,260
Total liabilities			86,401			60,644
Shareholders’ equity
Ordinary shares NIS 0.01 par value, 100,000,000 shares authorized at September 30, 2021 and at December 31, 2020;	3
45,934,072 issued shares at September 30, 2021 and 45,365,354 at December 31, 2020;
43,841,696 shares outstanding at September 30, 2021 and 43,272,978 at December 31, 2020;			172			171
Additional paid-in capital			174,948			170,497
Retained earnings			106,011			58,494
			281,131			229,162
Treasury stock, at cost (2,092,376 as of September 30, 2021 and December 31, 2020)			(1,898	)		(1,898	)
Total shareholders' equity			279,233			227,264
Total liabilities and shareholders' equity			365,634			287,908

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)

		Nine months ended September 30,						Three months ended September 30,						Year ended December 31,
		2021			2020			2021			2020			2020
	Note	U.S. dollars						U.S. dollars						U.S. dollars
Revenues	4		195,488			107,240			70,686			40,061			155,859
Cost of revenues			95,724			57,315			34,893			20,636			82,628
Gross profit			99,764			49,925			35,793			19,425			73,231
Research and development costs			16,774			13,952			5,530			5,068			19,575
Selling, general and
administrative expenses	6A		31,406			21,374			10,118			8,036			31,032
			48,180			35,326			15,648			13,104			50,607
Operating income			51,584			14,599			20,145			6,321			22,624
Financial income, net	6B		911			958			349			307			775
Income  from continuing
operations before taxes			52,495			15,557			20,494			6,628			23,399
Income tax expense			(4,978	)		(1,445	)		(1,989	)		(604	)		(1,621	)
Net income			47,517			14,112			18,505			6,024			21,778

F - 4

Camtek Ltd. and its Subsidiaries

Interim Unaudited Condensed Consolidated Statements of Operations (contd.)

Net income per ordinary share:

		Nine months ended				Three months ended				Year ended
		September 30,				September 30,				December 31,
		2021		2020		2021		2020		2020
	Note	U.S. dollars				U.S. dollars				U.S. dollars
Basic net earnings			1.09		0.36		0.42		0.15		0.55
Diluted net earnings			1.06		0.35		0.41		0.15		0.54
Weighted average number of
ordinary shares outstanding
(in thousands):
Basic			43,577		38,957		43,826		39,176		39,383
Diluted			44,627		39,878		44,658		40,066		40,372

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			capital			earnings		capital		equity
	Shares Issued		(in thousands)		U.S. Dollars (in thousands)
Balances at
December 31, 2019		40,742,355		157		(2,092,376	)		(1,898	)		101,327		36,716		136,302
Share-based
compensation
expense		-		-		-			-			1,768		-		1,768
Exercise of share
options and RSUs		382,359		1		-			-			333		-		334
Net income		-		-		-			-			-		8,088		8,088
Balances at
June 30, 2020		41,124,714		158		(2,092,376	)		(1,898	)		103,428		44,804		146,492
Share-based
compensation
expense		-		-		-			-			1,297		-		1,297
Exercise of share
options and RSUs		179,043		1		-			-			184		-		185
Net income		-		-		-			-			-		6,024		6,024
Balances at
September 30, 2020		41,303,757		159		(2,092,376	)		(1,898	)		104,909		50,828		153,998
Balances at
December 31, 2020		45,365,354		171		(2,092,376	)		(1,898	)		170,497		58,494		227,264
Share-based
compensation
expense		-		-		-			-			2,681		-		2,681
Exercise of share
options and RSUs		439,508		1		-			-			205		-		206
Net income		-		-		-			-			-		29,012		29,012
Balances at
June 30, 2021		45,804,862		172		(2,092,376	)		(1,898	)		173,383		87,506		259,163

F - 6

Camtek Ltd. and its Subsidiaries

Interim Unaudited Condensed Consolidated Statements of Shareholders’ Equity (cont’d)

	Ordinary Shares				Number of						Additional				Total
	NIS 0.01 par value				Treasury			Treasury			paid-in		Retained		shareholders'
	Number of		U.S. Dollars		Shares			capital			earnings		capital		equity
	Shares Issued		(in thousands)		U.S. Dollars (in thousands)
Share-based
compensation
expense		-		-		-			-			1,512		-		1,512
Exercise of share
options and RSUs		129,210		*		-			-			53		-		53
Net income		-		-		-			-			-		18,505		18,505
Balances at
September 30, 2021		45,934,072		172		(2,092,376	)		(1,898	)		174,948		106,011		279,233

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

F - 7

Camtek Ltd. and its Subsidiaries

Interim Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)

	Nine months ended September 30,						Three months ended September 30,						Year ended December 31,
	2021			2020			2021			2020			2020
	U.S. dollars						U.S. dollars						U.S. dollars
Cash flows from operating activities:
Net income		47,517			14,112			18,505			6,024			21,778
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization		1,982			1,625			704			568			2,234
Deferred tax expense		704			738			36			512			476
Loss on disposal of fixed assets		31			-			-			-			-
Share based compensation expense		4,193			3,065			1,512			1,297			4,235
Change in provision for doubtful debts		(33	)		(83	)		-			(83	)		(87	)
Changes in operating assets and liabilities:
Trade accounts receivable, gross		(20,364	)		(2,360	)		(1,130	)		5,748			(9,696	)
Inventories		(19,045	)		(12,838	)		(3,863	)		(5,824	)		(19,330	)
Due from related parties, net		(13	)		56			(1	)		36			72
Other assets		(1,336	)		(146	)		(269	)		455			(501	)
Trade accounts payable		2,379			9,136			(3,661	)		(83	)		15,661
Other current liabilities		23,110			4,008			4,713			(3,757	)		10,686
Liability for employee severance benefits, net		7			110			(36	)		64			224
Net cash provided by operating activities		39,132			17,423			16,510			4,957			25,752
Cash flows from investing activities:
Release from (investment in) short-term deposits		(15,000	)		(28,500	)		22,000			(11,000	)		(20,500	)
Investment in long-term deposits		(10,000	)		-			-			-			-
Purchase of fixed assets		(2,514	)		(1,390	)		(1,246	)		(615	)		(2,410	)
Purchase of intangible assets		(60	)		(196	)		(15	)		(70	)		(216	)
Net cash provided by (used in) investing activities		(27,574	)		(30,086	)		20,739			(11,685	)		(23,126	)

Cash flows from financing activities:
Share issuance, net	-	-		-	-		64,288
Proceeds from exercise of share options	259	519		53	185		629
Net cash provided by financing activities	259	519		53	185		64,917
Effect of change in exchange rate on cash and cash equivalents	220	139		211	116		225
Net increase (decrease) in cash and cash
equivalents	12,037	(12,005	)	37,513	(6,427	)	67,768
Cash and cash equivalents at beginning of
the period	105,815	38,047		80,339	32,469		38,047
Cash and cash equivalents at end of the
period	117,852	26,042		117,852	26,042		105,815

F - 8

Camtek Ltd. and its Subsidiaries

Interim Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)

	Nine months ended September 30,				Three months ended September 30,				Year ended December 31,
	2021		2020		2021		2020		2020
	U.S. dollars				U.S. dollars				U.S. dollars
Supplementary cash flows information:
Income taxes paid		197		308		44		97		546
Interest received		785		825		386		382		1,420
Lease payments		699		780		218		250		1,025
Non-cash transactions:
Fixed assets purchased with supplier credit		81		152		81		152		159

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

F - 9

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 20.9% by Priortech Ltd., an Israeli corporation listed on the Tel-Aviv Stock Exchange and 17.9% 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.

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. As detailed in the annual financial statements as of December 31, 2020, since January 2020, the Covid-19 outbreak has dramatically expanded into a worldwide pandemic creating macro-economic uncertainty and disruption in the business and financial markets. At present, business activity is continuing at all of the Company’s locations, with new routines implemented as required by local Covid-19 regulations. 

From the beginning of the outbreak, the Company has been carefully managing the risks and its global operations. The Israeli facility has been able to maintain its required production levels. Worldwide, the Company has benefitted from its strategy of having in place local professional teams in each of its territories that can independently install and support systems. As such, the Company has been able to deliver most of its orders on time and the impact of the Covid-19 pandemic on the its business activity has not been significant.

F - 10

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 2020 annual audited consolidated financial statement for the year ended December 31, 2020.

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 2020 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, 2020.

In the opinion of management of the Company, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine-month periods ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ended December 31, 2021 or for any other future period.

B.          Recent Accounting Pronouncements

In December 2019, the FASB issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This guidance became effective in the first quarter of 2021 on a prospective basis. The adoption of this guidance has not had a material impact on the Company’s consolidated financial statements.

F - 11

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.          Changes in Stock Options and RSUs

The number of stock options exercised in the three-month and nine-months period ended September 30, 2021, was 12,001 and 71,372, respectively. The number of restricted share units (RSUs) vested in the three-month and nine-month periods ended September 30, 2021, was 117,209 and 497,346, respectively.

B.          Share-based Compensation Expense

In the first nine months of 2021, 191,842 RSUs and 5,704 stock options were granted by the Company.  The RSUs and stock options vest over a four-year period.

The total share-based compensation expense amounted to $4,193, $3,065, $1,512, $1,297 and $4,235 for the nine-month periods ended September 30, 2021 and 2020, the three-month periods ended September 30, 2021 and 2020 and the year ended December 31, 2020, respectively.

Note 4 – Revenue Recognition

Revenues are attributable to geographic areas/countries based upon the destination of shipment of products and related services as follows:

	Nine months ended September 30,				Three months ended September 30,				Year ended December 31,
	2021		2020		2021		2020		2020
	U.S. Dollars (in thousands)
Asia Pacific		167,157		97,317		57,812		35,403		137,555
United States		15,268		4,425		6,441		1,167		9,847
Europe		13,063		5,498		6,433		3,491		8,457
		195,488		107,240		70,686		40,061		155,859

F - 12

Camtek Ltd. and its Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands, except per share data)

Note 5 - Supplementary Financial Statements Information

A.          Cash and cash equivalents

The Company’s cash and cash equivalent balance at September 30, 2021 and December 31, 2020 is denominated in the following currencies:

	September 30,		December 31,
	2021		2020
	U.S. Dollars
US Dollars		107,887		102,669
New Israeli Shekels		8,754		1,542
Euro		507		570
Other currencies		704		1,034
		117,852		105,815

B.          Inventories

	September 30,		December 31,
	2021		2020
	U.S. Dollars
Components		31,256		19,630
Work in process		10,350		10,123
Finished products (including systems at customer locations not yet sold)		20,194		14,399
		61,800		44,152

Inventories are presented in:

	September 30,		December 31,
	2021		2020
	U.S. Dollars
Current assets		56,968		39,736
Non-current assets		4,832		4,416
		61,800		44,152

F - 13

Camtek Ltd. and its Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands, except per share data)

Note 5 - Supplementary Financial Statements Information (cont’d)

C.          Other Current Assets

	September 30,		December 31,
	2021		2020
	U.S. Dollars
Prepaid expenses		1,973		455
Due from Government institutions		1,739		1,967
Income tax receivables		324		302
Interest receivable		268		207
Deposits for operating leases		189		195
Other		188		240
		4,681		3,366

D.          Property, Plant and Equipment, Net

	September 30,		December, 31
	2021		2020
	U.S. Dollars
Land		863		863
Building		14,698		14,438
Machinery and equipment		13,170		11,260
Office furniture and equipment		841		785
Computer equipment and software		5,130		4,760
Automobiles		479		263
Leasehold improvements		1,120		630
Right of use assets		3,376		3,014
		39,677		36,013
Less accumulated depreciation		17,263		15,615
		22,414		20,398

F - 14

Camtek Ltd. and its Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands, except per share data)

Note 5 - Supplementary Financial Statements Information (cont’d)

E.          Intangible Assets, Net

	September 30,		December 31,
	2021		2020
	U.S. Dollars
Patent registration costs		1,987		1,927
Accumulated amortization		1,397		1,318
Total intangible assets, net		590		609

F.          Other Current Liabilities

	September 30,		December 31,
	2021		2020
	U.S. Dollars
Commissions		15,770		7,965
Advances from customers and deferred revenues		14,887		6,155
Accrued employee compensation and related benefits		10,643		9,698
Government institutions and income tax payable		4,910		752
Accrued warranty costs		3,549		2,328
Accrued expenses		2,493		2,570
Operating lease obligations		636		736
		52,888		30,204

F - 15

Camtek Ltd. and its Subsidiaries

Notes to the Interim Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands, except per share data)

Note 6 - Statements of Operations

A. Selling, general and administrative expenses

	Nine months ended September 30,				Three months ended September 30,				Year ended December 31,
	2021		2020		2021		2020		2020
	U.S. Dollars (in thousands)
Selling (1)		24,451		15,397		7,816		5,846		22,969
General and administrative		6,955		5,977		2,302		2,190		8,063
		31,406		21,374		10,118		8,036		31,032
(1)          Including shipping and handling costs		1,274		1,694		434		557		2,356

B.          Financial income (expenses), net

	Nine months ended September 30,					Three months ended September 30,					Year ended December 31,
	2021		2020			2021		2020			2020
	U.S. Dollars (in thousands)
Interest income		900		1,047			339		318			1,281
Other, net (1)		11		(89	)		10		(11	)		(506	)
		911		958			349		307			775
(1)          Including foreign currency expense    resulting from transactions not denominated in U.S. Dollars		228		13			77		34			(351	)

F - 16

EX-99.3

Exhibit 99.3

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 are a developer and manufacturer of high-end inspection and metrology equipment for the semiconductor industry. Our systems inspect IC and measure IC features on wafers throughout the production process of semiconductor devices, covering the front and mid-end and up to the beginning of assembly (Post Dicing). Our systems inspect wafers for the most demanding semiconductor market segments, including Advanced Interconnect Packaging, Memory, CMOS Image Sensors, MEMS, and RF, serving numerous industry’s leading global IDMs, OSATs, and foundries.

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

In the first nine months of 2021, our sales to customers in the Asia Pacific region accounted for approximately 86% 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. From October 2020, this generally occurs upon shipment whereas previously it was generally upon installation at the customer’s premises. This policy change was made following changes to pre-shipment calibration and testing processes which have enabled the simplification and streamlining of the installation at the customer site. The change did not have a material effect on revenues. 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. Since October 2020, following the change in the point in time at which product revenues are recognized, a fixed amount is deferred in respect of installation services for systems 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 nine months of 2021 we wrote-off inventory of approximately $0.4 million. In the first nine months of 2020 we wrote-off inventory in the amount of approximately $0.1 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 the first nine months of 2021 and 2020 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 September 30, 2021, a portion of our inventory in the total amount of $4.8 million 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.

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 September 30, 2021. 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 (2.43% in 2021). 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:

	Nine Months Ended September 30,
	2021			2020
Revenues		100.0	%		100.0	%
Cost of revenues		49.0	%		53.4	%
Gross profit		51.0	%		46.6	%
Operating expenses:
Research and development, net		8.6	%		13.0	%
Selling, general and administrative expenses		16.1	%		19.9	%
Total operating expenses		24.6	%		32.9	%
Operating income		26.4	%		13.6	%
Financial income, net		0.5	%		0.9	%
Income tax expenses		(2.5	)%		(1.3	)%
Net income		24.3	%		13.2	%

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Revenues. Revenues increased by 82% to $195.5 million in the first nine months of 2021 from $107.2 million in the first nine months of 2020. The increase is mainly due to the sale of a higher number of tools due to increased 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 increased to $99.8 million in the first nine months of 2021 from $49.9 million in the first nine months of 2020, an increase of $49.8 million, or 100%. Our gross margin increased to 51.0% in the first nine months of 2021, compared to a gross margin of 46.6% in the first nine months of 2020, primarily due to significantly increased revenues and sales mix.

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 the first nine months of 2021 increased to $16.8 million from $14.0 million in the first nine months of 2020 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 increased by 47% to $31.4 million in the first nine months of 2021 from $21.4 million in the first nine months of 2020, mainly due to an increase in sales channels activity on increased revenues.

 

Financial Income (Expenses), Net. Financial income/expenses consist of interest, revaluation and other bank fees. We recorded net financial income of $0.9 million in the first nine months of 2021, compared to net financial income of $1.0 million in the first nine months of 2020. These changes are attributed to lower interest rates on short-term deposits.

Provision for Income Taxes. Income tax expense was $5.0 million in the first nine months of 2021 compared to expense of $1.4 million in the first nine months of 2020, mainly due to increased income before tax.

Net Income. We realized net income of $47.5 million in the first nine months of 2021 compared to net income of $14.1 million in the first nine months of 2020, due to the factors discussed above.

B.          Liquidity and Capital Resources

Our cash and cash equivalents and short-term deposit balances totalled approximately $204.9 million as of September 30, 2021 and $177.8 million as of December 31, 2020. In addition, as of September 30, 2021 we held $10 million in long-term deposits. Our cash is invested in bank deposits held among several banks, primarily in Israel.

In November 2020, we raised $64.3 million, net, in a public offering.

Our working capital was approximately $245.0 million at September 30, 2021 and $204.5 million at December 31, 2020. The increase is mainly attributed to the increase in cash and cash equivalents, short-term deposits, trade accounts receivable and inventory, partially offset by the increase in trade accounts payable and other current liabilities.

Our capital expenditures during the first nine months of 2021 were approximately $2.6 million, mainly in support of our operating activities.

Cash flow from operating activities

Net cash and cash equivalents provided by operating activities for the first nine months of 2021, totalled $39.1 million. Net cash and cash equivalents provided by operating activities for the first nine months of 2020 totalled $17.4 million.

During the first nine months of 2021, cash provided by operating activities was primarily attributed to the positive net income and the increase in trade accounts payable and other liabilities, partially offset by the increase in trade accounts receivable and inventory.

Cash flow from investing activities

Cash flow used in investing activities in the first nine months of 2021 was $27.6 million, primarily due to investment in short- and long-term deposits, compared to $30.1 million in the first nine months of 2020.

Cash flow from financing activities

Cash flow provided by financing activities the first nine months of 2021 totalled $0.3 million compared to $0.5 million in the first nine months of 2020. This related to proceeds from the exercise of share options.

EX-99.4

Exhibit 99.4

RISK FACTORS

You should carefully consider the risks described below in addition to the remainder of this offering memorandum and the risk factors discussed in our public filings with the SEC, including the information provided under the caption “Risk Factors” in our Annual Report describing, among others, risk factors related to (i) our business and our industry, and (ii) our operations, before making an investment decision. The risks and uncertainties described below and incorporated by reference into this offering memorandum are not the only ones related to our business, the notes, our ordinary shares or the offering. Additional risks and uncertainties that we are unaware of, that were not presently known to us or that we currently believe are immaterial may also become important factors that materially and adversely affect our business. If any of the following risks actually occurs, our business operations, financial conditions, results of operations and prospects could be materially and adversely affected. The market price of the notes and our ordinary shares, if any, issuable upon conversion of the notes could decline due to the materialization of any of these or other risks, and you may lose all or part of your investment.

Risks Related to Our Business and Our Industry

Risks Relating to the COVID-19 Pandemic (“COVID-19”)

The waves of the global COVID-19 pandemic may continue to negatively impact the global economy in a significant manner for a further extended period of time, and may also adversely affect our operating results in a material manner.

The COVID-19 worldwide pandemic, which began in December 2019, has created macro-economic uncertainty and disruption in the business and financial markets. Many countries around the world, including Israel, have been taking measures designed to limit the continued spread of COVID-19, including closing workplaces, restricting travel, prohibiting assembling, closing international borders and quarantining populated areas. As our global operations require physical presence in many stages of our business activities, including travel for installation and services, shipment of materials and products, as well as teamwork, we are particularly vulnerable to the consequences of and the restrictions caused by COVID-19. While our results of operations have not been adversely affected so far in a material manner, given the continued uncertainty around the extent and timing of the future spread or mitigation of COVID-19 and around the imposition or relaxation of protective measures, we cannot reasonably estimate the impact to our future results of operations, cash flows or financial condition. If COVID-19 continues to negatively impact the global economy in a significant manner for a further extended period of time, this may also adversely affect our future operations and results in a material manner.

Below are some of the risks and challenges that we may face as a result of the continuation of the COVID-19 pandemic for a further extended period of time:

•          Economic downturn or slowdown of macro-economic development and significant decline of business which could harm the strength of the worldwide electronics industry in general and the semiconductor fabrication and packaging industry in particular. Such downturn or slowdown could affect demand for our customers’ end products and as a result may cause manufacturers in the semiconductor industry to suspend or reduce capital investments in our products for use in their manufacturing processes, and decrease our sales of products and related services to such industry;

•          An extended period of global supply chain and economic disruption as a result of the COVID-19 pandemic could have a material adverse effect on our business, results of operations, access to sources of liquidity and financial condition, though the full extent and duration is uncertain;

•          Disruptions to production and installation operations. Although we have so far managed, in general, to manufacture, install and maintain our products, we may suffer as a result of additional, more extensive or continuous restrictions on our operations and those of our suppliers and contractors, including on our or their ability to manufacture, distribute, install or maintain our products or provide services relating thereto;

•          Disruptions to our supply chain and outsourced production-activities that could extend lead times and significantly increase the price of one or more component or materials, as well as our supply chain and shipment costs. COVID-19 presents various challenges to our supply chain and manufacturing activities, which we outsource;

•          COVID-19 has also adversely affected, and may continue to adversely affect and increase our costs in doing business, including a significant increase in components, materials and shipment costs;

•          Disruptions to our marketing and sales activities or to our after-sale activities. Disruptions or restrictions may also be imposed on our marketing and sales operations, including on our ability to submit bids and purchase orders, participate in RFPs, perform site-visits and surveys, or other after sale support, maintenance and repair services;

•          Disruptions or restrictions on our operations and those of our contractors and customers, including on our ability to travel or to install or provide services to our products, as well as temporary closures of our facility or the facilities of our suppliers, manufacturers or customers, and prohibitions on the export, import or release from customs of products and components;

•          Lower work efficiency, productivity and service quality; while most of our employees in Israel and globally are vaccinated against COVID-19, such vaccination may become ineffective after a certain period of time or against any mutation thereof, COVID-19 could continue to harm the health of one or more of our employees. Employees may lose their ability to manage and run our operations, share their knowhow and further pursue the development of our products and business;

•          Disruption, reduction or interruption in supply, disruption to our suppliers, manufacturers or customers and their other vendors, lack or delay in the supply of raw materials and goods, or in the performance of work or services by our contractors and subcontractors;

•           Disruption to R&D efforts. A slowdown and delays in our research and development (“R&D”) projects, due to the effect of COVID-19 restrictions and constraints, might delay introductions of new products while exposing us to significant loss;

•          Slowdown in production and manufacturing, and a significant increase in the price of one or more components or materials;

•          Imposition of fines, penalties, damages and contract terminations (including the exercise of certain force majeure clauses), and damage to our reputation and relationship with our customers, as a result of delays in production, shipment, deliveries and services due to any of the above constraints;

•          COVID-19 has had and could continue to have an adverse effect on our business as a result of the materialization of any of the above or similar risks with respect to our significant customers. Our business has been and could further be impacted negatively if there is a prolonged impact of COVID-19 in countries from which we generate a significant portion of our business. For example, this may cause, and to some extent has caused a freeze of procurement budgets, cancellation, suspension or reduction in new equipment purchases from us, failure by our customers in meeting their obligations under purchase orders already issued, postponement or cancellation of rollout projects, and postponement in the introduction of our new products and capabilities;

•          Financial difficulties and insolvencies of major customers, which could lead to slowing the payment of their obligations to us or even discharging those obligations; and

•          Difficulties in collection of amounts due from customers and in satisfying revenue recognition procedures.

•          We are closely monitoring the developments and continually assessing the potential impact of COVID-19 on our business and the mitigation measures to minimize that impact. However, there is a global uncertainty with respect to the expected timing for the defeat of COVID-19. It is not clear for how long protective measures will continue to be imposed, how quickly will the vaccination be effective in stopping the continued spread of the virus and any mutation thereof globally, if at all, and whether there will be enough of the population vaccinated for such solution to become effective. As the scale and duration of these effects remain uncertain, further realization of any of the above-mentioned or other risks could have macro and micro negative effects on the global economy and financial markets in general, and on our business in particular, and cause a material risk to our operations, financial condition and share price. Furthermore, to the extent that the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other factors described in this section and in the “Risk Factors’” section in our Annual Report as filed with the SEC, that we incorporate by reference herein.

Risk Factors Related to Our Business and Our Markets

A substantial majority of our sales have been to manufacturers in the Asia Pacific region (with China being our largest territory). The concentration of our sales and other resources within a particular geographical region, subjects us to additional material risks.

In 2020, our sales in the Asia Pacific region (mainly China, Taiwan and South Korea) accounted for approximately 88% of our total revenues. A number of Asian countries have experienced or could experience political and economic instability. For instance, Taiwan and China encountered a number of continuous disputes, as have North and South Korea, and Japan has experienced significant economic instability for a number of years. Additionally, the Asia-Pacific region is susceptible to the occurrence of natural disasters, such as earthquakes, cyclones, tsunamis and flooding. Changes in local legislation, changes in governmental policies, controls and regulations, trade restrictions, a downturn in economic or financial conditions, an outbreak of hostilities or other political upheaval, as well as any further extraordinary events having an adverse effect on the economy or business environment in this region, would likely harm the operations of our customers in these countries, may cause a significant decline in our future revenues and may have an adverse effect on our results of operations and cash flow. These general risks are heightened in China, which is our largest territory, where the nature of the economy, governmental policies and regulatory environment are rapidly evolving and where foreign companies may face the negative effects of changed governmental policies, regulatory, business and cultural obstacles. Additionally, recent revisions made in the U.S. administrative policy, with respect to China, and the relevant trade and other policies adopted by China with respect to trade, may present obstacles, such as regulatory restraints or significant increases in tariffs on goods imported into these markets.

Our business could be materially disrupted by negative effects on the semiconductor industry.

The semiconductor industry, including semiconductor equipment industry, relies on a global supply chain and is considered strategically important by major trading countries. Political, economic and financial crises have in the past negatively affected and in the future could negatively affect the semiconductor industry and its end markets. Our business may also be materially affected by the impact of geopolitical tensions and related actions. Trade barriers have had a particular adverse impact on the semiconductor industry and related markets. Prolonged or increased use of trade barriers may result in a decrease in the growth of the global economy and semiconductor industry and could cause turmoil in global markets, which in turn often results in declines in our customers’ electronic products sales and could decrease demand for our products and services. Also, any increase in the use of economic sanctions or export control restrictions to target certain countries and companies could impact our ability to continue supplying products and services to our customers globally and to our customers’ demand for our products and services, and could disrupt semiconductor supply chains.

Any future systemic political, economic or financial crisis or market volatility, including interest rate fluctuations, inflation or deflation and changes in economic, trade, fiscal and monetary policies in major economies, could cause revenue or profits for us or the semiconductor industry as a whole to decline dramatically. If the economic conditions in the markets in which our customers operate or the financial condition of our customers were to deteriorate, the demand for our products and services may decrease and impairments, write-downs and other accounting charges may be required, which could reduce our operating income and net income.

The global supply of electronic components, including integrated circles, has experienced, and is likely to continue to experience, a sharp increase in demand, while production capacity remains limited, which had, and may continue to have, an adverse effect on the lead-time for our components and increase in their prices.

The global demand for electronic components has experienced a sharp increase, with a growing number of industries dramatically increasing their demand and consumption. This, together with the effect of COVID-19 and trade restrictions, which have, for example, discouraged U.S. companies from using fabs in China, have led to a longer lead-time to receive electronic components, which in turn has led many companies to stock up and increase their inventory levels, which has added to the pressure on the supply chain and caused an increase in the prices of the electronic components. As a result of this situation, we may be unable to obtain essential components in a timely manner and at a reasonable cost that is necessary for us to remain competitive. During such times, supplier-specific or industry-wide lead times for delivery can be as long as twelve months or more. Industry-wide demand increases for such components could increase its market price as well as the market price of replacement parts and consumable materials needed to manufacture our products. If we are unable to obtain components in a timely manner to fulfill our customers’ demand on technology and production capacity, or at a reasonable cost, we may be unable to meet commitments under our contracts with customers, which could expose us to substantial liquidated damages and other claims and could materially and adversely affect our results of operations, financial condition, business and prospects.

To date, we have successfully managed our supply chain, but if these factors continue or become more severe, they may have an adverse effect on our supply chain and on our ability to fulfill customer orders in a timely manner, which could in turn have an adverse effect on our position in the market and on our business and operations.

Global and local price-pressures may increase our costs of operations. 

We have encountered during the last year, and there is a global concern that such trend will continue, an increase in the costs of raw materials, components, electric power and water, shipping and in turn the cost of the R&D, production and sales work-force. If the price pressure intensifies, this could materially and adversely affect our results of operations, financial condition and business. 

Our customers’ manufacturing processes are highly complex, costly and potentially vulnerable to impurities and other disruptions, and cost increases, that can significantly increase their costs and delay products’ purchase by our customers.

Our customers’ manufacturing processes are highly complex, require advanced and costly equipment, and are continuously being modified to improve manufacturing yields and product performance. Disruptions in manufacturing operations could be caused by numerous issues including impurities in raw materials (such as chemicals, gases and wafers), facilities issues (such as electrical power and water outages), equipment failures (such as performance issues or defects) or IT issues (such as down computer systems and viruses). For example, during 2021 Chinese provinces have implemented power rationing and diverted electricity to critical sectors due to coal shortages and in order to meet energy intensity targets. Any of these issues, and others, could lower production yields or interrupt manufacturing, which could result in the cancellation or delay of purchase of our products, as well as cause our customers to experience reduced revenues, increased costs or reduced quality delivered to their customers.