MIND C.T.I. LTD MIND C.T.I. LTD. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2023
1
MIND C.T.I. LTD. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2023
TABLE OF CONTENTS
Page | |
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID No. 1375) | F-2 |
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID No. 1197) | F-4 |
CONSOLIDATED FINANCIAL STATEMENTS: | |
Consolidated balance sheets | F-5 |
Consolidated statements of operations | F-6 |
Consolidated statements of comprehensive income | F-7 |
Consolidated statements of changes in shareholders' equity | F-8 |
Consolidated statements of cash flows | F-9 |
Notes to consolidated financial statements | F-10 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of MIND C.T.I Ltd.
Fahn Kanne & Co.
Head Office
32 Hamasger Street
Tel-Aviv 6721118, ISRAEL
PO Box 36172, 6136101
T +972 3 7106666 F +972 3 7106660 www.grantthornton.co.il
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of MIND C.T.I Ltd. and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, changes in shareholders' equity, and cash flows, for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Certified Public Accountants
Fahn Kanne & Co. is the Israeli member firm of Grant Thornton International Ltd
F-2
Critical Audit Matter Description
Goodwill Impairment Analysis
As described further in Note 1k and Note 4b to the consolidated financial statements, as of September 30, 2023, the Company performed goodwill impairment analysis with respect to goodwill balance with a total carrying amount of $7.9 million that was allocated to two reporting units. As disclosed in Note 1k, goodwill is not amortized but rather tested for impairment at least annually or most often if indicators of impairment are present. Management either assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying value, including goodwill (qualitative assessment) or elects to proceed directly to the impairment test and bypass the qualitative assessment. As part of the qualitative assessment, if, after assessing the totality of events or circumstances, the Company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, additional impairment testing is not required. Goodwill impairment is measured by comparing the fair value of a reporting unit with its carrying amount. The impairment test was based on a valuation performed by management. Judgments and assumptions used in the discounted cash flow model which included projected net cash flows from operations, short-term and long-term growth rates, weighted average cost of capital, interest, capital expenditures, cash flows, and market conditions. We identified the goodwill impairment analysis as a critical audit matter.
The principal considerations for our determination that the goodwill impairment assessment is a critical audit matter are the high degree of auditor judgment, effort and subjectivity in performing procedures and evaluating management's fair value estimate, which included projected net cash flows from operations, estimated weighted average cost of capital and short-term and long-term growth rates for the reporting units. Given the subjective nature and judgment applied by management, auditing these estimates required a high degree of auditor judgment and an increased extent of effort, including the use of our valuation specialist.
Our audit procedures related to the annual goodwill impairment analysis of the reporting units included, among others, the following:
- We evaluated the appropriateness of the discounted cash flow model; tested the completeness, accuracy and relevance of underlying data used in the model; and evaluated the reasonableness of significant assumptions used by management, including projected net cash flows from operations, estimated weighted average cost of capital and short-term and long- term growth rates for the reporting units. Our evaluation involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit, (ii) the consistency with external market and industry data, and (iii) the consistency of the assumptions used with evidence obtained in other areas of the audit.
- We utilized a valuation specialist to assess the appropriateness of the impairment methodology used and to assist us with testing the appropriateness of the discount rate used (the estimated weighted average cost of capital) in the discounted cash flow model.
/s/ FAHN KANNE & CO. GRANT THORNTON ISRAEL
FAHN KANNE & CO. GRANT THORNTON ISRAEL
Certified Public Accountants (Isr.)
Tel-Aviv, March 18, 2024
We have served as the Company's auditor since 2022.
Certified Public Accountants
Fahn Kanne & Co. is the Israeli member firm of Grant Thornton International Ltd
F-3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of MIND C.T.I Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of operations, comprehensive income, changes in shareholders' equity, and cash flows of MIND C.T.I Ltd. and subsidiaries (the "Company") for the year in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.
/s/ Brightman Almagor Zohar & Co.
Brightman Almagor Zohar & Co.
Certified Public Accountants
A Firm in the Deloitte Global Network
Tel Aviv, Israel
April 10, 2022
We began serving as the Company's auditor since 2009. In 2022, we became the predecessor auditor.
F-4
MIND C.T.I. LTD. AND SUBSIDIARIES | ||
CONSOLIDATED BALANCE SHEETS | ||
Note | ||
ASSETS | ||
CURRENT ASSETS: | ||
Cash and cash equivalents | 8a | |
Short-term bank deposits | 8a | |
Marketable securities | ||
Accounts receivable (net of allowance for credit losses of $12 and $70 as of December | ||
31, 2023 and 2022, respectively) | ||
Other current assets | 8b | |
Prepaid expenses | ||
Total current assets | ||
NON-CURRENT ASSETS: | ||
Accounts receivable | ||
Severance pay fund | 5 | |
Deferred income taxes | 7c | |
Property and equipment, net | 2 | |
Right-of-use assets, net | 3 | |
Intangible assets, net | 4a | |
Goodwill | 4b | |
Total assets | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||
CURRENT LIABILITIES: | ||
Accounts payable | ||
Other current liabilities and accruals | 8c | |
Current maturities of lease liabilities | 3 | |
Deferred revenues | ||
Total current liabilities | ||
LONG-TERM LIABILITIES: | ||
Deferred revenues | ||
Lease liabilities, net of current maturities | 3 | |
Accrued severance pay | 5 | |
Deferred income taxes | ||
Total liabilities | ||
SHAREHOLDERS' EQUITY: | 6 | |
Share capital - Ordinary shares of NIS 0.01 par value - Authorized: 88,000,000 shares as |
of December 31, 2023 and 2022; Issued: 21,660,010 shares as of December 31, 2023
and 2022; Outstanding: 20,184,826 and 20,124,326 shares as of December 31, 2023 and 2022, respectively
Additional paid-in capital Accumulated other comprehensive loss Accumulated deficit
Treasury shares - 1,475,184 and 1,535,684 shares as of December 31, 2023 and 2022, respectively
Total shareholders' equity
Total liabilities and shareholders' equity
December 31,
2 0 2 3 | 2 0 2 2 | |||
U.S. dollars in thousands | ||||
$2,958 | $5,265 | |||
13,464 | 12,040 | |||
182 | 174 | |||
2,295 | 2,357 | |||
538 | 293 | |||
277 | 169 | |||
19,714 | 20,298 | |||
714 | 58 | |||
2,051 | 1,914 | |||
102 | 143 | |||
216 | 225 | |||
690 | 946 | |||
266 | 374 | |||
7,872 | 7,785 | |||
$ 31,625 | $ 31,743 | |||
$ 989 | $ 937 | |||
1,749 | 1,978 | |||
218 | 271 | |||
1,517 | 1,986 | |||
4,473 | 5,172 | |||
100 | 107 | |||
424 | 615 | |||
2,060 | 1,930 | |||
80 | 112 | |||
7,137 | 7,936 | |||
54 | 54 | |||
27,776 | 27,546 | |||
(1,001) | (1,073) | |||
(1,334) | (1,662) | |||
(1,007) | (1,058) | |||
24,488 | 23,807 | |||
$ 31,625 | $ 31,743 | |||
The accompanying notes are an integral part of the consolidated financial statements.
F-5
MIND C.T.I. LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Note | |
REVENUES: | 9a |
Sales of licenses | |
Services | |
Total revenues | |
COST OF REVENUES | |
Cost of sales of licenses | |
Cost of services | |
Total cost of revenues | |
GROSS PROFIT | |
OPERATING EXPENSES: | |
Research and development | |
Selling and marketing | |
General and administrative | |
Total operating expenses | |
OPERATING INCOME | |
FINANCIAL INCOME, net | 9b |
INCOME BEFORE TAXES ON INCOME | |
TAXES ON INCOME | 7 |
NET INCOME | |
EARNINGS PER SHARE - in U.S. dollars: | 9c |
Basic | |
Diluted | |
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES | |
USED IN COMPUTATION OF EARNINGS | |
PER SHARE - in thousands: | 9c |
Basic | |
Diluted |
Years Ended December 31,
2 0 2 3 2 0 2 2 2 0 2 1
U.S. dollars in thousands,
except per share data
$ 558 | $ 611 | $ 1,548 | ||||
21,054 | 20,940 | 24,783 | ||||
21,612 | 21,551 | 26,331 | ||||
115 | 108 | 86 | ||||
10,631 | 9,936 | 12,364 | ||||
10,746 | 10,044 | 12,450 | ||||
10,866 | 11,507 | 13,881 | ||||
3,538 | 3,495 | 4,048 | ||||
1,162 | 965 | 1,403 | ||||
1,417 | 1,523 | 1,602 | ||||
6,117 | 5,983 | 7,053 | ||||
4,749 | 5,524 | 6,828 | ||||
777 | 93 | 55 | ||||
5,526 | 5,617 | 6,883 | ||||
359 | 330 | 936 | ||||
$ 5,167 | $ 5,287 | $ 5,947 | ||||
$ 0.26 | $ 0.26 | $ 0.30 | ||||
$ 0.25 | $ 0.26 | $ 0.29 | ||||
20,163 20,099 20,006
20,471 20,397 20,270
The accompanying notes are an integral part of the consolidated financial statements.
F-6
MIND C.T.I. LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended December 31, | |||||
2 0 2 3 | 2 0 2 2 | 2 0 2 1 | |||
U.S. dollars in thousands | |||||
NET INCOME | $ 5,167 | $ 5,287 | $ 5,947 | ||
OTHER COMPREHENSIVE INCOME (LOSS): | |||||
Translation adjustments | 72 | (237) | (314) | ||
TOTAL COMPREHENSIVE INCOME | $ 5,239 | $ 5,050 | $ 5,633 |
The accompanying notes are an integral part of the consolidated financial statements.
F-7
MIND C.T.I. LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Share capital | Accumulated | ||||||||||||||||||||||||||
Number | Additional | other | |||||||||||||||||||||||||
of shares | paid-in | comprehensive | Accumulated | Treasury | |||||||||||||||||||||||
outstanding | Amount | capital | loss | deficit | shares | Total | |||||||||||||||||||||
In thousands | U.S. dollars in thousands | ||||||||||||||||||||||||||
BALANCE AS OF JANUARY 1, 2021 | 19,986 | $54 | $27,202 | $(522) | $(2,472) | $(1,143) | $23,119 | ||||||||||||||||||||
CHANGES DURING 2021: | |||||||||||||||||||||||||||
Comprehensive income | - | - | - | (314) | 5,947 | - | 5,633 | ||||||||||||||||||||
Dividend paid ($0.26 per share) (Note 6c) | - | - | - | - | (5,197) | - | (5,197) | ||||||||||||||||||||
Employees share-based compensation expenses | - | - | 171 | - | - | - | 171 | ||||||||||||||||||||
Exercise of options issued to employees from treasury shares | 71 | - | (49) | - | - | 49 | - | ||||||||||||||||||||
BALANCE AS OF DECEMBER 31, 2021 | 20,057 | 54 | 27,324 | (836) | (1,722) | (1,094) | 23,726 | ||||||||||||||||||||
CHANGES DURING 2022: | |||||||||||||||||||||||||||
Comprehensive income | - | - | - | (237) | 5,287 | - | 5,050 | ||||||||||||||||||||
Dividend paid ($0.26 per share) (Note 6c) | - | - | - | - | (5,227) | - | (5,227) | ||||||||||||||||||||
Employees share-based compensation expenses | - | - | 258 | - | - | - | 258 | ||||||||||||||||||||
Exercise of options issued to employees from treasury shares | 67 | - | (36) | - | - | 36 | - | ||||||||||||||||||||
BALANCE AS OF DECEMBER 31, 2022 | 20,124 | 54 | 27,546 | (1,073) | (1,662) | (1,058) | 23,807 | ||||||||||||||||||||
CHANGES DURING 2023: | |||||||||||||||||||||||||||
Comprehensive income | - | - | - | 72 | 5,167 | - | 5,239 | ||||||||||||||||||||
Dividend paid ($0.24 per share) (Note 6c) | - | - | - | - | (4,839) | - | (4,839) | ||||||||||||||||||||
Employees share-based compensation expenses | - | - | 281 | - | - | - | 281 | ||||||||||||||||||||
Exercise of options issued to employees from treasury shares | 61 | - | (51) | - | - | 51 | - | ||||||||||||||||||||
BALANCE AS OF DECEMBER 31, 2023 | 20,185 | 54 | 27,776 | (1,001) | (1,334) | (1,007) | 24,488 |
The accompanying notes are an integral part of the consolidated financial statements.
F-8
MIND C.T.I. LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, | |||||||||
2 0 2 3 | 2 0 2 2 | 2 0 2 1 | |||||||
U.S. dollars in thousands | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||
Net income | $ 5,167 | $ 5,287 | $ 5,947 | ||||||
Adjustments to reconcile net income to net cash | |||||||||
provided by operating activities: | |||||||||
Depreciation and amortization | 196 | 193 | 194 | ||||||
Deferred income taxes, net | 6 | 7 | (96) | ||||||
Accrued severance pay | 46 | 41 | 83 | ||||||
Unrealized loss from marketable securities | - | 34 | 1 | ||||||
Unrealized gain from marketable securities | (8) | - | - | ||||||
Realized loss (gain) on sale of marketable securities, net | - | 11 | (3) | ||||||
Realized gain on sale of property and equipment | - | - | (3) | ||||||
Employees share-based compensation | 281 | 258 | 171 | ||||||
Changes in operating asset and liability items: | |||||||||
Decrease (increase) in accounts receivable, net | (549) | (666) | 243 | ||||||
Decrease (increase) in other current assets | (244) | (149) | 117 | ||||||
Decrease (increase) in prepaid expenses | (108) | (45) | 149 | ||||||
Increase (decrease) in accounts payable | 20 | 139 | (363) | ||||||
Increase (decrease) in other current liabilities and accruals | (243) | (265) | 399 | ||||||
Change in operation lease liability | 12 | (71) | (52) | ||||||
Increase (decrease) in deferred revenues | (476) | (216) | 111 | ||||||
Net cash provided by operating activities | 4,100 | 4,558 | 6,898 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||
Proceeds from sales of (investment in) marketable securities, net | - | (11) | 1,370 | ||||||
Purchase of property and equipment | (64) | (130) | (82) | ||||||
Proceeds from sales of property and equipment | - | - | 3 | ||||||
Severance pay funds | (53) | (61) | (89) | ||||||
Proceeds from (investment in) short-term bank deposits | (1,424) | 2,031 | (6,891) | ||||||
Net cash provided by (used in) investing activities | (1,541) | 1,829 | (5,689) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||
Dividend paid | (4,839) | (5,227) | (5,197) | ||||||
Net cash used in financing activities | (4,839) | (5,227) | (5,197) | ||||||
TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVILENTS | (27) | (77) | (90) | ||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (2,307) | 1,083 | (4,078) | ||||||
BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 5,265 | 4,182 | 8,260 | ||||||
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF YEAR | $ 2,958 | $ 5,265 | $ 4,182 | ||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW: | |||||||||
Taxes paid | $ 419 | $ 413 | $ 903 |
The accompanying notes are an integral part of the consolidated financial statements.
9
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
MIND CTI Ltd. published this content on 05 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 May 2024 11:38:06 UTC.
