Full Results for the year ended December 2020

30 June 2021, 12:02

Source - LSE Regulatory

RNS Number : 6753D

Shefa Gems Ltd

30 June 2021

B"H

30 June 2021

Shefa Gems Ltd.

("Shefa Gems" or the "Company")

Full Year Results for the year ended 31 December 2020

Shefa Gems (LSE: SEFA), a company focused on advanced exploration and development of multi-gemstone mines in Northern Israel, is pleased to announce its end year results for the year ended 31 December 2020.

2020 Highlights

Development Progress

· Award of a Certificate of Discovery for the Kishon Mid Reach (Zone 1+2) in Northern Israel, by the Commissioner of Mines at the Ministry of Energy, Natural Resources Administration in Israel.

· Timely completion of the processing of bulk samples from the Kishon Mid-Reach Zone 2 and published a Summary of Pre-commercial findings from the Kishon Mid-Reach (Zones 1 + 2).

· Completed first bulk samples from exploration in Kishon Mid-Reach Zone 3.

· Awarded a renewed Exploration Permit, covering a total of 173,635 Dunams (17,363 hectares), by the Commissioner of Mines at the Ministry of Energy, Natural Resources Administration in Israel.

· Commenced a target working plan for the prioritisation and development of the most visible potential deposits without equity dilution.

· Awarded a renewed Prospecting Permit, covering a total of 312,500 Dunams (31,250 hectares) by the Commissioner of Mines at the Ministry of Energy, Natural Resources Administration in Israel.

· Completed a bulk sample from exploration in the 'Bat Shlomo' ("BTS") location, showing good results.

· Awarded a new Prospecting License, for the BTS location, covering a total of 990 Dunams by the Commissioner of Mines at the Ministry of Energy, Natural Resources Administration in Israel.

· Promoting world recognition: The mineral inclusions ('Carmeltazite') in the company's exclusive Gemstone Carmel Sapphire™, was chosen to be Mineral of the Year 2018 by the IMA.

· Published initial gemstone inventory, and commenced a programme of gem visual testing, initial branding and marketing strategy.

Corporate and Financial

· Appointment of Ms. Tali Shalem, as Chief Executive Officer of the company (the late founder, Mr Avi Taub's daughter) and retirement of Vered Toledo the previous CEO.

· Addition of Mr Zvi Nemeth and Mr Nathan Drukman to the board and retirement of Mr Hanoch Erlich.

· Raised £ 902,000 in equity by conversion, mainly from new shareholders to fund its development activities.

· Completion of conversion to equity of all investment made by June 2020, in a total amount of £1,424,000 (including the above £ 902,000 raised in H1 2020 and the amount raised in H2 2019).

· A full debt repayment, of approximately US$650,000 in cash and equity was received from major shareholder Shefa Yamin Ltd

· Received a loan from one of the company's officers in the total amount of of £192,000 and another loan from a shareholder in the total amount of of £151,000 .

Post Period

· Timely filed an initial application for mining rights for the Kishon Mid-Reach, that will be examined for approval by the Commissioner of Mines, only after the completion of the construction planning procedures and the authorities and landowner's approval for rezoning.

· Carried out consultations in order to promote the regulatory process and negotiated with service providers in accordance with the guidelines of the certificate of discovery - showing new information on the complexity and cost of the regulatory procedures in relation to licensing of the commercial gem mining in the Kishon area.

· Prepared a target working plan for the development of the primary deposits and other potential locations in the Prospecting Permit area and the Exploration Permit area - showing several potential projects, the actions that are still required in each of the potential locations, and the costs that are still required accordingly.

· Commenced an internal strategic review of the company business activities and mining assets value - following the reviews on regulation and costs, and also re-examined the share trading capacity when it is based solely on gemstone exploration activity (pre-profitable mining).

· In addition, the Company does not know, at this point, what the effects of the Coronavirus will be on the time schedule for advancing and assumes that there will be minor delays in the scheduling, that are not within the Company's control.

· Accordingly, The Company announced on 1 June 2021 that it had entered into the Agreement with the Shany Group to distribute the Company's current mining business to all of the Company's existing shareholders via a dividend in specie, raise new funds for the Company, change the Company's name, make certain changes to the Board and change the Company's focus of activity to a cash shell seeking an acquisition in the web technology and software space. The Independent Directors consider that it is in the best interest of the Company and Shareholders as a whole to proceed with the Proposed Combined Transaction and recommend that Shareholders vote in favour of the Resolution to be proposed at the Special General Meeting (A full and detailed Circular for the general meeting regarding the terms of the proposed transaction for the approval of the shareholders, the schedule for execution, and the voting options, will be published in the coming days.

Tali Shalem, CEO of Shefa Gems, said:

"Despite the Covid-19 crisis that is still in full swing, it has been a very encouraging year as the Company has achieved several key milestones. Nevertheless, having taken into account the new data on the complexity of regulation and the high costs still required for exploration, we understood that there was a need to change the strategy, and as a result of lengthy negotiations, which were carried out under a number of key objectives, including both the benefits for the Company and its Shareholders, we believe that the combined transaction we are asking shareholders to approve (as will be outlined in more detail in the Circular of the SGM), is the best way forward - including by, promoting profitability and new opportunities in new rising sectors using the Israeli innovation opportunities, closing burdensome liabilities, cutting costs, and also preserving the shareholders' holdings in the gem mining in Israel (the Company's original field of activity). -

- Ends -

Enquiries

Shefa Gems Ltd
Michael Rosenberg, OBE - Chairman Tali Shalem - Chief Executive Officer www.shefayamim.com	+44 7785 727595 +972 50 447 5770

VSA Capital Limited - Financial Adviser
Andrew Raca	+44 20 3005 5000

SI Capital Limited - Broker and Strategic Adviser
Nick Emerson and Jon Levinson	+44 20 3871 4038 / +44 1483 413500

Notes to Editors

About Shefa Gems Ltd

Shefa Gems Ltd (LSE: SEFA) is an explorer and developer of precious gems deposits operating in Northern Israel. Exploration activity is managed by professionally skilled and technically competent personnel and is accompanied by an international team of geological experts. All exploration activities are conducted under international standards and the internationally recognized SAMREC 2016 Code.

The Company holds three permits, granted to it by the Commissioner of Mines at the Ministry of Energy, Natural Resources Administration, Israel, extend over an area of approximately 488,366 Dunams (48,836 hectares) that includes the Kishon River, the volcanic bodies on Mount Carmel, the Zevulun and Yizre'el valleys and their margins.

Shefa Gems has established a "Source to Sink" geological model and the presence of a Target Mineral Assemblage of gemstones ("TMA Suite") in both primary volcanic sources and in secondary alluvial deposits lying within the Kishon catchment, on Mount Carmel and in the Zevulun and Yizre'el valleys and their margins. The TMA suite comprises Precious Stones (Diamond, rare natural moissanite, sapphire, ruby, Carmel Sapphire™, garnet, hibonite, spinel, ilmenite) and heavy minerals including zircon and rutile.

On March 2020, the Quarries and Mines Branch of the Ministry of National Infrastructures of the State of Israel has awarded a Certificate of Discovery to the Company covering the projected gemstone mine development in the Kishon Mid Reach, Zones 1 and 2. The Certificate of Discovery is the culmination of the Company's successful exploration activities and market analysis; and signals the beginning of the process towards future commercial mining. 20 years of exploration in the Kishon valley have brought the Company one step closer in the establishing Israel's first and only future precious gemstone mine, originally identified and progressed by the founder of the company, the late and much missed Abraham (Avi) Taub.

Alongside its exploration activities, the Company is developing a "Mine to Market" strategy to promote unique jewellery collections utilising Shefa Gems' suite of precious gemstones.

The Company upholds environmental values and protects the nature in the areas where it operates, cooperating fully with all authorities.

For further information please visit the website at www.shefagems.com

Overview

Operational Review

Development Progress:

Award of Certificate of Discovery for the Kishon Mid Reach (Zone 1+2) Northern Israel

The Quarries and Mines Branch of the Ministry of Energy of the State of Israel has awarded a Certificate of Discovery to the Company covering the projected gemstone mine in the Kishon Mid Reach, Zones 1 and 2.

The Certificate of Discovery, dated 17 March 2020, is the culmination of the Company's successful exploration activities and market analysis; and signals the beginning of the process towards commercial mining in the first and only precious gemstone mine, originally identified and progressed by the founder of the company, the late and much missed Abraham (Avi) Taub.

The award of the Certificate of Discovery (No. 869D12) under Article 39 of the Mines Ordinance enables and requires Shefa Gems to proceed with mine planning procedures with the Israel Lands Authority and other relevant planning institutions and to prepare a mining plan that demonstrates its commercial feasibility.

An initial application for mining rights was filed by the Company on April 2021 - and will be examined for approval by the Commissioner of Mines, only after the completion of the construction planning procedures and the authorities and landowner's approval for rezoning.

Timely completion of the processing of bulk samples from the Kishon Mid-Reach Zone 2 - and publication of Summary of Pre-commercial findings from the Kishon Mid-Reach (Zone 1 + 2)

In H1 reports of 2019, the company undertook to complete the processing of all bulk samples from the Kishon Mid-Reach Zone 2, by August 2020.

In July 2020, and despite the Covid's delays, the company completed its processing and published a Summary of Pre-commercial findings from the Kishon Mid-Reach (Zone 1 + 2) as follows: Zone 1: 9,778 carats recovered from a total of 14 bulk samples and 6,384 tons of palaeo gravels giving a raw sampling grade of 153 carats per hundred tons. The largest gems recovered were: 33.3ct Carmel sapphire™, 13.6ct Garnet, 5.7ct Sapphire, 6.2ct Spinel, 2.8ct Hibonite and 1.7ct Ruby. Zone 2; 8,319 carats recovered from a total of 30 bulk samples and 6,094 tons of palaeo gravels giving a raw sampling grade of 136.5 carats per hundred tons. The largest gems recovered were: 6.9ct Spinel, 5.72ct Sapphire, 5.26ct Carmel Sapphire^TM and a 4.1mm of Natural Moissanite, the largest natural moissanite ever found.

Exploration in Zone 3 of the Kishon Mid-Reach

Following the excellent progress and encouraging results from exploration campaigns in Zone 1 and Zone 2, another one of Shefa Gems' goals is to expand its exploration efforts in Zone 3.

Implementing cost reduction goals, during January 2020, as part of infrastructure work carried out by the Israeli Water Company (Mekorot) in the Kishon Mid reach zone 3 area, approximately 1,500 tons of Gravel have been transported for treatment and analysis in the Company's operational site in Akko.

Post Period - In August 2020 the company completed the processing results for this first bulk sample from Zone 3, and a total of 781.24 Carats of gemstones were recovered from 1,531 tonnes ('t') of basal gravels with an overall TMA recovered grade of 51.03 carats per hundred tonnes ("cpht") at a bottom screen size of 1mm.

The results from this first bulk sample of Zone 3, together with the excellent grade achieved in Zone 1 and 2, further highlight the potential of the Kishon Mid-Reach deposits.

The company will be preparing further resource delineation drilling campaigns in the Kishon Mid-Reach Zone 3, as per the development of regulation in Zone 1+2.

Renewal of Prospecting Permit and Exploration Permit

In addition to the Kishon Mid-Reach Certificate of Discovery for Zone 1+2, the company has 2 additional permits: Prospecting permit and Exploration permit.

These 2 permits extend over an area of approximately 488,113 Dunams (48,811 hectares) that includes the Kishon River, the volcanic bodies on Mount Carmel, the Zevulun and Yizre'el valleys and their margins - Tivon-Alonim Hills and Nazareth range.

On February 2020, the Commissioner of Mines at the Ministry of Energy, Natural Resources Administration in Israel has renewed the Company's Prospecting Permit, covering a total of 314,478 Dunams (31,447 hectares). The permit provides the Company prospecting rights for diamonds, gold and precious stones over the permitted areas for a period of a year and entitles the Company to conduct all required actions connected with prospecting for these minerals.

On July 2020 the Commissioner of Mines at the Ministry of Energy, Natural Resources Administration in Israel has renewed exploration permit 869B11 for a further year. The renewed exploration permit, 869B13, includes four volcanic bodies on Mount Carmel; RMC (Rakefet Magmatic Complex), Muhraka, Har Alon and Beit Oren, the eastern slope of Mt. Carmel, Zevulun and west Yizre'el valleys, and part of the Kishon River. Exploration Permit 869B13 covers a total of 173,635 Dunams (17,363 hectares) and entitles the Company to continue conducting geological exploration at the site including further drilling and excavations.

The Kishon Mid Reach Zone 1 and 2 was extracted from this permit after declared as Discovery (Certificate 869D12).

Post Period - On the Commissioner of Mines at the Ministry of Energy, Natural Resources Administration in Israel has renewed the Company's Prospecting Permit, covering a total of 312,500 Dunams (31,250 hectares). The permit provides the Company prospecting rights for diamonds, gold and precious stones over the permitted areas for a period of a year and entitles the Company to conduct all required actions connected with prospecting for these minerals.

Following a prioritization report made by the company's geologists in relation to the magmatic bodies on Mount Carmel, and in accordance with the summary of data researched over the years in this area, it was decided in November 2020 to perform a Bulk Sample (BS-1260), which final results allowed the company to progress, relatively quickly, to the regulatory status of a Prospecting License for this project.

On 22th of February 2021 the company announced that it has been granted its second Prospecting Licence (#1010C1), for one of the company's primary exploration targets, the Bat Shlomo ('BTS') Project, taking it towards a 'Certificate of discovery' and potentially a mining licence.

The 'BTS' project is one of the company's primary exploration targets (Magmatic Body) in the Carmel area, and is spread over an area of 990 Dunams (99 Hectares) which were extracted from the prospecting permit.

Promoting Marketing strategy

In February 2019, the company launched a preliminary Market Test in order to obtain preliminary understanding of the market's ability to accept the valuation of the Holy Land Gems, and in particular for the new gems: the Carmel sapphire™ and the Natural Moissanite. This preliminary Market Test was performed by the 'Heaven on Earth' jewellery collection designed by the international jewelry designer Mr. Yossi Harari and sold mainly at his flagship store in Dallas USA. As of the date of this reports, it can be said that the customer (the American at this test), estimates the value of the gems from the Holy Land according to the company's estimates and even more.

Notwithstanding the foregoing, and in relation to the presentation of commercial profitability for the purpose of complying with the terms of the license, and as part of the 'Mine to Market' development strategy - the company needs to perform additional actions for promoting the marketing targets.

The mineral inclusions ('Carmeltazite') in the company's exclusive Gemstone Carmel sapphire™, was chosen to be Mineral of the Year 2018 by the IMA

On February 2020, The International Mineralogical Association ("IMA") an international scientific group of 40 national societies that recognizes new minerals and new mineral names, has chosen the Shefa Gems' 'Carmeltazite' (the mineral inclusions in the company's exclusive Gemstone 'Carmel Sapphire') as the Mineral of the Year for 2018 (https://www.shefagems.com/ima-mineral-of-the-year-2018).

Carmeltazite is a complex oxide (ZrAl2Ti4O11) which forms inclusions in blue corundum crystals - the exclusive 'Carmel Sapphire' - found in Cretaceous pyroclastic rocks and associated alluvial deposits at the Kishon Mid-Reach in northern Israel.

Gem Visual Testing - The company began in August 2020 to perform testing and examination processes in order to test what are the maximum visual qualities of each of the company's gem types. In order to bring the natural visual qualities of the raw gem to a state of perfect radiate luxury gem - the treatment on the gem includes high-level polishing and in some cases soft heating in favor of enhancing the natural color or transparency. The cost at this stage of testing is negligible. The costs of the above treatment at the commercial quantities stage will be calculated and clarified after receiving the test results.

Initial Branding and Exposure - Significant exposure requires significant expenses. Had it been made directly by the company - it could have significantly impaired profitability. That is, the company is interested that the significant marketing expenses will be reduced from the jewelry margin and not from the gem direct profits. This conclusion requires the company to consider options for cooperation on a percentage basis or otherwise, with marketers, manufacturers, and retailers. And/or with big international brands that already have significant exposure and relevant audiences. However and in order to reach those collaborations, we need to perform initial branding and exposure, and building the brands special "story". (ie graphics, copywriting, PR, registration, atc.) The company is currently negotiating with companies that provide the services required, and decisions will be made accordingly regarding the date of implementation and the method of financing.

Corporate Review

Appointment of new CEO

Following the sad passing of Avi Taub, the founder of Shefa Gems, and with effect from 1st June 2020 the company appointed new CEO - Ms Tali Shalem, the daughter of the late Avi Taub and her appointment as CEO was approved by the Board of Shefa.

From 2008 until 2018 Tali served as second to Avi Taub and was involved in all aspects of the business including legal and regulatory procedures, finance and fund raising. Prior to that she worked for many years at the family jewellery company with experience in all stages of jewellery production sales and finance. Since 2019 she has been the owner of a new marketing company who had a website for the sale of gems and jewellery and worked with suppliers from Tel Aviv and manufacturers from Israel and Europe.

Board changes and 2020 AGM results

At the Annual General Meeting of the Company, held on August 5, 2020 all resolutions were duly passed, Including: The re-appointment of Barzely & Co. as the Company's auditors and to authorise the directors of the Company to determine their remuneration. The amendment of section 41 in the Company's Articles of Association (stating that: The Board of Directors of the Company shall consist of not less than four Directors nor more than eight Directors (including External Directors). To re-elect Mr. Michael Rosenberg as an executive director of the Company. (Mr. Michael Rosenberg also serves as the Chairman of the company). To re-elect Mr. Yosef Itshak Taub as an executive director of the Company. (Mr. Yosef Itshak Taub also serves as the Business Development Manager of the company). To re-elect Mr. David Israel Nachshon as a non-executive director of the Company. To re-elect Mr. Gershon Fraenkel as a non-executive director of the Company. To re-elect Mr. James Campbell as a non-executive and external (Independent) director of the Company. To re-elect Mrs. Nathalie Schwarz as a non-executive and external (Independent) director of the Company. To confirm the appointment of Mr. Zvi Nemeth (ADV) as a non-executive director of the Company (Instead of Mr. Ehrlich, who did not renew his candidacy). To appoint Mr. Natan Drukman (ADV) as a new executive director of the Company (Mr. Drukman also serves as the company legal secretary).

Board review of the company's activities and an examination of the possibilities for promoting profitability

During the second half of 2020, the company began conducting a number of reviews:

a) Carried out consultations in order to promote the regulatory process, and negotiated with service providers in accordance with the guidelines of the certificate of discovery - showing new information on the complexity and high costs of the regulatory procedures in relation to licensing of the commercial gem mining in the Kishon area.

b) Prepared a target working plan for the development of the Primary Deposits and other potential locations in the Prospecting Permit area and the Exploration Permit area - showing several potential projects, the actions that are still required in each of the potential locations, and the high costs (with low level of certainty) that are still required accordingly.

c) Commenced an internal strategic review of the company business activities and mining assets value - following the reviews on regulation and costs, and also re-examined the share trading capacity when it is based solely on gemstone exploration activity (pre-profitable mining).

Following this review, it is now apparent that, due to recent regulatory changes, the exploitation of these assets is likely to take longer than previously anticipated and, in addition, may require further funding. While in the longer term it is hoped that the eventual value of the mining assets will prove to be attractive, the present day value of these assets needs to be impaired to reflect the current uncertainties on the timing of eventual exploitation and, accordingly, it is proposed to impair that value to a more adjusted level.

The Company also re-examined the share trading capacity when it is based solely on gemstone exploration activity (pre-profitable mining), both by observing the Company's stock trading in recent years, and also by observing the stock trading of other exploration companies in the world, It is clear from these examples that since shefa is a relatively small exploration company and the time expected before full mining can commence is now much longer than anticipated it is not economic to continue to bear costs of being a listed company and that any future funds raised on the basis of these mining prospects, should be entirely focussed on the development of these further mining opportunities.

Accordingly, it was first decided to transfer all the Company's exploration and mining assets to the Company's fully owned (100%) subsidiary, Shefa in Israel (G.M.) Ltd. (a private company registered in Israel).

In addition, The Company announced on 1 June 2021 that it had entered into the Agreement with the Shany Group to distribute the Company's current mining business to all of the Company's existing shareholders via a dividend in specie, raise new funds for the Company, change the Company's name, make certain changes to the Board and change the Company's focus of activity to a cash shell seeking an acquisition in the web technology and software space. The Independent Directors consider that it is in the best interest of the Company and Shareholders as a whole to proceed with the Proposed Combined Transaction and recommend that Shareholders vote in favour of the Resolution to be proposed at the Special General Meeting (A full and detailed Circular for the general meeting regarding the terms of the proposed transaction for the approval of the shareholders, the schedule for execution, and the voting options, will be published in the coming days.

The Covid-19 Coronavirus Pandemic

During January 2020 the Covid-19 Coronavirus was released in China and has since spread worldwide, including in Israel, leaving chaos and uncertainty wherever it has touched civilization. The scope pf economic activity has been sharply reduced, including in Israel, and there exists a suspicion that there will be a global recession as a result. As part of the coping mechanism and efforts to restrain the virus from spreading, steps are being implemented, including in Israel, that are drastically limiting mobility and social gatherings.Preparations of the Company for further expansions in the global economic environment as well as possible implications for these developments on Group operations are not under Company control, are uncertain and are based on information presently available to the Company, that is based, inter alia, on information in Israel and worldwide as well as on guidelines of the relevant Authorities that could possibly change at any moment. As long as the global crisis continues for a lengthy period of time, this is likely to result in significant deterioration of the operating results for the Company, including its financial ability to cope with the situation

Effect of the Coronavirus on the Company

The Company's recent efforts revolve around prompting extensive exploration work and working with the various Authorities in order to advance the planning and regulation procedures that will enable it to commence commercial mining. The Company does not know, at this point, what the effects of the Coronavirus will be on the time schedule for advancing and assumes that there will be minor delays in the scheduling, that are not within the Company's control. During the months of March until may 2020, the company's employees were required to go on "unpaid leave" because the state demanded the closure of all factories and offices (state quarantine). But immediately when the quarantine was uplifted, all the company's employees returned to work in full force. And that delay did not have any significant effect on the company's schedule.

Concurrently, the Company does not know, if there will be difficulties with mobilization of capital in accordance with the current world economic situation or if the ability and timing of the Company to raise additional capital will be impacted by these unprecedented external factors.

Financial Review

In 2020 the Company recorded a comprehensive loss for the period, of TNIS (in thousands) 3,988 (2019: TNIS 7,929) equating to a loss per share of NIS 0.021 (2019: 0.049). The loss was attributed to general and administrative expenses, and financing expenses due to adjustment of the value of a financial liability at fair value. As of December 31, 2020, the Company's cash and cash equivalents stood at TNIS 483 (2019: TNIS 6).

General and administrative expenses

The decrease is mainly due to a decrease in marketing and advertising expenses and expenses of professional advisers.

Financial expenses

Financing expenses increase due to adjustment of the value of a financial liability at fair value.

Loan Conversions

On June 30, 2020 the Company issued 28,922,507 shares and 28,900,715 warrants to various investors following conversion of loans in the amount of GBP £1,423,939. The shares were converted at a price of 5 pence per share. The company allotted warrants at an exercise price of 10 pence for a 24-month period.

The Company received from investors loans convertible to shares in the amount of GBP £901,755 In the first half of 2020..

Completion and Receipt of Debt Settlement from the Company's largest shareholder (hereinafter: 'TopCo')

On August 2020 (post period) the company received NIS330,000 (approx. US$100,000) in cash and 313,000 shares in its major shareholder, 'Shefa Yamim Ltd.' ("TopCo"), at a share value of NIS 6 on the day of the settlement (approx. US$550,000) together in settlement of debts owed to the Company in accordance with its financial statements published on 30 April 2020. The settlement reflects the full value of the original debt of NIS 2,200,000 (approx. US$650,000). Following the settlement, Shefa Gems will hold approximately 2.9% of the issued capital of TopCo.

This settlement and its completion are in fulfilment of a court order sanctioned by the Tel Aviv District Court, as part of a capital reorganization of TopCo to create an investment vehicle mainly engaged in the FinTech sector.

Amongst further details of this settlement, Shefa Gems has agreed not to dispose of its shares in TopCo on the market for a period of 6 months from 20 July 2020. The Company may, at its discretion, sell the shares at any stage through a bilateral transaction. The Company will decide how to proceed according to the performance of TopCo's shares in the market and the financial needs of Shefa Gems.

TopCo currently holds 68,004,420 shares in Shefa Gems, representing approximately 33.8% of its issued share capital. As previously announced, and as part of TopCo's capital reorganization, provision has been made for all shareholders of TopCo (who held shares on 26 July 2020 ("the record date"), to elect to exchange 10% of their shareholding in TopCo into existing shares held by TopCo in Shefa Gems (in the amount depending on the percentage they held in TopCo on the record date). This election has been made available to them by the Tel Aviv District Court until 26 July 2021.

To the extent that TopCo shareholders elect to exchange their TopCo shares for shares in Shefa Gems, this will reduce the shareholding by TopCo in Shefa Gems. This process will not result in the issue of any new shares by Shefa Gems.

Outlook

As stated, following the company's review, it was decided to transfer all the Company's exploration and mining assets to the Company's fully owned (100%) subsidiary, Shefa in Israel (G.M.) Ltd. (a private company registered in Israel).

the Company also announced on 1 June 2021 that it had entered into the Agreement with the Shany Group to distribute the Company's current mining business to all of the Company's existing shareholders via a dividend in specie, raise new funds for the Company, change the Company's name, make certain changes to the Board and change the Company's focus of activity to a cash shell seeking an acquisition in the web technology and software space.

In light of the decision to distribute the company's assets of exploration and liabilities, and as stated by the auditors, the Company did not implement IFRS 5 - non current assets held for sale and discontinued operations. Accordingly we estimate that the value of the exploration assets will be lower than the amounts presented in the financial statements.

Regarding the continuation of the gem mining in Israel - all of the exploration activity of the Subsidiary, in the relevant exploration areas, will be carried out in accordance with the relevant regulations, and the material is processed in the operational complex and laboratories in the city of Akko by a professional Israeli team with extensive experience, accompanied by professional consultants with international expertise in the field.

All business activities of the Subsidiary will be managed in accordance with the Israeli Companies Law, and in accordance with the rules of private corporate governance (including a management hierarchy with a board of directors that will audit the professional management team).

The professional management team will include the team that managed the Company's exploration activities including, the CEO (Tali Shalem), Business Development Manager (Yosef Taub), Operations Manager (Menachem Taub), CFO (David Ben David), Chief Geologist (Dr. Reli Weld), and the Certified Geological Adviser and CP (James Campbell).

The Subsidiary intends to finance both the day-to-day activity and the activity required in accordance with the work plans in the Permits and Licenses in the following manner:

· From the revenue that will come from the sale of the limited quantity of gems in stock, as part of a strategic marketing plan with the aim of exposing the gems to the market under a registered brand.

· From investments in sub-projects (such as the acquisition of a percentage of future income in one of the potential deposits, in accordance with and subject to the existence of economic feasibility).

Although, as mentioned, the management team believes that the prospects are positive, the staff is professional, and the work plans are good - it should be clarified that the ability of the management team of the Subsidiary to develop the projects into active mines with commercial mining licenses, depends entirely on the ability to fund the required activity, satisfy the Israeli regulations, and also in the ability and desire of Company executives to continue.

Having said that, the management team of the Subsidiary have confirmed that as long as it will be possible, from an economic and regulatory point of view, they will do their best to realize the original vision of the late founder, Mr. Avi Taub, which included to maximize all possible benefit to the Shareholders.

Following the Proposed Distribution of the subsidiary's shares to the company shareholders, as outlined above, the Company will remain listed as a cash shell on the Main Market of the London Stock Exchange and will look to make an acquisition of a suitable company in the web technology and software space. Should an acquisition be completed it would constitute a reverse takeover under the Listing Rules and the Company would apply for the readmission of its shares to the Official List and the Main Market of the London Stock Exchange.

Although the Company has currently not identified a suitable acquisition target, the Proposed Directors will look for an acquisition target in the web technology and software space. The Company will particularly focus on the key areas of high growth delivering digital services to consumers in areas such as leisure, financials, e-commerce, gaming, as well as disruptive technologies such as blockchain and crypto currencies. In addition, the Company will also look at potential targets in the software space, the areas of B2B software, Customer Relationship Management software and corporate risk management software (presenting a good opportunity for the Company to create shareholder value).

Should the Company identify a suitable target, it will, in accordance with the Listing Rules, publish a prospectus containing all information required for the approval of a reverse takeover. At present, there can be no assurance that the Company will be able to identify a suitable acquisition target or that it will be able to complete any contemplated transaction and, as a consequence, the Company's admission to the Standard Listing segment of the Official List and trading on the London Stock Exchange's Main Market for listed securities may be cancelled.

A full and detailed Circular for the general meeting regarding the terms of the proposed transaction for the approval of the shareholders, the schedule for execution, and the voting options, will be published in the coming days.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

STATEMENTS OF FINANCIAL POSITION

NIS in thousands

				December 31,
		Note	2020		2019
	ASSETS
	Non-Current Assets:
	Fixed assets, net	6		1,007		1,494
	Right of use assets	15		1,645		1,751
	Loans to parent company	7		- . -		1,116
	Interested party			- . -		77
	Assets for exploration and evaluation of precious stones	8		63,098		60,628
	Total non-current assets			65,750		65,066

	Current Assets:
	Cash and cash equivalents			483		6
	Marketable securities			926		- . -
	Short-term deposit in bank	4		- . -		14
	Trade receivables			- . -		51
	Other accounts receivable	5		220		145
	Total current assets			1,629		216

	Total Assets			67,379		65,282

EQUITY AND LIABILITIES
Equity		17		55,609		56,422
Non-Current Liabilities:
Long-term loans from interested party and others		14		433		- . -
Liability at fair value		13		6,187
Long-term leasehold liabilities		15		1,302		1,492
Liability for severance pay		3h		154		164
Options convertible to shares		16		6		1,120
Total Non-current Liabilities				8,082		2,776

Current Liabilities:
Short-term credit from bank and others		9		1,789		762
Trade payables		10		681		1,071
Interested parties		11		88		211
Other accounts payable		12		670		1,114
Short-term liability at fair value		13		279		1,792
Loans convertible to shares		13		181		1,134
Total current liabilities				3,688		6,084

Total Equity and Liabilities				67,379		65,282

The accompanying notes are an integral part of the financial statements.

June 30, 2021

Date of Approval of the Financial Statements

Michael Rosenberg

Chairman of the Board of Directors

Tali Shalem

CEO

David Ben David

CFO

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

NIS in thousands (except for income (loss) per share)

			For the Year Ended December 31,
	Note		2020	2019	2018

General and administrative expenses	18		(1,915)	(3,123)	(3,410)

Amortization of assets for exploration	8		- . -	(2,409)	- . -

Operating loss			(1,915)	(5,532)	(3,410)

Other income (expenses), net	19		1,195	(1,023)	- . -

Loss prior to financing			(720)	(6,555)	(3,410)

Financial expenses			(4,382)	(1,534)	(218)

Financial income			1,114	160	9,637

Financial income (expenses), net		20	(3,268)	(1,374)	9,419

Profit (loss) for the year and comprehensive profit (loss) for the year			(3,988)	(7,929)	6,009

Basic and diluted income (loss) per share (in NIS)		24	(0.021)	(0.049)	* 0.0431

* Subsequent to the split, an adjustment of the income (loss) per share was performed.

The accompanying notes are an integral part of the financial statements.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

STATEMENT OF CHANGES IN EQUITY

NIS in thousands

		Share Capital	Additional Paid-in Capital, net	Receivables in Regard to Shares	Capital Reserve for Share- Based Payments	Capital Reserve from Transactions with Shareholder	Accumulated Deficit	Total Equity Attributed to Shareholders

Balance as of January 1, 2018		13,905	93,742	- . -	5,583	6,312	(67,054)	52,488
				- . -
Comprehensive Income for the year		- . -	- . -	- . -	- . -	- . -	6,009	6,009
Issuance of shares		319	595	- . -	- . -	- . -	- . -	914
Share based payment		- . -	- . -	- . -	133	- . -	- . -	133

Balance as of December 31, 2018		14,224	94,337	- . -	5,716	6,312	(61,045)	59,544
				- . -
Comprehensive Loss for the year		- . -	- . -	- . -	- . -	- . -	(7,929)	(7,929)
Issuance of shares		3,006	1,960	(205)	- . -	- . -	- . -	4,761
Share based payment		- . -	- . -	- . -	46	- . -	- . -	46

Balance as of December 31, 2019		17,230	96,297	(205)	5,762	6,312	(68,974)	56,422
				- . -
Comprehensive Loss for the year		- . -	- . -	- . -	- . -	- . -	(3,988)	(3,988)
Issuance of shares **		2,890	80	205	- . -	- . -	- . -	3,175

Balance as of December 31, 2020		20,120	96,377	- . -	5,762	6,312	(72,962)	55,609
	* See Note 1d, 17f. ** Net of fees in the amount of NIS 413 thousand. The accompanying notes are an integral part of the financial statements.								- . -

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

STATEMENTS OF CASH FLOWS

NIS in thousands

	For the Year Ended December 31,
	2020	2019	2018
Cash flows from operating activities:
Profit (Loss) for the year	(3,988)	(7,929)	6,009
Appendix A - Adjustments required to reconcile profit (loss) for the year to net cash used in operating activities	767	5,209	(9,931)
Net cash used in operating activities	(3,221)	(2,720)	(3,922)

Cash flows from investing activities:
Purchase of fixed assets	(8)	(395)	(391)
Consideration from sale of fixed assets	111	- . -	55
Deposits	14	(14)	173
Investment in exploration and evaluation assets	(1,361)	(2,161)	(3,541)
Loan repaid (rendered) to the top-co	330	253	(84)
Net cash used in investing activities	(914)	(2,317)	(3,788)

Cash flows from financing activities:
Consideration received for issuance of share capital and options (including additional capital), net	205	3,575	908
Receipt (repayment) of credits from banks and others, net	(130)	103	(2)
Receipt (repayment) of loans from interested parties, net	1,431	(674)	(111)
Repayment of fund in regard to leasing	(393)	(299)	- . -
Liabilities to shareholders	- . -	- . -	685
Receipt of loans convertible to shares	3,804	2,636	- . -
Repayment of long-term loans	- . -	- . -	(25)
Interest paid	(226)	(334)	(106)
Net cash provided by financing activities	4,691	5,007	1,349

Linkage differences in regard to cash and cash equivalents	(79)	(173)	81

Increase (decrease) in cash and cash equivalents	477	(203)	(6,280)
Cash and cash equivalents at the beginning of the year	96	209	6,489

Cash and cash equivalents at the end of the year	483	6	209

The accompanying notes are an integral part of the financial statements.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

STATEMENTS OF CASH FLOWS

NIS in thousands

APPENDIX A	For the Year Ended December 31,
Adjustments required to show the cash flows from current operations:	2020	2019	2018
Expenses (income) not involving cash flows:
Depreciation *	48	49	54
Capital gain	(75)
Share based payment	- . -	11	25
Capital mobilization fees	- . -	414	- . -
Amortization of assets for exploration and evaluation of precious stones	- . -	2,409	- . -
Amortization of a loan to an interested party	(1,091)	1,116	- . -
Finance expenses (income), net	3,268	1,374	(9,419)
	2,150	5,373	(9,340)

Changes in asset and liability items:
Increase in clients	51	(51)	- . -
Decrease (increase) in receivables	(75)	376	(.169)
Increase (decrease) in trade payables	(391)	(374)	121
Decrease in liability to a shareholder	(316)	(296)	(242)
Increase (decrease) in other accounts payable	(422)	181	(301)
	(792)	(164)	(591)

	(1,766)	5,209	(9,931)

* Net of depreciation encumbered on the assets for exploration and evaluation of precious stones.

APPENDIX B	For the Year Ended December 31,
Significant non-cash flow operations:	2020	2019	2018

Accounts payable in regard to assets for exploration and evaluation of precious stones	248	785	428
Fixed assets in regard to assets for exploration and evaluation of precious stones	411	464	- . -
Usage rights assets in regard to assets for exploration and evaluation of precious stones	450	364	- . -
Loan for acquisition of fixed assets	- . -	- . -	124
Loans assigned to capital	3,381	1,017	- . -
Balance from a supplier assigned to capital	- . -	60	223

The accompanying notes are an integral part of the financial statements.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 1:- GENERAL


1.	a.	The reported entity -
		SHEFA GEMS LTD. (Formerly: Shefa Yamim A.T.M. LTD. and hereinafter - "the Company") is an Israeli company engaged in exploration for diamonds, precious stones and gold in Northern Israel.
		As of December 31, 2019 the controlling party of the Company was Nela Digital Ltd. (formly "Shefa Yamim"), that owns 33.77%. During April 2020, as a result of the debt management by Nela Digital Ltd., its holdings in the Company were transferred to a trustee who was appointed by the Court. See also Note 7.

	b.	The Company engages in prospecting and exploration for diamonds, precious stones and gold ("precious stones") in Northern Israel, along the length of the Nahal Kishon riverbed in the Zevulun Valley, in Emek Yizrael, on designated slopes of Mount Carmel, Ramot Menashe and Migdal Ha-Emeq areas based on prospecting and exploration permits received from the Inspector of Mines in the Office of National Infrastructure, Energy and Water Resources of the Government of Israel, in accordance with the Mines Ordinance, over an inclusive area of approximately 488 dunam. (For detail in regard to the permits, see Note 8 - "exploration assets"..)

		In November 2020 the board of directors decided to perform organizational changes within the Company. In the framework of these changes, all the exploration and prospecting operations for diamond deposits, precious stones and gold ("explorations") performed by the Company since its establishment and until March 2021 would be transferred to the Subsidiary. Concurrently, they decided to sign a Memorandum of Understanding with a third party. Subsequent to balance sheet date, it was decided to approve the Company signing an agreement with this party for exploration expenses of the Company. See item c. below.

		Proximate to date of approval of the financial statements, the Subsidiary continues to conduct prospecting and explorations in accordance with current valid permits.

		In accordance with the Mining Ordinance, subsequent to exposure of the mine and quarry of precious minerals, the Subsidiary will be required, inter alia, to pay royalties to the Israeli Government, as outlined in the Mining Ordinance, at the rate of at least 5% of the value of the mined minerals or their value while still unmined.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 1:- GENERAL (cont.)

c.	Agreement between the Company and a third party for engagement in new operations -
	In the framework of the Company's decision to transfer the exploration assets to the Subsidiary, as abovementioned in 27a, a decision was reached upon signing the financial statements that Company management would be permitted to sign an agreement with a third party who is unrelated to the Company, subject to approval of the Company shareholders. Terms of the agreement (in accordance with implementation procedures) are detailed below in summary (and will be detailed at length by the Company in the framework of a call to a meeting of the shareholders that is set to be published proximate to reporting the financial statements).
	1.	Distribution of the shares of the Subsidiary, directly to the Company shareholders, as a dividend in-kind.
	2.	Consolidation of the Company's share capital (authorized and issued) so that every 100 shares of NIS 0.10 par value will be consolidated to one share (hereinafter - "the consolidated share").
	3.	Increasing the Company's authorized share capital (subsequent to consolidation of the capital) to 1,000,000,000 shares.
	4.	Allocation of shares to a third party, as consideration for an inclusive amount of 1,050,000 dollars, in accordance with a valuation of 0.0445 dollars per consolidated share. From the abovementioned amount, the Subsidiary will receive a transfer in the amount of 700,000 dollars against a payment of the open exploration liability amounts, and the balance of 150,000 dollars will remain in the Company account for financing the stock market operations until a new operation is engaged.
	5.	Change in the makeup of the board of directors.
	6.	Change of the Company name to Alef Green Energy 1998 Limited.
	7.	Engagement of new operation for the Company, so that the terms determined will be in accordance with the negotiations that will occur between the Company and the other companies engaged in new energy operations that include all components.
	According to initial estimates, management is in the opinion that the fair market value of the exploration assets maybe materially lower than the current books value.

d.	The Company's financial status
	Since the operations of the Company are prospecting and exploration for gold, precious stones and diamond deposits and the Company has not yet commenced commercial mining, therefore, the Company does not as yet have any significant revenues. Financing of its operations has been performed until now by infusions of capital and/ or by loans and convertible loans received by the Company. Continued operation is contingent upon further similar infusions of capital. As mentioned in note 1c, the company plans to enter into the energy field and to distribute its exploration assets to its shareholders. As of the date of authorization of the financial statements the company does not have any income and its plans and infusion of capital are uncertain. These factors create significant doubts in regard to continued operation of the Company as a "going concern". These financial statements do not contain any adjustments for valuation of assets and liabilities or their classification that would likely be necessary in the event that the Company is unable to continue its operations as a "going concern."

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 1:- GENERAL (cont.)

e.	Definitions -
	In these financial statements:
	International Financial Reporting Standards (IFRS) - Standards and interpretations adopted by the International Accounting Standards Board (IASB) that include international financial reporting standards (IFRS) and international accounting standards (IAS), and interpretations of these Standards as determined by the International Financial Reporting Interpretations Committee (IFRIC) or interpretations determined by the Standards Interpretation Committee (SIC), respectively.
	"The Company" - SHEFA GEMS LTD.
	The parent company - Nela Digital Ltd. (formerly - Shefa Yamim Ltd.).
	The subsidiary company - Shefa in Israel (G.M.) Ltd.
	"Related Party" - As defined in IAS 24 and by the International Accounting Standards Board (IASB).
	"Interested Party" - as defined in the Securities Act - 1968, and its Amendments.
	"101" - One Hundred One - Gold Holdings Ltd. - An interested party (hereinafter: "101").
	"808" - Eight O Eight Global Corp. - An interested party (hereinafter: "808").
	"Index" - The Consumer Price Index published by the Central Bureau of Statistics.
	"Dollar" or $ - The U.S. dollar.

NOTE 2:- BASIS FOR PREPARATION OF THE FINANCIAL STATEMENTS

Declaration in regard to Implementation of International Financial Reporting Standards (IFRS)

The Company's financial statements were prepared in accordance with International Financial Reporting Standards (hereinafter - "IFRS") and related clarifications published by the International Accounting Standards Board ("IASB").

The significant accounting principles detailed below were consistently implemented for all reporting periods presented in these financial statements except for changes in the accounting policies that derive from application of standards, amendments to standards and clarifications that became effective at the date of the financial statements.

The financial statements were approved by the board of directors on April 27, 2021.

b. Functional Currency and Presentation Currency
The financial statements are presented in New Israel Shekels (NIS) that is the functional currency of the Company, and are rounded to the nearest thousand. The Shekel is the representative currency of the main economic environment wherein the Company operates.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 2:- BASIS FOR PREPARATION OF THE FINANCIAL STATEMENTS (cont.)


Basis for preparation of financial statements	c.
These financial statements are prepared on the basis of historical cost. The statement of comprehensive income was included according to characteristics of operations. Value of non-cash assets and detail of share capital measured on the basis of historical cost, were adjusted to changes in the Consumer Price Index until December 31, 2003 since until that date the Israeli economy was considered to be hyper-inflationary.

The operating turnover cycle	d.
The ordinary operating turnover cycle for the Company is one year. The assets and liabilities attributed to this operation and that are intended to be realized during this operating period are shown in the framework of current assets and current liabilities.

		e.	Foreign currency and linkage basis
			Transactions stated in foreign currency are translated into the functional currency of the Company at dates of transactions, using the representative exchange rate. Financial assets and liabilities designated in foreign currency at reported date have been included in the financial statements according to the prevailing representative exchange rates as published by the Bank of Israel at the balance sheet date. Non-monetary items designated in foreign currency and measured at fair value are translated into the functional currency at the exchange rate prevailing when the fair value was determined. Non-monetary items measured at cost are translated into the effective exchange rate at transaction date for the non-monetary item.

Detail in regard to the Consumer Price Index and the exchange rate of the U.S. dollar and the British pound:

	December 31,
		2020	2019	2018
CPI in points (applicable) *		124.20	125.06	124.31
CPI in points (known) *		124.30	125.06	124.68
Exchange Rate of U.S. $ in NIS		3.215	3.456	3.748
Exchange Rate of British £ in NIS		4.39	4.56	4.793
* Base Index 2002 = 100.

	Year Ended December 31,
	2020	2019	2018
Change in CPI (applicable)	(0.7%)	0.6%	0.80%
Change in CPI (known)	(0.6%)	0.3%	1.20%
Change in rate of exchange- U.S. $	(7%)	(7.8%)	8.10%
Change in rate of exchange- Brit. £	(3.7%)	(4.9%)	2.38%

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 2:- BASIS FOR PREPARATION OF THE FINANCIAL STATEMENTS (cont.)

	f.	Critical accounting decisions
		Implementation of accounting policies adopted by the Company requires Company management, in certain instances, to implement broad accounting decisions (as opposed to accounting decisions that related to determination of estimates and valuations as detailed in Section g. below). These broad decisions relate mainly to adoption of the accounting principle most suitable to the circumstances, or rendering of an acceptable interpretation under circumstances where the accounting regulation does not render a full or clear response for the specific circumstances. A critical accounting decision is such that the results may have a significant effect on the financial situation and results of operations of the Company as reflected in the financial statements and with other basic assumptions could lead to an accounting result significantly different than the one presented therein. By its nature, an accounting decision as such is partially subjective. Concurrently, by implementing a critical accounting decision, Company management bases its conclusion on understanding of the accounting principles for implementation of its operations and, where relevant, the Company consults with external experts in the relevant field.

	g.	Essential estimates and uncertainties
		Upon preparation of the financial statements, Company management is required to utilize estimates or valuations in regard to transactions or matters that their final effect on the financial statements cannot be accurately determined at the time. The main basis for determination of the quantitative value of these estimates is assumptions adopted by Company management, taking into account the circumstances for the estimate, as well as the best of knowledge available at the time. It is natural, since these estimates and valuations are a result of decisions during uncertainty, that during significant moments, changes in the basic assumptions derived from changes that are not absolutely dependent on Company management, as well as additional information at a future date that was unavailable to the Company management at the time when the estimate was formulated, will result in changes in the quantitative value of the estimate. Thus, this will also influence the financial position of the Company and the results of its operations.

Therefore, though these estimates and valuations were concluded using the best of knowledge available to management, based on past experience and taking into account the singular circumstances, and, where relevant, reliance on external consultants, the final quantitative effect of transactions or circumstances requiring estimate can only be clarified when these transactions or circumstances reach their conclusions. Therefore, the actual results, upon final clarification of the results for an event that requires determination of estimates and valuations, may differ, sometimes significantly, from estimates and valuations that were determined initially and are updated over the period of the related events.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 2:- BASIS FOR PREPARATION OF THE FINANCIAL STATEMENTS (cont.)

	g.	Essential estimates and uncertainties (cont.)
		The estimates and valuations that form the basis are examined currently and are updated as a result of information gained by management or of an event that occurred subsequent to the last date when the estimate was determined, and were not available at the previous period when the estimate was determined or examined. Changes in accounting estimates are charged to the period when the change occurs in the estimate, or also to subsequent periods following the change, when it is apparent that the implications of the change will have an effect on the present and future periods.

		Following are areas where the valuation for the financial statements requires estimation and valuation that, in the opinion of management, will have a very significant effect:
		1) fair value of prospecting assets; 2) fair value of financial instruments;
		3) fair value of Options.

NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES

a.	Cash and Cash Equivalents
	Cash and cash equivalents include highly liquid investments that are immediately realizable. This includes short-term bank deposits for immediate withdrawal and deposits with maturities of three months or less that are not limited in any way and no charges are placed thereon.
	Deposits that are limited or that their maturity dates are in excess of three months but not in excess of one year are classified as deposits in the current assets section of the statements of financial position.

b.	Fixed assets
	Fixed assets are stated at cost net of accumulated depreciation and any losses in value that may have occurred.
	The cost includes acquisition cost of the fixed assets as well as all costs that can be attributed directly to bringing the asset to its location and its current situation that are necessary for operations, using the methodology intended by management.
	Vehicles purchased under financial lease agreements are presented at cost computed by estimated capitalization of the leasing costs in accordance with the leasing agreement.
	Depreciation included in the statement of comprehensive income is calculated using the straight-line method based on the estimated useful lives of the assets, at the following annual rates:
		%
	Office furniture and equipment	6-15
	Laboratory machinery and equipment	10-15
	Leasehold improvements - Establishment of a laboratory	10
	Vehicles	15
	Computers	33

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (cont.)

	b.	Fixed assets (cont.)
		Depreciation expenses for vehicles and laboratory equipment used during explorations are charged to cost of assets for prospecting and valuation of precious stones. Profit or loss arising from sale or decrement of a fixed asset item is determined as the difference between receipts from its sale and its book value at decrement date, and is included in operations.

c.		Assets for prospecting and valuation of precious stones
		1.	The Company has adopted the "Successful Efforts Method" in regard to the accounting treatment of expenses incurred in prospecting, mining and extraction of precious stones. In accordance with this Method:

			a)	Expenses for participation in geologic tests and scans that occur prior to the prospecting and valuation stage and prior to receiving a permit are charged immediately to the statements of comprehensive income when incurred.

			b)	Investments in explorations for precious stones during the exploration and valuation stages, relating to areas that are as yet unproven whether they will indeed yield precious stones or are unprofitable, are shown in the statements of financial position at cost, as exploration and valuation assets that are stated as tangible or intangible assets in accordance with the essence of the asset. These investments include, inter alia, costs incurred for performance of geological research, drilling costs, operations relating to evaluation of technical ability for commercial existence of resources to be yielded as well as general and administrative costs of a headquarters (mainly to a related company) related to direct costs for prospecting and valuation of assets.
			c)	Investments in prospecting for precious stones that have an existing technical plan and the resource has a commercial existence will be restated and included as "investments in precious stone assets." Prior to their restatement, these items will be examined for decrease in value. In the event that a loss has been created, this will be recognized and included in the statements of comprehensive income. Investments in precious stone assets are amortized in the statements of comprehensive income on the basis of amounts extracted in relation to total proven reserves for the precious stone assets, as valuated by an external assessor with expertise in this area.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (cont.)

c.		Assets for prospecting and evaluation of precious stones (cont.)
		1.		(cont.):
				d)	Prospecting and evaluation assets will be examined for decrease in value when events and occurrences would lead one to believe that their book value exceeds their attributed realization value. Such events and occurrences include, inter alia: expiration of prospecting rights in a specified area or predictions that these rights will expire in the near future and renewal is not foreseen; prospecting for precious stones in a specific area have not resulted in proven commercial quantities of reserves of precious stones. In the event that there are signs of an impairment in value, as abovementioned, the realization value for the asset is estimated in accordance with IAS 36 (see Section 3e).

	2.		"Investments in Precious Stone Assets" in the statements of financial information will include, also, accumulated costs for development of infrastructures for the necessary bases in order to yield resources. These costs are capitalized and can include headquarters costs that are directly attributable to establishment of the assets and other direct overhead costs. They are shown in the statements of financial information at cost and are amortized in the statements of comprehensive income on the basis of quantity yielded in proportion to total proven reserves as evaluated by an external expert assessor, as stated in 1c), abovementioned.

	3.		Investments in precious stone assets that have an existing technical plan are examined at each reporting period for any signs of impairment. In the event that such signs exist, the realization value is computed in accordance with IAS 36 (see Sect. 3e).

	4.		The Company will recognize the liability and, correspondingly, the asset in regard to Company obligation to disassemble, clear and rehabilitate the site where the asset was established. The liability is initially measured at its present value and the expenses derived from its increase are depreciated over a period of time in the statement of comprehensive income. The asset is initially measured at its present value and is depreciated over a period of time in the statement of comprehensive income in accordance with the useful life of the removed asset. Changes in timing and in the amount of the economic resources that are necessary for the removal of the liability as well as the change in the capitalization rate are added to or deducted from the asset during the current period corresponding to a change in the liability.
			Changes in the obligation to disassemble and clear items and rehabilitation of the site where they were established, except for changes deriving from timing, are added to or deducted from the asset cost during the period when incurred. The amount deducted from the asset cost will not exceed the book value of the asset and the balance, if any, is immediately recognized in the statements of comprehensive income.


The Company examines its projected obligations to rehabilitate and renew excavation sites and includes a provision, when necessary, in accordance with the current value of projected costs.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (cont.)

d.	Issue of a package of securities
	When securities are issued as a package, the consideration received is allotted (prior to issue expenses) to securities issued as a package in conjunction with the following order of allocation: financial derivatives and other financial items that are presented at fair value periodically. Subsequently, the fair value of the financial liabilities is determined, with the allotted consideration for capital instruments determined as the remaining value. Issue costs are allotted to each component in accordance with the ratio of amounts determined for each component of the package.

e.	Impairment in value of assets

	At the close of every reporting period, the Company examines the book value of its tangible assets to determine any signs of loss from impairment in value of these assets. In the event that there are signs of impairment, the Company examines the realization value of the designated asset in order to determine the loss from impairment, if any.

	The realization value is the higher of fair value of the asset net of sale costs as compared with its useful life that is determined by the present value of projected cash flows to be realized from this asset using a rate prior to taxes that reflects the present book value of the time span for the money and the specific risks for the asset that the estimated future cash flows were not adjusted for in this regard. In the event that the book value of the asset is greater than its realization value, a devaluation of the asset has occurred in the amount of the difference between its book value and its realization value. This amount is recognized immediately in the statements of comprehensive income.
	Prior devaluation of an asset is nullified, partially or completely, only when changes in the determinants of realization value of the asset have occurred. In the event of such an occurrence, the book value of the asset is increased to the estimated current fair value, but not in excess of the asset book value that would have existed had there not been devaluation and subsequent to deduction of any relevant depreciation. Such nullification is recognized immediately in the statements of comprehensive income.

f.	Leases -
	The Company decides whether a contract is a lease arrangement (or includes a lease arrangement) upon signing the contract. The Company recognizes the asset right to usage on the one hand, and the lease liability on the other hand in regard to every lease contract wherein it is the lessee, except for short-term leases (for a period not in excess of twelve months) and leases of low value assets. For these leases, the Company recognizes lease payments as an operating expense on the straight-line basis of the lease period, unless there is an alternative precedent basis that presents, in a more acceptable manner, the format of economic benefits derived for the Company from its leased assets. The leasing period is a unit that cannot be cancelled for which the lessee has the right to utilize the leased asset in conjunction with: Periods that are covered by an option to extend the lease if it is reasonably certain that the lessee will exercise this option, as well as Periods that are covered by an option to nullify the lease if it is reasonably certain that the lessee will not exercise this option.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (cont.)

f.	Leases (cont.)

	In determining the lease period, the Company takes into account the extension options that, at the time of the commencement of the lease, it is reasonably certain that they will be exercised by the Company. The extension option's reasonability is examined by taking into account, inter alia, lease payments during the extended period as compared with market prices, significant renovations of the leased property performed by the Company that predictably will render to it a significant economic benefit during the extended period, costs related to the end of leasing (negotiations, vacating the existing asset and search for an alternative asset as a replacement), importance of the asset for Company operations, location of the leased asset and the availability of fitting alternatives.
	The Company's liability is originally measured in accordance with the present value of the lease payments that were not paid at the start of the lease. For computation, the Company uses its additional rate of interest.
	The lease payments included in measurement of the liability are composed as follows:
	Fixed payments (including existing fixed payments), net of any leasing incentives;
	Variable lease payments dependent on the Consumer Price Index, that are initially measured by utilization of the applicable Index at the beginning date;
	The leasing liability is presented in a separate section in current liabilities and non-current liabilities in the statement of financial position. The leasing liability is measured subsequently by increasing the book value in order to reflect interest on the leasing liability using the effective interest method, and by decreasing the book value in order to reflect the lease payments made.
	The Company remeasures the leasing liability (against adjustment of the usage right for the asset) when a change occurs in the future lease payments forecasted for payment in accordance with guarantees for scrap value. In this instance, the lease liability is measured by capitalization of the updated lease payments while utilizing the original capitalization rate (unless the change in lease payments derives from a change in variable interest rates. In this instance, there is utilization of an updated interest rate).
	Cost of the usage right asset is composed of the original measured amount of the lease liability and any lease payments paid at the beginning or beforehand. Subsequently, the usage right asset is measured at cost net of accumulated depreciation and losses from decrements.
	The usage right is shown in a separate section of the report of financial information. The usage right asset is measured by cost and is depreciated by the straight-line method over the shorter of the lease span or the useful life of the base asset.
	The Company implements the principles of IAS 36, Decrement of Assets in order to Determine if the Usage Right has been Changed and to Handle the Resulting Decrement Loss Identified.

g.	Financial instruments
	1.	Non-derivative financial instruments
		Non-derivative financial instruments comprise various accounts receivable, deposit, and cash and cash equivalents.
		Non-derivative financial instruments are recognized initially on the trade date at which the Company becomes a party to the contractual provisions allowing the Company to receive the financial instrument. Investments in these instruments are initially presented at their fair value with the addition of transaction costs.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

Financial instruments (cont.)

The Company classifies its financial assets as loans and receivables. This classification is determined in accordance with the purpose for holding the financial asset, when initial recognition of the financial asset occurs.

Losses from impairment in value and write-off of non-derivative financial instruments

Financial instruments not classified at fair value through profit and loss are examined at each reporting period as to whether there are signs of impairment in value. Impairment occurs when there is objective evidence that as a result of a specific incident or occurrences, occurring subsequent to initial recognition date of the financial asset, a negative effect exists on the projected cash flows for the investment in this asset.

In regard to financial assets that are included at amortized cost (mainly loans and receivables), the amount of impairment in value is the difference between the book value of the financial asset and the present value of the estimated future cash flows projected to derive from the asset, discounted at the original effective interest rate for the asset. This amount is charged to the statement of comprehensive income.

In the event that during a parallel period to that when a loss was recorded for impairment in value for a financial asset included at amortized cost there are indications that the amount of the loss from impairment in value is less and is objectively related to an event occurring subsequent to recognition of the impairment, then the prior impairment loss will be written off, in part or completely, to profit and loss. The amount written off is limited so that the book value of the investment in the financial asset at the time of write-off of the loss from impairment in value does not exceed the amortized cost of the asset at the cancellation date had there not been a prior recognition of impairment in value.

Non-derivative financial liabilities

The Company initially recognizes debt securities issued on the date that they originated. All other financial liabilities (including financial liabilities designated at fair value through profit and loss) are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

Financial liabilities are reduced when the obligation of the Company, as specified in the agreement, expires or when it is discharged or written off.

Financial obligations are initially recognized in accordance with their fair value with the addition of attributable transaction costs. Subsequent measurement of financial liabilities is mainly on the basis of amortized cost using the effective interest method.

The Company has the following non-derivative financial liabilities: loans and credit from banks and others, and trade and other payables.

Financial assets and liabilities are offset and the net amounts are presented in the statement of financial position when the Company currently has a legally enforceable right to offset the recognized amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (cont.)

h.	Provisions
	Provisions are recognized when the Company has a current obligation (legal or derived) as a result of a past occurrence that can be reliably measured, that will in all probability result in the Company being required to provide additional benefits in order to settle this obligation. The amount recognized as a provision reflects the best estimate by management of the amount that will be required to settle the obligation currently at financial statements date, while taking into account the risks and uncertainties related to obligations. When provisions are determined by capitalization of projected cash flows in order to settle the obligation, the provision is the current value of the projected cash flows. Changes in the time value are recognized in the statement of comprehensive income or loss. When the entire sum or a portion thereof necessary for current settlement of the liability will likely be repaid by a third party, the Company recognizes an asset for the return, up to the amount of the recognized provision, only when there is actual certainty that the amount will be received and it can be reliably estimated.

i.	Liability in regard to employee benefits
	The Company has several benefit plans for its employees:
	1.		Short-term employee benefits -
			Short-term employee benefits include salaries, vacation days, recreation and employer deposits to the National Insurance Institute that are recognized as expenses when rendered. A liability for a cash bonus or a plan for participation in Company earnings is recognized when the Company has a legal or derived responsibility for payment of the amount for services rendered in the past by the employee and the amount can be reliably measured.
	2.		Benefits upon retirement -
			These plans generally are funded by deposits to insurance companies and pension funds and are classified as restricted deposit plans or as restricted benefit plans.

			Some Company employees have restricted deposit plans, in accordance with Section 14 of the Severance Pay Law, whereby the Company pays fixed amounts without bearing any legal or derived responsibility to pay additional amounts thereto even if the fund did not accumulate enough amounts to pay the entire benefit amount to the employee that relates to the services he rendered during the current and prior periods. Deposits to the restricted plan are classified for benefits or for compensation, and are recognized as an expense upon deposit to the plan concurrent with receiving services from the employee and no additional provision is required in the financial statements.

		Concurrently, the Company operates a restricted benefit plan for severance pay as required by the Severance Pay Law. In accordance with the Severance Pay Law, employees are entitled to compensation upon retirement or upon termination of their employment.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (cont.)

i.		Liability in regard to employee benefits (cont.)
		The financial statements include a provision in the amount of the difference that the Company would be required to pay in the event that the employees would be entitled to severance pay at the date of statements of financial position. No actuarial computations of possible obligation and actual value of deposits with the restricted benefit plan were made since, in the opinion of Company management, such computation would not have a material effect on the Company's financial statements.

	j.	Financial income and expenses
		Financial income includes interest in regard to invested amounts, revenues from exchange rate differences that are recognized in the statements of comprehensive income and revenues from adjustments of fair value of liabilities. Interest income is recognized upon accumulation, using the effective interest method.

		Financial expenses include interest on loans received, finance expenses in regard to fair value of liabilities and changes in the time estimates of provisions.
		Gains and losses from exchange rate differences are reported net. Costs of credit are recognized as an expense during the period of their inception, in accordance with the effective interest methodology.

	k.	Deferred Taxes
		The Company creates deferred taxes in regard to temporary differences of value for tax purposes of assets and liabilities and their values in the financial statements. These deferred tax balances (asset or liability) are computed according to the projected tax rates occurring upon realization, based on tax rates and regulations in force or legislated fully at the date of the statements of financial position. Deferred tax liabilities are recognized, generally, for all temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. A deferred tax asset is recognized on the books for carryforward losses, tax benefits and temporary differences that are deductible to the extent that it is probable that future taxable profit will be available against which the temporary differences can be offset. Deferred tax assets are reviewed at every reporting date and, in the event that the related tax benefits will not be utilized, they are deducted.
		In the absence of certainty regarding taxable income in the future, there was no recording of a tax deferred asset in regard to carryforward losses on the Company books of account.

	l.	Statement of Cash Flows
		The statement of cash flows from current operations is presented using the indirect method, whereby interest amounts paid and received by the Company are included in the cash flows in the framework of finance operations.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (cont.)

Gain (Loss) per Share

The Company computes the basic revenue or loss per share in regard to gain or loss that is attributed to the Company shareholders by dividing the income or loss, attributable to ordinary shareholders of the Company, by the weighted average of ordinary shares that exist in the turnover during the reported period. The Company does not have any securities that are convertible to shares that would have a potential effect on the diluted income per share.

Share Based Compensation

In share based compensation, transactions with employees (including officers and others who provide similar services) that are cleared by parent company capital instruments, the costed benefit of capital instruments granted is based on their fair value at grant date. The costed fair value upon granting of Options is measured on the basis of the Black-Sholes model. The abovementioned benefit is attributed to expenses in the profit and loss against a straight-line growth in share capital, over the vesting period of the capital instrument that was granted, so that every sub-granting is considered as a separate graded vesting. In transactions involving share based compensation with renderers of services, the Company measures the expense in accordance with the value of the services received. In share based compensation transactions cleared by cash payment, the Company measures the services acquired and the liability that was created, in accordance with the fair value of the liability. Until the liability is cleared, the Company remeasures the fair value of the liability at every reported period and upon clearance, so that any changes in the fair value are recognized in the statement of comprehensive income for the period.

Financial Instruments

Financial Assets

Financial assets are measured at fair value on their initial recognition date. In addition, the transaction costs that are directly attributable to acquisition of the financial asset are included, except where the financial asset is measured at fair value through profit and loss, so that the transaction costs are charged to profit and loss.

The financial assets will be handled as follows:

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (cont.)

	o.	Financial Instruments (cont.)
·		Debit instruments will be classified and measured subsequent to initial recognition under one of the following alternatives: depreciated cost, fair value through profit and loss or fair value through other comprehensive income. Determination of the measurement model will take into account the business model of the entity in regard to management of financial assets and in accordance with the characteristics of the projected cash flows that will be derived from those financial assets.
·		A debit instrument that was measured by depreciated cost or by fair value through other comprehensive income may be designated for fair value through profit and loss, but only if the designation will nullify lack of consistency in recognition and measurement that would be created if the asset was measured by depreciated cost or by fair value through other comprehensive income.
·		As a rule, the financial instruments will be measured at fair value through profit and loss.
·		Upon initial recognition, one may designate financial instruments at fair value through other comprehensive income. Those instruments that will be designated in that manner, will not be subject any longer to the test of impairment, and profit or loss in their regard will not be transferred to profit or loss, including upon realization.
· ????		Embedded derivatives will not be separated from the existing contract found at the beginning of the Standard. Alternatively, mixed contracts will be measured generally at depreciated cost or at fair value, in accordance with the testers of the business model and the projected cash flows.
·		Debt instruments will be reclassified only when the entity changes its business model to management of financial assets.
·		Investments in capital instruments that do not have a quoted price on a functioning market, including the derivatives of these instruments, will be measured at fair value. The alternative measurement according to cost under certain circumstances is hereby nullified. However, the Standard declares that under certain circumstances the cost should be a proper measure of the fair value.

Financial Liabilities
The Standard determines also the following procedures in regard to financial liabilities:
·		The change in fair value of financial liabilities that is intended, upon initial recognition, to be fair value through profit or loss, which is attributed to changes in the credit risk of the liability, will be directly charged to other comprehensive income unless such attribution will create or increase lack of consistency - an accounting mismatch.
·		When a financial liability is paid or cleared, the amounts charged to other comprehensive income will not be classified to profit or loss.
·		All the derivatives, whether they are assets or liabilities, will be measured at fair value through profit or loss, including a derived financial instrument that constitutes a liability related to an unquoted capital instrument that we are unable to measure its fair value in a reliable manner.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (cont.)

	o.	Financial Instruments (cont.)
		Impairments
		The new model for impairment is based on projected credit losses and will be implemented for the debit instruments that are measured at depreciated cost or at fair value through other comprehensive income, receivables in regard to leasing, contract assets that are recognized according to IFRS 15 and written obligations for rendering loans and financial guarantee contracts.

		The provision for impairment will be in regard to reasonable projected losses within the following twelve months (the coming year), or reasonable failure to repay during the entire lifetime of the financial instrument. Examination for the entire lifetime of the instrument is necessary in the event that the credit risk for the asset rose significantly since the date of initial recognition. An alternative approach will be enforced if the financial asset was created or acquired when it was already credit impaired.

NOTE 4:-

SHORT-TERM DEPOSIT IN BANK

As of December 31, 2019 the Company has a short-term deposit in NIS, bearing annual interest at 1.73%.

NOTE 5:-	OTHER ACCOUNTS RECEIVABLE
		December 31,
		2020	2019
	Advances to suppliers and others	10	20
	Prepaid expenses	210	125
		220	145

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 6:-		FIXED ASSETS, NET
			Machines and Laboratory Equipment	Vehicles	Office Furniture and Equipment	Computers	Leasehold Improvements - Laboratory	Total
	Cost:
	As of January 1, 2019		3,801	69	338	367	436	5,011
	Additions		299	- . -	- . -	6	- . -	305
	As of December 31, 2019		4,100	69	338	373	436	5,316
	Additions		- . -	- . -	2	6	- . -	8
	Decrements		(403)	(21)	- . -	- . -	- . -	(424)
	As of December 31, 2020		3,697	48	340	379	436	4,900

	Accumulated Depreciation:
	As of January 1, 2019		2,215	42	319	355	344	3,275
	Depreciation for the year		487	8	7	7	38	547
	As of December 31, 2019		2,702	50	326	362	382	3,822
	Decrements		(376)	(12)	- . -	- . -	- . -	(388)
	Depreciation for the year		397	10	7	7	38	459
	As of December 31, 2020		2,723	48	333	369	420	3,893

	Depreciated Cost:
	As of December 31, 2020		974	- . -	7	10	16	1,007
	As of December 31, 2019		1,398	19	12	11	54	1,494

NOTE 7:-	LOAN TO THE PARENT COMPANY
	On August 11, 2020 the Company reached at an arrangement for settling the debt with Shefa Yamim. Accordingly, Nela Digital Ltd. will pay the loan in consideration for NIS 330 thousand in cash and 313 thousand shares of Nela Digital Ltd. at the price of NIS 6 per share (total value of the shares is in the amount of approximately NIS 1,878 thousand).
	Composition:
		2020	2019
	Opening balance January 1	1,117	2,495
	Loan amortization	1,091	(1,116)
	Repayment in cash	(330)	(262)
	Repayment with shares available for trade	(1,878)	-
	Closing balance December 31	- . -	1,117

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 8:-	ASSETS FOR EXPLORATION AND EVALUATION

		The Company is the first and only company in northern Israel that is engaged, since 1999, in exploration (prospecting and exploring) related to precious stones (diamonds, gemstones and gold).
		The exploration operation performed by the Company is, actually, exploration and examination of the primary deposit in targeted entities and performance of work plans that are managed by a professional work team, expert and competent in the technical aspects necessary for implementation of exploration operations that include, inter alia: mapping, sampling, geophysical, geochemical and geological surveys, visual and mineral examination in the laboratory established in the operating area of the Company in Akko of the various findings using the most advanced methods known worldwide in order to assess the economic potential of the findings at each site. The goal is to raise expectations and reduce the risk level, as well as to identify the exact location where it will be possible to open a "mineralogical resource" and a commercial mine.

		The Company's operating area is along the southern Akko industrial zone (Barbour Center) that stretches over an area of approximately 6,000 sq. m. The Company's operations are concentrated parallelly at the Primary Sources for mineral deposits at the Carmel mountain range and Ramot Menashe stretching over the lower Galilee territory and at the Secondary deposits of alluvial erosion areas.

		The exploration procedures are in accordance with international specifications, as is customary in this field and, for this purpose, the Company is assisted with a wealth of progressive methods engaged in worldwide by other exploratory companies.

		The exploratory Company operations are accompanied by an international geological team who are experts in their fields (hereinafter: "Company advisors from abroad"), who have proven expertise in the fields of earth sciences, geology, geochemistry and geophysics, especially within the field of dynamic special explorations wherein the Company operates - prospecting for precious stones.
		During November 2020 the Company directors decided to perform a reorganization so that every exploration procedure, and exploration assets (see Note 1c) will be transferred to the Subsidiary. As of the date of approval of these financial statements, every exploratory operation is actually performed by the Subsidiary.

		The Company presently holds the following Permits:
	1.		The Company holds Carmel Prospecting Permit 837A14, extending over an inclusive area of 312, dunam, that is valid until December 20, 2021.
	2.		In addition, the Company holds Prospecting License 869D12 for an area of 500 dunam in an area known as Zone 1 in the Kishon Mid Reach., rendered to the Company by the Superintendent of Mining during March 2020 in order to enable the Company to expedite the planning of mining procedures in accordance with the terms of the License, in order to receive a Mining Permit for this area. This License is not valid for more than three years (the period intended for license and planning procedures).

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 8:-	ASSETS FOR EXPLORATION AND EVALUATION OF PRECIOUS STONES (cont.)

The Company presently holds the following Permits:

3. In February, 2021 the Company received an Exploration License Number 1010C1 in regard to an inclusive area of 990 dunam in the area known as "Solomon;s Daughter", that is valid until February 13, 2022.

4. During May 2021, the validity of an additional Exploration Permit expired and the Company requested from the Mining Inspector to renew it. As yet, the request has not been approved.

Gemological Valuation of the gemstones included in the Company's TMA Suite:

On March 19, 2019, in order to receive an exploration certificate, the Company published an initial valuation of the gemstones included in the TMA Suite. This valuation was performed by Dr. Gila Gavrielov, a gemologist. The valuation is for one carat of polished gemstone not including the categories of Moissanite and KIM's.

The quantity of gemstones in the Company's safes from explorations performed in the Kishon Mid Reach zone 1 and 2 as of December 31, 2020 is 17,465 carat.

During November 2020 the Company commenced polishing the gemstones in order to examine their commercial value. This procedure is not yet completed and, therefore, at this stage we cannot value the balance of carats that is meant to remain subsequent to the polishing or what will be their total commercial value.

b.	Composition:December 31,
		2020	2019
	Purchase of exploration rights, fees and planning	5,357	5,142
	Geologic research and laboratory maintenance **	23,144	22,059
	Drilling for exploratory purposes	5,690	5,655
	Headquarters operations expenses directly attributable to the asset (mainly to a related company) **	25,583	24,641
	Other expenses	5,733	5,540
	Amortization of exploration assets *	(2,409)	(2,409)
		63,098	60,628

* During the prior year, the exploration areas were minimized. The Company amortized the exploration assets in the amount of expenses attributed in prior years to these areas.

** Includes share based compensation in the amount of approximately NIS 1,111 thousand.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 9:-	SHORT - TERM CREDITS FROM BANK AND OTHERS

					December 31,
	a.	Composition:			2020				2019
		Overdraft			- . -		211
		Short-term bank credit			176		96
		Current maturities of loan from interested party			62
		Loans from interested party (1.)			500		131
		Loan from shareholders (2.)			586		- . -
		Current maturities of leases			465		324
					1,789		762
		Classification to liabilities of the realization group that is categorized as held for sale				(1,003)		- . -
		Balance of credit from a bank and from others				768		- . -

			1.	A loan in the amount of NIS 145 thousand bearing interest per annum of 10%.
				A loan in the amount of NIS 355 thousand bearing interest per annum of 5%.

			2.	As of the date of signing the financial statements, terms of the shareholders' loan have not as yet been finalized in regard to repayment dates and terms for each loan.

	b.		As of December 31, 2020 and 2019, the Company has a fixed bank credit framework of approximately NIS 200 thousand and NIS 250 thousand, respectively. The overdraft account is guaranteed by the personal credit of an interested party.

NOTE 10:-	TRADE PAYABLES
		December 31,
			2020	2019
	Checks payable		520	340
	Open balances		161	731
			681	1,071

NOTE 11:-	INTERESTED PARTIES
		December 31,
	Interested party:		2020	2019
	Current debt		88	211

Agreements with interested parties see Note 22.

NOTE 12:-	OTHER ACCOUNTS PAYABLE
		December 31,
		2020	2019
	Salaries and related items	288	617
	Accrued expenses	382	497
		670	1,114

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 13:-

LOANS CONVERTIBLE TO SHARES

	a.	During November 2018 until June 2019, the Company received convertible loans from investors in the amount of approximately £ 251 thousand. According to the agreements, the Company obligated to allocate to the lenders a number of shares at the price of 5 pence until December 31, 2019 and, in addition, to allocate one Option per share at the exercise price of 10 pence for a 24 month period.

		Concurrently, the Company received from an investor a loan convertible to shares in the amount of approximately £ 78 thousand. According to the agreement, the Company obligated to allocate to the lender shares at the price of 4 pence until December 31, 2019 and. in addition, to allocate one Option per share at the exercise price of 8 pence for a 24 month period.
		On December 31, 2019 the Company signed an agreement with the lenders. Accordingly, the shares allocation date was extended until June 2020.
		Upon receiving the loans, the Company recorded an entry in the amount of approximately NIS 627 thousand (£ 133 thousand) as a loan at fair value and an amount of NIS 924 thousand (£ 196 thousand) was recorded as a loan at amortized cost.
		During October 2019 the Company received two additional convertible loans in the amount of NIS 742 thousand (£ 164 thousand). In accordance with the loan agreement, the Company obligated to allocate to the lenders, in the event that they choose until March 31, 2021, an amount of shares at the price of 5 pence per share and to allocate one Option per share at the exercise price of 10 pence for a 24 month period.
		In addition, the Company obligated to double the yield on the allocated shares at the end of the 24 months from allocation date. If the yield will not be doubled, then the Company will grant additional shares until the promised yield is attained.
		Upon receiving the loans, the Company recorded an entry in the amount of approximately NIS 728 thousand (£ 161 thousand) as a loan at fair value and an amount of NIS 14 thousand (£ 3 thousand) as a loan at amortized cost.
		All the loans bear 5% interest per annum.
		During November 2018 until June 2019, the Company received convertible loans from investors via loan agreements in the amount of approximately £ 253 thousand. The Company obligated to allocate to the lenders, until June 30, 2019, shares at 5 pence per share as well as one Option per share at an exercise price of 10 pence for a 24 month period.
		On June 30, 2019 the loans were converted to shares and Options in the amounts of NIS 1,017 thousand and NIS 149 thousand, respectively. See Note 17e.
	b.	During the first half of 2020, the Company mobilized convertible loans in the amount of NIS 3,426 thousand (£ 774,810) that bear 5% interest per annum. The shares will be allocated at the rate of 5 pence per share and for every share allocated there will be one Option allocated at the exercise price of 10 pence for a period of 24 months. In addition, the Company obligated that at the end of 24 months from the allocation date, it will double the yield on the shares. In the event that the yield will not be doubled, the Company will allocate additional shares in order to attain the promised yield. Most of the loans were converted to shares on June 30, 2020.

		During the first half of 2020, the Company mobilized convertible loans in the amount of NIS 571 thousand (£ 126,945), bearing 5% interest per annum. The shares were allocated at the price of 5 pence per share with every share receiving an additional Option at the exercise price of 10 pence for 24 months. On the date of receiving the loans, an amount of £ 11,525 was recorded as a loan at fair value and an amount of £ 115,420 was recorded as a loan at amortized cost. Most of the loans were converted to shares on June 30, 2020.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 13:-

LOANS CONVERTIBLE TO SHARES (cont.)

	b.	(cont.)
		On June 30, 2020 the Company issued 28,922,507 shares and Options to various investors in consideration for convertible loans in the amount of NIS 3,381 thousand. The shares were allocated at a price of 4-5 pence per share and an Option was allocated per share at the exercise price of 8-10 pence over 24 months.
		As of December 31, 2020 the value of the Options allocated in the framework of this issuance was NIS 6 thousand.

c.
	Activity:	Loans at Amortized Cost		Loans and liability at Fair Value
		2020	2019	2020	2019
	Opening Balance	1,134	772	1,792	-
	Additional convertible loans	3,824	1,550	173	1,122
	Classification from amortized cost to fair value	- . -	(232)	- . -	232
	Loans converted to shares	(3,381)	(1,166)	- . -	-
	Financing (income) expenses	(1,396)	210	4,501	438
	Closing balance at Dec. 31,	181	1,134	6,466	1,792

NOTE 14:-		LONG-TERM LOANS FROM INTERESTED PARTY AND OTHERS

		Composition:		December 31,
				2020	2019
	Loan from interested party (1)			496	-
	Net of current maturities			(63)	-

				433	-
	(1)
	(1)		A loan in NIS bearing annual interest of 4.6%.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 15:-	FINANCIAL LEASE
	The Company has several leasing agreements that include leasings of a building and vehicles, that are utilized for current operations. Building lease agreements are for a period of 3 to 7 years while vehicle lease agreements are for a period not in excess of three years. The building lease includes extension options.
	The Company's policy is to extend the initial lease period for the building over a period that is not less than 3 years. The Company examines the probability of exercise or non-exercise of the option in view of the business requirements and the lease agreement.
	In addition, the vehicle lease agreements are for a period up to three years without option periods for extensions during the leasing.

a.	Composition:
1. Rights of use assets:		Building	Vehicles	Total
	Opening balance Jan.1, 2020	1,568	183	1,751
	Additions during the year	- . -	344	344
	Depreciation	(261)	(189)	(450)
	Closing balance Dec. 31. 2020	1,307	338	1,645

Rights of use assets:		Building	Vehicles	Total
	Opening balance Jan.1, 2019	- . -	- . -	- . -
	Additions during the year	1,829	286	2,115
	Depreciation	(261)	(103)	(364)
	Closing balance Dec. 31. 2019	1,568	183	1,751

		December 31,
2.	Liability in regard to leasing:	2020	2019
	Liability	1,767	1,816
	Net of current maturities	(465)	(324)
		1,302	1,492

Amount of the liability was computed by capitalization of the leasehold payments for the payments period at an annual interest rate of 8%. The amounts are linked to the Consumer Price Index.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 16:-	OPTIONS CONVERTIBLE TO SHARES

	a.	On December 18, 2017, the Company completed its Initial Public Offering (IPO) on the London Stock Exchange in the framework of which convertible loans (see Note 13) were converted to 39,734,610 shares and an amount of 65,893,310 non-marketable Options. In accordance with the valuation of an independent external assessor, the Options have no fair value as of December 31, 2020 and they have a value as of December 31, 2019 of approximately NIS 370 thousand. During July 2019 a six month extension was granted for every Options series. As of December 17, 2019 an amount of 24,804,020 Options expired that had been rendered for an exercise period of 18 months (subsequent to the extension rendered as abovementioned).


		On October 31, 2018 the Company issued 3,006,250 shares and allotted 3,006,250 non-marketable Options in their regard. In accordance with the valuation of an independent external assessor, it was determined that the Options for shares that had been rendered, as of December 31, 2020 had no fair value and as of December 31, 2019 the fair value was approximately NIS 3 thousand.

		On May 13, 2019 the Company issued 25 million shares and Options to various investors in consideration for £ 1 million. The shares were allocated at a price of 4 pence per share, and to each share one Option was allocated at the exercise price of 8 pence for 24 months (see Note 17d). In accordance with the valuation of an external assessor, the Options had a zero value fair value at allocation date. As of December 31, 2019, the valuation is approximately NIS 655 thousand.

		On June 30, 2019 the Company issued 5,061,055 shares and Options to various investors in consideration for convertible loans in the amount of NIS 1,166 thousand, allocated at a price of 5 pence per share. To each share one Option was allocated at an exercise price of 10 pence for 24 months. In accordance with the valuation of an independent external assessor, as of December 31, 2020 the Options had zero fair value while as of December 31, 2019 the fair value of the Options per shares that were rendered is in the amount of approximately NIS 92 thousand.

		On June 30, 2020 the Company issued 28,900,715 shares and Options to various investors as a consideration for convertible loans in the amount of £ 1,385 thousand. The shares were allocated at a price of 4-5 pence per share, and for each share an Option was issued at an exercise price of 8-10 pence for 24 months. As of December 31, 2020 the value of the allocated Options in the framework of the issuance was in the amount of approximately NIS 5 thousand.

	b.	Parameters used in the fair value valuation:
			December 31, 2020	December 31, 2019
		Projected fluctuations (in percentages)	28 - 51	67 - 79
		Life of the Option (in years)	0.36 - 1.5	0.5 - 1.5
		Rate of non-risk interest (in percentages)	(0.10) - (0.15)	0.58 - 0.69
		Market price (in £)	0.2	0.043

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 16:-

OPTIONS CONVERTIBLE TO SHARES (cont.)

c. Composition of existing Options

	Number of Options		Value of Options (NIS in Thousands)
	31.12.2020	31.12.2019	31.12.2020	31.12.2019

Options allocated Dec. 18, 2017 *	20,544,650	41,089,290	- . -	370
Options allocated Oct. 31, 2018	3,006,250	3,006,250	- . -	3
Options allocated May 13, 2019	25,000,000	25,000,000	- . -	655
Options allocated June 30, 2019	5,061,055	5,061,055	- . -	92
Options allocated June 30, 2020	28,900,715	- . -	6	- . -
	82,512,670	74,156,595	6	1,120

During 2020 and 2019, an amount of 23,550,890 and 24,804,020 Options, respectively, expired.

Fair value hierarchy -

Measurement of fair value of financial instruments is performed using a fair value hierarchy that reflects the data that was used in performance of a measurement of fair value. The hierarchy of fair value is based on the following three levels:

Level 1 -

Quoted prices (unadjusted) on the active markets for identical assets or liabilities.

Level 2 -

Data that are not price quotes included in Level 1 abovementioned, that may be seen directly (that is, price quotes) or indirectly (that is, derivatives of price quotes).

Level 3 -

Data in regard to an asset or liability that are not based on market information that may be seen (unseen data).

As of December 31, 2020 and 2019, the liability in regard to allocation agreements and the liability in regard to the Options were measured using a valuation technique based on Level 2 while basing itself on visual market data.

NOTE 17:-	SHARE CAPITAL				December 31, 2020		December 31, 2019
					Number of Ordinary Shares		Number of Ordinary Shares
	a.		Composition:		Authorized	Issued and Outstanding	Authorized	Issued and Outstanding
		Ordinary shares of NIS 0.1 par value			1,000,000,000	201,299,072	1,000,000,000	172,306,565

	b.			On December 18, 2017 the Company completed its IPO on the London Stock Exchange in the framework of which 45,174,560 Ordinary Company shares were registered for trade as follows:
				397,346,100 shares were allocated as a result of loan conversions to shares.
				32,085,060 shares were allocated to an interested party in the framework of a debt conversion.
				20,223,000 shares were allocated in consideration for payment of debts to issuance advisors.
				2,090,900 shares were allocated to subscribers on the issuance date.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 17:-	SHARE CAPITAL (cont.)
		429,431,700 shares were allocated at a 15% discount from the basic issuance price - £ 1.10.
		The inclusive amount attributed to capital in accordance with the basic price per share is NIS 18,857 thousand (net of issuance expenses and fees in the amount of approximately NIS 4,470 thousand).

		During 2018 the Company issued 3,194,950 shares to various investors. The number of shares were adjusted in accordance with the split. See c below.
	c.	On April 9, 2019 the Company performed a stock split of 1:10 so that each shareholder received 9 additional shares for every share that he held beforehand.

	d.	On May 13, 2019 the Company issued 25,000,000 additional shares and Options to various investors for a consideration of £ 1 million. The shares were allocated at the price of 4 pence per share, and each share received an allocation of one Option at the exercise price of 8 pence for 24 months.

	e.	On June 30, 2019 the Company issued 5,061,055 shares and Options to various investors as a consideration for convertible loans in the amount of NIS 1,116 thousand. The shares were allocated at the price of 5 pence per share, with an Option added at the exercise price of 10 pence for 24 months.

	f.	On June 30, 2020 the Company issued 28,922,507 shares to various investors in consideration for convertible loans in the amount of NIS 3,381 thousands. The shares were allocated at a price of 4-5 pence per share.

	g.	The shares render to their owners the right to vote and to participate in meetings of the shareholders, the right to receive revenues and to participate in surplus assets upon dissolution of the Company.

	h.	In regard to agreements with interested parties - see Note 22a.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 18:-

GENERAL AND ADMINISTRATIVE EXPENSES

	Year Ended December 31,
	2020	2019	2018
Salaries expense to an interested party (see Note 22a)	683	- . -	- . -
Professional consultation	322	707	735
Salaries to directors	280	612	367
Fees	230	255	246
Other	151	173	197
Management fees and participation in expenses to an interested party (see Note 22a1, 23a) *	90	670	763
Office maintenance and office expenses	60	58	23
Depreciation	48	49	54
Office services to an interested party (see Notes 22a2, 23a)	32	67	- . -
Advertising and marketing	18	402	669
Travel abroad	1	130	356
	1,915	3,123	3,410
* Includes share based compensation	- . -	11	25

NOTE 19:-	OTHER INCOME (EXPENSES), NET
		Year Ended December 31,
		2020	2019	2018
	Revenues from sale of jewelry	33	254	- . -
	Expenses for jewelry production	(3)	(161)	- . -
	Capital gain from sale of fixed assets	75	- . -	- . -
		105	93	- . -
	Income (expenses) regarding bad debt from loan of the parent company	1,090	(1,116)	- . -

		1,195	(1,023)	- . -

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 20:-	FINANCING EXPENSES (INCOME), NET
		Year Ended December 31,
		2020	2019	2018
	Finance expenses -
	Adjustment of the value of a financial liability and loans according to fair value, net	3,105	1,067	- . -
	Exchange rate differentials	119	235	- . -
	Finance expense in regard to leasing	156	159	- . -
	Interest on loans from interested and related parties	20	16	3
	Other expenses	30	57	177
	Interest to a company that is an interested party	- . -	- . -	38
	Revaluation of shares available for trade	952	- . -	- . -
		4,382	1,534	218

Finance income -

Interest income from the parent company		- . -	(69)
Adjustment of financial liability in regard to Options according to fair value	(1,114)	(160)	(9,487)
Exchange rate differentials	- . -	- . -	(81)
	(1,114)	(160)	(9,637)

	3,268	1,374	(9,419)

NOTE 21:-	TAXES ON INCOME

	a.		Data in regard to the tax environment wherein the Company operates:
				Tax rates
				Corporate tax rate in Israel for 2018 and thereafter is 23%.

	b.	The Company received final assessments from the Income Tax Authorities through 2014.

	c.	The Company has a carryforward loss for tax purposes as of December 31, 2020 in the amount of approximately NIS 83 million. The tax benefit in this regard will be included in the financial statements at the time when realization is expected. Currently utilization of loss is not anticipated

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 22:-	TRANSACTIONS WITH INTERESTED AND RELATED PARTIES

	a.		Transactions with interested parties:
				Year Ended December 31,
				2020	2019	2018
		Charged to statements of comprehensive income (loss):
		Management fees and participation expenses paid to "101"		90	670	763
		Fees for office services paid to "808"		31	67	- . -
		Finance expenses paid to "101"		- . -	- . -	38
		Interest income received from the parent company		- . -	- . -	69
		Salaries to interested parties		683	- . -	- . -
		Finance expenses to shareholders		18	8	3
		Charged to the statements of financial position:
		Capitalized management fees and participation in expenses to "101"		270	799	841

b.		Balances of interested and related parties:
				December 31,
			2020		2019
	In the framework of current assets:
	Marketable securities		926		- . -
	In the framework of long-term assets:
	Interested parties		- . -		77
	Loan to the parent company		- . -		2,233
	In the framework of short-term liabilities:
	Interested parties		88		211
	Loan from interested parties		1,147		- . -
	In the framework of non-current liabilities:
	Loan from interested parties		433		- . -
c.		Commitments:
		See Note 24a.

d.		Guarantees for the Company from interested parties:
		See Note 24b.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 23:-

COMMITMENTS, GUARANTEES AND LIENS

Commitments with interested parties:

1. Commitment regarding "101":

Since 1999, when the Company was established, it has been managed by 101 Gold Holdings (hereinafter - "101"), an interested company, that, at balance sheet date, holds 2.73% of the Company shares and 3.90% fully diluted shares, in the framework of management agreements.

On January 1, 2020 a new agreement was signed between the Company and "101", whereby "101" provided office services to the Company in return for an amount of approximately NIS 60 thousand with the addition of VAT, in accordance with the law. (This amount does not include refund of expenses related to travel abroad for the purpose of mobilizing investors.)

This agreement supersedes any previous agreement between the companies. The agreement is for a three month period with an option for extension for an additional three months. The Company did extend the agreement in accordance with the option, until June 30, 2020. On that date, the agreement expired and the parties chose not to renew it.

2. Commitments regarding "808":
On January 1, 2005 the Company signed an agreement with "808", an interested party, whereby "808" will assist in finding potential investors. In addition, "808" will provide collection services regarding the investment money of investors that were found by "808"for a consideration of 2% of the total gross investment by each such investor in the Company.

In addition, "808" will provide office services to the Company representatives in the United States for a fixed monthly retainer in the amount of $ 770. The Company and "808" agreed that the agreement will be valid until December 31, 2015. Each party has the right to bring the agreement to an early termination upon written notification six months in advance. The agreement was extended until December 31, 2020 under the same terms.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 23:-	COMMITMENTS, GUARANTEES AND LIENS (cont.)
	a. Commitments with interested parties (cont.):
		3.			Commitment regarding Kibbutz Yagur (related to the Distal area according to the Company's geological model):
		On August 13, 2000 the Company signed a Memorandum with Kibbutz Yagur (hereinafter - "The Kibbutz"). In accordance with the Memorandum, the Company has the right to dig and drill on land that the Kibbutz is leasing from the Israel Lands Authority, in accordance with the utilization permission that will be rendered by the Kibbutz and in the framework of the operations permitted to be performed by the Company, as per the Permits issued to it. In the event that mineral deposits will be found, then the Company will be permitted to dig and operate a mine in the area, in consideration for annual usage fees in the amount of U.S. $ 2,000 + VAT (hereinafter - "the service fees"). The service fees will be paid to the Kibbutz until the end of the permitted usage period rendered by the Kibbutz or until the period contracted by the parties in a leasing or purchase agreement, as detailed below. The Memorandum does not have a time limit.
		This liability was transferred to the Subsidiary together with the other liabilities of the Company that are related to exploration and prospecting assets and operations.

			4. Chairman of the Board of Directors
			On April 28, 2019 the Company signed an agreement with Mr. Michael Rosenberg, chairman of the Board of Directors, whereby the Company obligates to render over a two year period an amount of 1 million convertible Options at a price of nine pence. This agreement has not as yet been approved by the Board of Directors and, therefore, a liability was not recorded in this regard.

	b.		Guarantees and Liens:
				The Company gave to a third party a guarantee through a bank in the amount of approximately NIS 7 thousand.

	c.		Information in Regard to Exploration and Prospecting Permits:
			In November 2020, the Company board of directors decided to reorganize so that all exploration and prospecting, as defined above, will be transferred to a Subsidiary that is, as of the date of the financial statements, 100% owned by the Company. The detailed information below relates to the assets transferred, as abovementioned, during March 2021 to ownership of the Subsidiary.
			The Company received exploration and prospecting permits from the Mining Inspector at the Government of Israel National Infrastructures Ministry. These exploration permits grant exclusive rights to perform geological explorations in specific areas of northern Israel. Prospecting and discovery of minerals in Israel is subject to the statutes detailed in the Mining Ordinance and Mining Amendments added thereto as well as the Mining Regulations subsequently appended.


			Since commencement of the Company's operations in January 1999, the Company has acquired all necessary permits and licenses and maintains its schedule of operations determined in accordance with these licenses by the Mining Inspector at the National Infrastructures Ministry.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 23:-

COMMITMENTS, GUARANTEES AND LIENS (cont.)

	c.	Information in Regard to Exploration and Prospecting Permits (cont.):
		Prospecting permit:
		A prospecting permit grants to its holder the right to enter any area included in the permit, in order to verify the presence or absence of minerals in the area and to dig up to two meters and tunnel up to a depth of ten meters. A prospecting permit holder is not allowed to drill or perform any other actions that have the intent or directly result in removal of minerals, unless other special terms were designated by the Inspector. The prospecting permit is also limited in regard to the exploration area and to the minerals that may be prospected. The permit does not grant exclusive rights to its holder in regard to area and to minerals that are permitted to be prospected. The prospecting permit is for an initial twelve month period and may then be renewed for an unlimited amount of months, subject to terms and conditions to be determined.

		Exploration permit:
		An exploration permit grants exclusive rights to its holder for exploring in the area designated in the permit. An exploration permit may cover an area up to 500 sq. km. and is valid for a two-year period. The holder of an exploration permit is required to employ expert geologists and other trained individuals who are approved by the Inspector and have been hired to explore in accordance with the general guidelines published periodically by the Inspector. In addition, these individuals explore the rocks, minerals, quarries, ground and water supply in the area in accordance with the Inspector's opinion and they furnish reports, maps or other information as requested by the relevant Authorities, who then renew and extend the validity of the permit.
		The Inspector has the right to nullify an exploration permit, completely or partially, without any compensation to the holder of the permit, in the event that the Inspector determines that the holder of the exploration permit is not conducting a survey of the area with proper expertise, as required by the Ordinance and instructions of the Inspector.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 23:-	COMMITMENTS, GUARANTEES AND LIENS (cont.)
	c.	Information in Regard to Exploration and Prospecting Permits (cont.):
		Prospecting License:
		Subject to the limitations designated in the Ordinance and in the event that the prospecting that is conducted in accordance with the prospecting permit is completed satisfactorily, the holder of a prospecting permit may request a "prospecting license" for certain areas that he chooses from those areas designated in the prospecting permit. The Inspector may choose to grant a prospecting license to an individual, subject, inter alia, to the fact that this person holds an exploration permit or a prospecting permit for the area that he requested and that this individual presented sufficient proofs that the minerals for which he wants to explore do indeed exist in the requested license area.

		In the event that the prospecting is for non-precious quarries, the prospecting license area will not exceed 1% of the prospecting permit area granted to the holder. In the event that the prospecting is for precious stones, then the prospecting license area will not exceed 0.5% of the prospecting permit area. (Precious stones are defined in the Ordinance as including gems, as well as diamonds, precious metals and metal ores.) In the event that the requestor does not hold a prospecting permit, then the area requested will not exceed 50 hectares (0.5 sq. km) for exploration of non-precious minerals; and will not exceed 20 hectares (0.2 sq. km.) if the individual wishes to explore for precious minerals in the determined area.
		A prospecting license is granted for a period of from one up to five years. However, in the event that the license is granted for a period of less than one year, then the Inspector may decide to renew the license for a period of up to five years.

		A prospecting license grants to its holder the exclusive right to explore the designated area and for this purpose, he is permitted, inter alia, to dig, drill or perform other work required to determine whether the area contains "sufficient quantities" of minerals for which the license was granted (that would enable continued operations on a commercial level) and to establish and maintain machinery and equipment and pave roads necessary for performance of the exploration.

		The holder of a prospecting license is required to operate efficiently and with proper expertise. Failure to conform to these requirements can result in nullification of the license. Transfer to a third party of the license or any other right granted therein is subject to obtainment of written consent from the Inspector.

		Discovery Certificate:
		Subject to the limitations determined in the Ordinance, and if the feasibility examination has been completed to the satisfaction of the Inspector, the bearer of a Prospecting License will have the exclusive right to request a "Discovery Certificate" for parts of the area that are marked in the Prospecting License or for the complete area.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 23:-

COMMITMENTS, GUARANTEES AND LIENS (cont.)

	c.	Information in Regard to Exploration and Prospecting Permits (cont.):
		As long as the individual has a Discovery Certificate for quarries, he will have the right to obtain a mining right or a contract for digging that is conditioned in the Discovery Certificate and by the limits of the issues mentioned in the Ordinance.
		Subject to those limitations, and the mining right or the mining contract rendered by the Inspector and subject to the orders stated in the Mining Ordinance, bearer of the Certificate receives a period of one year from the date the Certificate is rendered to request a mining right or a contract to mine in regard to the quarry or quarries that are mentioned in the Discovery Certificate and in regard to the area so as not to violate the maximum fixed rates that are determined by those rights.
		The request for mining is a formality, mainly since the owner of the Discovery Certificate is required to perform all the planning for mining in conjunction with all the relevant Authorities, and the Certificate is renewed accordingly.

NOTE 24:-	EARNINGS (LOSS) PER SHARE
			Year Ended December 31,
			2020	2019	2018
		Comprehensive earnings (loss) for the year (NIS in thousands)	(3,988)	(7,929)	6,009
		Weighted number of Ordinary shares	186,767,818	160,769,606	*142,245,510
		Basic and diluted earnings (loss) per share (in NIS)	(0.021)	(0.049)	*0.0431

* Updated in accordance with the split.

NOTE 25:-	FINANCIAL INSTRUMENTS
	a.	Financial risk management
		1)	General
			The Company is exposed to the following main risks arising from use of financial instruments:
			•	Credit risk
			•	Liquidity risk
			•	Market risk
			In this Note, we will render information in regard to Company exposure for each of the risks abovementioned, as well as Company goals, policies and procedures regarding gauging and management of these risks. Additional quantitative disclosure is included throughout these financial statements.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 25:-

FINANCIAL INSTRUMENTS (cont.)

Financial risk management (cont.)

		2)	Framework for risk management
			Company policy for risk management was formulated in order to identify and analyze the risks confronting the Company, to determine sufficient limitations to the risks, control while supervising the risks and compliance with limitations. The policies and methods for risk management are surveyed currently in order to reflect changes in the market conditions and the Company operations. The Company utilizes training and management procedures in order to develop a control environment that is efficient, wherein all employees understand their roles and responsibilities.
		3)	Credit risk
			Credit risks arise from cash and cash equivalents, deposits in banks and receivable balances that are as yet unpaid. Company balances of cash and cash equivalents are deposited in a bank. The Company considers credit risks for unpaid receivable balances to be insignificant.

		4)	Liquidity risk
			Liquidity risk is the danger that the Company will not be able to pay its obligations related to its financial liabilities that are cleared by cash payments or payment of another financial asset. The Company's approach to management of its liquidity risks is to assure, as much as possible, the necessary liquidity to meet its obligations on time, under ordinary terms and when pressured, without encountering undesired losses or damage to its reputation.

			Hitherto, Company financing has been maintained by issuance of share capital, receiving of loans and use of credit from interested parties (management fees have been paid in accordance with the Company's abilities).

		5)	Market risks
			Market risks include the risk that changes in market prices, such as the exchange rates of foreign currencies, the Consumer Price Index, interest rates, and prices of capital instruments will have an effect on the value of Company holdings of financial instruments. The intent of market risk management is to manage and supervise exposure to market risks in the framework of accepted parameters, while maximizing yields.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 25:-		FINANCIAL INSTRUMENTS (cont.)
		a.	Financial risk management (cont.)

			5)		Market risks (cont.)
					The Company is exposed to the following risks:
					Exchange rate risks:
					Part of the Company's liabilities and mobilizations of capital is measured in dollars and pounds sterling. Therefore, the Company is exposed to changes in the exchange rates of the U.S. dollar and the British pound sterling. The Company has not utilized any protective measures against this exposure.
					Risks of falling market prices for diamonds, gold and precious stones:
					The Company is exposed to changes in market prices for diamonds, gold and precious stones. Despite the fact that the Company is still in the pre-production stage for the minerals, significant changes in the future market prices can and may have an effect on the preparation to repay investments in exploration and mining.

		b.	Interest rate risks
			Exposures to interest rate risks and average weighted interest rates for financial assets and liabilities are detailed as follows:
				NIS						Foreign Currency
				Linked to the CPI		Fixed Interest	Variable Interest		Non- Interest	Fixed Interest	Non- Interest	Total
				NIS in thousands
	31.12.2020
	Financial Assets:
	Cash and cash equivalents								15		468	483
	Receivables								220			220
	Shares available for trade								926			926

	Financial Liabilities:
	Short-term credit from banks and others							410		737		1,147
	Related parties										586	586
	Shareholders' loans								211			211
	Trade and other accounts payable								1,219		311	1,530
	Liability at fair value										6,475	6,475
	Loans convertible to shares									181		181
	Financial leasing					1,195						1,195

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 25:-		FINANCIAL INSTRUMENTS (cont.)
		b.	Interest rate risks (cont.)
				NIS					Foreign Currency
				Linked to the CPI	Fixed Interest	Variable Interest		Non- Interest	Fixed Interest	Non- Interest	Total
				NIS in thousands
	31.12.2019
	Financial Assets:
	Cash and cash equivalents									6	6
	Short-term bank deposit				14						14
	Receivables							128			128
	Interested party							77			77
	Parent company							1,116			1,116

	Financial Liabilities:
	Short-term credit from banks and others				95		211		131		438
	Loans from shareholders							211			211
	Trade and other accounts payable							535		646	1,181
	Liability at fair value									1,792	1,792
	Loans convertible to shares								1,134		1,134
	Financial leasing				1,492						1,492

c.	Analysis of sensitivity
	1)	As of December 31, 2020 and 2019, the Company has net liabilities with variable interest rates in the amounts of NIS 175 thousand and NIS 211 thousand, respectively.
		An increase in the market annual interest rate of 50% for the year ended December 31, 2020 is likely to increase interest expense in the amount of approximately NIS 4 thousand; to decrease net profit and shareholders' equity in the amounts of approximately NIS 4 thousand. A decrease in the market interest rate of 50% would decrease the interest and increase net profit and shareholders' equity by identical amounts. This analysis was performed assuming that there will not be any changes in other factors.

	2)	A stronger New Israel Shekel (NIS) against the U.S. dollar would increase (decrease) the shareholders' equity and net income or loss as follows. This analysis was performed assuming that all other variables, especially interest rates, will remain fixed.

				Date	5% Increase in Exchange Rate	5% Decrease in Exchange Rate
			December 31, 2020		(391)	391

			December 31, 2019		(185)	185

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 25:-	FINANCIAL INSTRUMENTS (cont.)
	d.	Fair value
		Book value of financial assets and liabilities, including cash and cash equivalents, other receivables, deposits, bank short-term credits, loans and overdrafts, trade payable and other payables is proximate to or equivalent to their fair value.

	e.	Liquidity risk
		The Company has liabilities bearing interest at variable rates and is, therefore, exposed to changes in the market interest rate. See Section c.1 above.

Changes in the liabilities resulting from financing operations

	Bank and Other Credits		Loans from Interested Parties	Options Converted to Shares	Loans at Fair Value and Shareholders' Loans	Financial Leasing	Loan From a Supplier	Receipts on Account of Shares	Other	Total Flow from Finan-cing
Balance 1.1.2019	(332)		(674)	(564)	(772)	- . -	(134)	(21,969)	386
Consideration from issue of shares and Options (including additional paid-in capital), net				(566)				(3,009)		(3,575)
Loans from banks and others	(103)									(103)
Receipt of shareholders' loans, net					(2,636)					(2,636)
Repayment of long-term loans			674			299				973
Interest paid									334	334

Cash from financing activities	(435)		- . -	(1,130)	(2,636)	299	(124)	(3,009)	334	(5,007)
Issue expenses attributable to P&L								(723)
Issue expenses paid with convertible shares					(36)			36
Loans converted to Options and shares				(149)	1,166			(1,017)
Classification of amortized cost to fair value					232 (232)
Financial leasing in accordance with IFRS 16	(2)					(2,115)
Finance expense to interested party
Finance expense for convertible loans					(210)		124
Debit balance converted to shares								(60)
Supplier in regard to fixed assets
Balance as of 31.12.2019		(437)	- . -	(1,279)	(2,926))	(1,816)	- . -	(26,742)

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 25:-

FINANCIAL INSTRUMENTS (cont.)

		f.
	Bank and Other Credits		Loans from Interested Parties		Options Converted to Shares	Loans at Fair Value and Shareholders' Loans	Financial Leasing	Receipts on Account of Shares	Other	Total Flow from Finan-cing
Balance 1.1.2020	(437)		-		(1,120)	(2,926)	(1,816)	(26,742)	-
Consideration from issue of shares and Options (including additional paid-in capital), net								(205)		(205)
Loans from banks and others										-
Receipt of interested parties loans, net			(1,431)							(1,431)
Receipt of shareholders' loans, net						(3,804)				(3,804)
Repayment of long-term loans	130						393			523
Interest paid									226	226

Cash from financing activities	130		(1,431)		-	(3,804)	393	(205)	226	(4,691)
Issue expenses attributable to P&L
Issue expenses paid with convertible loans						(116)
Loans converted to Options and shares						3,381
Classification of amortized cost to fair value
Financial leasing in accordance with IFRS 16							(344)
Adjustment of fair value of options					1,114
Finance expense for convertible loans						(3,182)
Debit balance converted to shares
Supplier in regard to fixed assets
Balance as of 31.12.2020	(307)			(1,431)	(6)	(6,647)	(1,767)	(26,947)

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 26:-

OTHER SIGNIFICANT EVENTS

	Corona pandemic -
	During January 2020 the Covid-19 Coronavirus was released in China and has since spread worldwide, including in Israel, leaving chaos and uncertainty wherever it has touched civilization. The scope of economic activity has been sharply reduced, including in Israel, and a suspicion exists that there will be a global recession as a result. As part of the coping mechanism and efforts to restrain the virus from spreading, steps were implemented, including in Israel, that drastically limited mobility and social gatherings.
	Preparations of the Company for further expansions in the global economic environment as well as possible implications for these developments on Group operations are not under Company control, are uncertain and are based on information presently available to the Company, that is based, inter alia, on information in Israel and worldwide as well as on guidelines of the relevant Authorities that could possibly change at any moment. As long as the global crisis continues for a lengthy period of time, this is likely to result in significant deterioration of the operating results for the Company, including its financial ability to cope with the situation.

	Effect of the Coronavirus on the Company:
	On March 17, 2020 the Company received a Discovery Certificate from the Ministry of Energy in Israel.
	The Company's recent efforts revolve around working with the various Authorities in order to advance the planning and regulation procedures that will enable it to receive a Mining Permit. The Company does not know, at this point, what the effects of the Coronavirus will be on the time schedule for advancing and receiving the necessary Permits in order to obtain the Mining Permit and assumes that there will be minor delays in the scheduling, that are not within the Company's control.

	Concurrently, the Company estimates that there will be difficulties with mobilization of capital in accordance with the current world economic situation.

	The ability and timing of the Company to raise additional capital will inevitably be impacted by these unprecedented external factors.

SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 27:-	EVENTS SUBSEQUENT TO BALANCE SHEET DATE
	a.	Agreement between the Company and its Subsidiary -
		On November 29, 2020 an agreement was signed between the Company and its Subsidiary in the framework of which the Company obligated to transfer to the ownership of the Subsidiary by January 1, 2021 all the exploration assets as defined above. Concurrently, all the business operations that are related to exploration assets were also transferred, including employees, supervisors, engagements, advisors and suppliers, etc. Accordingly, all the results in regard to operations related to exploration assets will be included for the Subsidiary commencing with March 1, 2021.

		Concurrently, it was agreed that as consideration for the abovementioned transfer of assets, the Subsidiary will allocate ordinary shares to the Company at a quantity to be agreed upon in accordance with the valuation that will be performed by an independent assessor.

		Further, it was agreed that any delay in registering formally the ownership of the exploration assets will not be able to harm the rights and/or liabilities of the Company and/or the Subsidiary in accordance with the agreement between the companies.

	b.	During February 2021, the Company received an Exploration Permit, 1010C1, that includes the area of approximately 990 dunam, in the "Daughter of Solomon" area that is valid until February 13, 2022.

	c.	During May 2021, an Exploration Permit received by the Company expired, and a renewal request was submitted to the Mining Inspector, but this renewal request has not as yet been approved.

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END

FR FMMMTMTAJBIB

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