TIDMSEFA

RNS Number : 2163P

Shefa Gems Ltd

16 June 2022

Shefa Gems Ltd.

("Shefa Gems" or the "Company")

Annual Financial Report for the year ended 31 December 2021

Shefa Gems (LSE: SEFA), a company formerly focused on advanced exploration and development of multi-gemstone mines in Northern Israel, is pleased to announce its annual results for the year ended 31 December 2021.

2021 Highlights

Corporate and Financial

Change of control and business of the Company

On June 2021, the Company announced that it had entered into an agreement with the Shany Group to distribute the Company's mining and exploration 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. Accordingly, on 9(th) August 2021, the Company convened a shareholders' meeting at which the following resolutions were approved:

   1.   Acquisition strategy- 

It was approved that the Company will become a cash shell seeking acquisition opportunities in the web technology and software space. Accordingly an equity subscription of Ordinary Shares was completed, at a price of USD 0.0005 (approximately 0.00031 GBP) for each Ordinary Share, raising a total of USD 1,050,000 (GBP 756,000). The Subscription Shares have been allotted to investors but will only be admitted trading on the Main Market of the London Stock Exchange following publication of a prospectus, in accordance with Listing Rule 14.3.4, and a completed Application for Admission to Trading. The Company intends to progress preparation of a prospectus as soon as practicable.

Should an acquisition of a new activity 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. The Company has currently not identified a suitable acquisition target but 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.

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.

   2.   Change of name- 

The Company intends to change its name to "Alef Bet Advanced Technologies (2021)", or a similar name, as approved by the Israeli Registrar of Companies. The purpose of the name change is to more closely reflect the Company's strategy to develop its business across the web technology and software space.

Following the change of name the Company will make application to the London Stock Exchange to change its TDIM symbol from "SEFA" to "ALEF". Shareholders should note that their shareholdings will be unaffected by the change of name, although new share certificates will be issued to Shareholders following the name change and completion of the Proposed Combined Transaction. The Company will notify the market of when the change of name and TIDM will be effective.

   3.   Changes to the Company's registered capital- 

The registered share capital of the Company has increased to 1,000,000,000,000 Ordinary Shares and the par value of the Ordinary Shares has been cancelled. The amended Articles of Association of the Company have been placed on the Company's website.

   4.   Board changes- 

Mr Alon Shany (Executive Chairman), Mr. Jacques Abitbol (Non-Executive Director), Ms Eva Abittan (Non-Executive Director), Ms. Irit Ben - Ami (External Director) and Mr. Avi Levin (External Director) have been appointed to the Board. Michael Rosenberg, David Nachshon, Gershon Frenkel, Zvi Nemeth, James Campbell, Natan Drukman and Yossef Taub have stepped down from the Board. Ms Nathalie Schwarz remains on the board as an External Non-Executive Director.

Annual and extraordinary shareholders' meeting

The following resolutions were approved by the general meeting held on 12 May 2022:

1. Receiving the Company's financial statements and annual reports for the year ended 31 December 2021 (and the reports of the directors and auditors in relation to).

2. Re-appointing Barzily & Co. as the Company's auditors and authorizing the directors of the Company to determine their remuneration.

3. Re-electing Mr. Alon Shany, Mr. Jacques Abitbol, and Mrs. Eva Abittan, who are the serving directors (which are not external directors) of the Company offering themselves for re-election to hold office until the conclusion of the next AGM, and authorising the management of the Company to determine their remuneration in accordance with the provisions of the Israeli Companies Law, 5759-1999 (the "Companies Law") and the articles of association of the Company, as amended from time to time (the "Articles").

4. Electing Mr. Avi Levin and Mrs. Irit Ben-Ami as external independent directors to serve in the Company as of their appointment date and for a period of 3 years with compensation terms as described in the circular.

5. Approving the directors' and officers' insurance policy that shall be in effect retroactively from 9 August 2021 until 9 August 2022, according to the terms stated in the circular.

Overview

Operational Review of Former Business

Prior of the completion of the change of control transaction described above, the Company and its wholly owned subsidiary, Shefa in Israel (G.M.) Ltd (the "Subsidiary") was an explorer and developer of precious gems deposits operating in Northern Israel. Exploration activity was managed by professionally skilled and technically competent personnel and is accompanied by an international team of geological experts. All exploration activities were conducted under international standards and the internationally recognized SAMREC 2016 Code.

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(TM), 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 Subsidiary covering the projected gemstone mine development in the Kishon Mid Reach, Zones 1 and 2. The Certificate of Discovery is the culmination of successful exploration activities and market analysis; and signals the beginning of the process towards future commercial mining.

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

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

Since the Company's financial results showed a significant increase in exploration expenses and in light of new information on the complexity of the regulatory procedures in relation to licensing of the commercial gem mining in Israel, which became clearer to the Company through the promotion of the regulatory procedures for the mining license in the Kishon area - the Company commenced an internal strategic review of its business activities.

Following this review, the board commissioned an independent review of the value of the mining assets carried in the financial statements. Since 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 as a result. 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 imper 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 - showing that the development of the mining projects does not justify the additional costs of a listed company and that any future funds raised on the basis of these mining prospects, should be entirely focused 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) with the intention that, following Shareholder approval, the Company will distribute the ownership of the Subsidiary from the Company to all of the Company's existing Shareholders via a dividend in specie. This was approved by the company's shareholders meeting held on 9 August 2021. The dividend in specie is yet to be competed and, to the date of these financial reports, the Subsidiary shares are held by a trustee.

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. During 2020 and 2021 the scope of 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 were being implemented, including in Israel, that were 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. It shall be noted that to the date of this report the most to the restrictions in Israel have been lifted, but the Company is no able to estimate possible and future developments since the Covid-19 Coronavirus still spreads around the world.

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 or finding a new activity will be impacted by these unprecedented external factors.

Financial Review

In 2021 the Company recorded a comprehensive loss for the period of TNIS (in thousands) 62,672 (2020: TNIS 3,988) equating to a loss per share of NIS 0.264 (2020: 0.2). Most of the loss was due to a reduction in assets for exploration and evaluation of precious stones .

As of December 31, 2021, the Company's cash and cash equivalents stood at TNIS 853 (2020: TNIS 483).

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

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. The Company convened a shareholders' meeting on 9(th) August 2021 for the approval of said resolutions.

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 are 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 includes the team that managed the Company's exploration activities, including the former 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 general meeting approved the terms of the transaction on 9(th) August 2021 as described above.

Jerusalem, May 31, 2022

REPORT OF INDEPENT AUDITORS

To the Shareholders of

SHEFA GEMS LTD.

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

We have audited the accompanying statements of financial position of Shefa Gems Ltd. (Formerly Shefa Yamim A.T.M. LTD.) (hereinafter - "the Company") as of December 31, 2021 and 2020, and the related statements of comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2021. These financial statements are the responsibility of the Company's board of directors and management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards in Israel, including those prescribed by the Israeli Auditors' Regulations (Mode of Performance) - 1973. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

We believe that our audit provides a reasonable basis for our opinion.

We were not satisfied in regard to the NIS 58 million amount of impairment of the exploration assets that is included in expenses in the Company statements of comprehensive loss, and in accordance in regard to the amount of dividend for distribution in the statement of changes in equity.

See Note 8b in regard to uncertainty in the value estimation of the exploration assets.

 
 
 In our opinion, except the above mentioned, the financial statements referred 
 to above present fairly, in all material respects, the financial position 
 of the Company as of December 31, 2021 and 2020 and the results of its operations, 
 the changes in its equity and cash flows for each of the three years in 
 the period ended December 31, 2021, in conformity with international financial 
 reporting standards (IFRS). 
 
  We draw attention as follows: 
   1. Note 1d of these financial statements - 
 The Company does not have any operations. Further continuation of the Company's 
  operations is contingent upon its having successful operations in the future. 
  An agreement was signed between the Company and "Shani group" as detailed 
  in note 1. Company management is of the opinion that it will be able to 
  mobilize the financial sources for future Company operations, but there 
  is no certainty in this regard. 
 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". 
  2. Note 1c regarding court approval for dividend distribution was not received 
  yet 
 
 
 
 Barzily & Co. 
 Certified Public Accountants 
 A Member of MSI Worldwide 
 

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

STATEMENTS OF FINANCIAL POSITION

NIS in thousands

 
                                                          December 31, 
                                             Note     2021         2020 
                                            -----   --------      ----- 
  ASSETS 
  Non-Current Assets: 
  Fixed assets, net                           6            -          1,007 
  Right of use assets                         14           -          1,645 
  Assets for exploration and evaluation 
   of precious stones                         8            -         63,098 
  Total non-current assets                                 -         65,750 
                                                    --------      --------- 
 
  Current Assets: 
  Cash and cash equivalents                              853            483 
  Marketable securities                                    -            926 
  Other accounts receivable                   5            8            220 
  Total current assets                                   861          1,629 
                                                    --------      --------- 
 
  Total Assets                                           861         67,379 
                                                    ========      ========= 
 
 EQUITY (DEFICIT) AND LIABILITIES 
 Equity (Deficit)                             16     (6,573)         55,609 
                                                    --------      --------- 
 
   Non-Current Liabilities: 
 Long-term loans from interested party        13           -            433 
 Liability at fair value                      12           -          6,187 
 Long-term leasehold liability                14           -          1,302 
 Liability for severance pay                  3h           -            154 
 Options convertible to shares                15           -              6 
                                                    --------      --------- 
 Total Non-current Liabilities                             -          8,082 
                                                    --------      --------- 
 
 Current Liabilities: 
  Short-term credit from bank and others      9            -          1,789 
  Trade payables                              10           9            681 
  Interested parties                                       -             88 
  Other accounts payable                      11          94            670 
 Short-term liability at fair value           12       7,331            279 
  Loans convertible to shares                 12           -            181 
  Total current liabilities                            7,434          3,688 
                                                    --------      --------- 
 
 Total Equity and Liabilities                            861         67,379 
                                                    ========      ========= 
 
           The accompanying notes are an integral part of the financial 
                                    statements. 
 
 
 
   June 16,2022 
------------------      --------------        ---------------- 
 Date of Approval         Alon Shani           David Ben David 
  of the Financial            CEO                    CFO 
     Statements           Chairman of 
                          the Board of 
                           Directors 
 

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          2021           2020           2019 
                                 --------       ----------   -------------   ------------ 
 
  General and administrative 
   expenses                            17          (2,816)         (1,915)        (3,123) 
 
 Amortization of assets for 
  exploration                          8b         (58,565)           - . -        (2,409) 
                                                ----------   -------------   ------------ 
 
 Operating loss prior to other 
  expenses                                        (61,381)         (1,915)        (5,532) 
 
 Other income (expenses), 
  net                                18                103           1,195        (1,023) 
 
 
 Loss prior to financing                          (61,278)           (720)        (6,555) 
                                                ----------   -------------   ------------ 
 
 Financial expenses                                (1,429)         (4,382)        (1,534) 
 
 Financial income                                       35       1,114                160 
                                                ----------   -------------   ------------ 
 
 Financial expenses, net               19          (1,394)         (3,268)       (1,374) 
                                                ----------   -------------   ------------ 
 
 Loss for the year and comprehensive 
  loss for the year                               (62,672)         (3,988)      (7,929) 
                                                ==========   =============   ============ 
 
 Basic and diluted loss per 
  share (in NIS) *                                (0.000)        (0.021)        (0.049) 
                                                ==========   =============   ============ 
 
 

* The loss per share was adjusted following the split.

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

 
 
 
                                                                              Capital        Capital 
                                                                              Reserve        Reserve 
                               Additional     Receivables                       for            from                                 Total 
                                Paid-in       on Account       Dividend        Share-      Transactions     Accumulated            Equity 
                                Capital        of Shares         for           Based           with           Deficit            Attributed 
                                                             Distribution     Payments     Shareholder                         to Shareholders 
                             ------------   -------------   -------------   ----------   --------------   -------------   ---------------------- 
 
 Balance as of January 
  1, 2019                         108,561               -               -        5,716            6,312        (61,045)                   59,544 
 
  Issuance of shares                4,966           (205)               -            -                -               -                  4,761 
  Share based payment                   -                                           46                                                       46 
  Comprehensive Loss for 
   the year                             -               -               -            -                -         (7,929)              (7,929) 
 
 Balance as of December 
  31, 2019                        113,527           (205)               -        5,762            6,312        (68,974)                56,422 
 
  Comprehensive Loss for 
   the year                             -               -               -            -                -         (3,988)                (3,988) 
  Issuance of shares *              2,970             205               -            -                -               -                    3,175 
 
 Balance as of December 
  31, 2020                        116,497               -               -        5,762            6,312        (72,962)               55,609 
 
  Comprehensive Loss for 
   the year                             -               -               -            -                -        (62,672)                 (62,672) 
  Issuance of shares *              3,328               -               -            -                -               -                  3,328 
  Dividend for distribution 
   (see note 1,16.2)                    -               -         (2,838)            -                -               -                (2,838) 
 
 Balance as of December 
  31, 2021                        119,826               -         (2,838)        5,762            6,312       (135,634)                    6,573 
                             ============   =============   =============   ==========   ==============   =============   ====================== 
                                                                                                                                                                            - . - 
                                        * Reclassified following erasure of par value of shares. See Note 16. 
                                      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, 
                                                         2021          2020           2019 
                                                    -------------  ------------  ------------- 
 Cash flows from operating activities: 
 Loss for the year                                       (62,672)       (3,988)        (7,929) 
 Appendix A - Adjustments required to reconcile 
  loss for the year to net cash used in operating 
  activities                                             59,531          767             5,209 
  Net cash used in operating activities                   (3,141)       (3,221)        (2,720) 
                                                    -------------  ------------  ------------- 
 
 Cash flows from investing activities: 
 Purchase of fixed assets                                     (5)           (8)          (395) 
 Consideration from sale of fixed assets                        -           111              - 
 Deposits                                                       -            14           (14) 
 Exit from consolidation (Appendix B)                     (3,775)             -            - 
 Investment in exploration and evaluation 
  assets                                                 (1,024)        (1,361)        (2,161) 
 Repayment of investment in shares                       1,200               -               - 
 Loan repaid parent company                                   -             330           253 
 Net cash used in investing activities                   (3,064)          (914)        (2,317) 
                                                    -------------  ------------  ------------- 
 
 Cash flows from financing activities: 
 Consideration received for issuance of share 
  capital and options (including additional 
  capital), net                                                 -        205          3,575 
 Receipt (repayment) of credits from banks 
  and others, net                                           (176)       (130)           103 
 Receipt (repayment) of loans from interested 
  parties, net                                              4,443      1,431          (674) 
 Repayment in regard to leasing                             (255)        (393)        (299) 
 Investment in Company shares                               3,283           -              - 
 Receipt of loans convertible to shares                         -      3,804          2,636 
 Repayment of long-term loans from interested                (16)        - .             - . - 
  parties                                                                 - 
 Interest paid                                              (164)       (226)          (334) 
 Net cash provided by financing activities                  7,115      4,691           5,007 
                                                    -------------  ------------  ------------- 
 
 Linkage differences in regard to cash and 
  cash equivalents                                              -       (79)            (173) 
                                                    -------------  ------------  ------------- 
 
 Increase (decrease) in cash and cash equivalents             370        477           (203) 
 Cash and cash equivalents at the beginning 
  of the year                                                 483          6              209 
                                                    -------------  ------------  ------------- 
 
 Cash and cash equivalents at the end of 
  the year                                                    853       483                6 
                                                    =============  ============  ============= 
 

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

 
 APPIX A                                                   For the Year Ended December 
                                                                          31, 
 Adjustments required to show the cash flows 
  from current operations:                              2021             2020             2019 
                                                   --------------  ---------------  --------------- 
  Expenses (income) not involving cash flows: 
    Depreciation *                                             15               48               49 
    Capital gain                                            (274)             (75)                - 
    Share based payment                                        -                 -               11 
    Capital mobilization fees                                 -               -                 414 
    Amortization of assets for exploration 
     and evaluation of precious stones                   58,565                  -           2,409 
    Amortization of a loan to an interested 
     party                                                     -         (1,091)             1,116 
  Finance expenses , net                                  1,394              3,268            1,374 
                                                   --------------  ---------------  --------------- 
                                                        59,700               2,150            5,373 
                                                   --------------  ---------------  --------------- 
 
   Changes in asset and liability items: 
  Decrease (increase) in clients                                -             51               (51) 
   Decrease (increase) in receivables                         99             (75)               376 
  decrease in trade payables                                (135)            (391)            (374) 
  Decrease in liability to a shareholder                        -            (316)            (296) 
   Increase (decrease) in other accounts payable           (133)             (422)              181 
                                                   --------------  ---------------  --------------- 
                                                            (169)            (792)            (164) 
                                                   --------------  ---------------  --------------- 
 
                                                         59,531            (1,766)            5,209 
                                                   ==============  ===============  =============== 
 

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

 
 APPIX B                                      For the Year Ended December 
                                                             31, 
 Cash that arose as a result of division 
  of a subsidiary:                                 2021        2020      2019 
                                              -------------  --------  ------- 
 
   Receivables                                        (112)         -        - 
   Assets for exploration                           (6,128)         -        - 
   Fixed assets                                       (831)         -        - 
   Right of use                                         136         -        - 
   Loans from related and unrelated parties           6,576         -        - 
   Trade payables                                     1,006         -        - 
    Liability for severance pay                         290         -        - 
    Less: Dividend for distribution                   2,838         -        - 
                                              -------------  --------  ------- 
    Decrease in cash from the division of a           3,775         -        - 
     subsidiary 
                                              =============  ========  ======= 
 
 
 
 APPIX C                                               For the Year Ended December 
                                                                      31, 
 Significant non-cash flow operations:                     2021        2020      2019 
                                                       ------------  --------  -------- 
 
    Accounts payable in regard to assets for 
     exploration and evaluation of precious stones                -       248       785 
                                                       ============  ========  ======== 
    Fixed assets in regard to assets for exploration 
     and evaluation of precious stones                          166       411       464 
                                                       ============  ========  ======== 
    Right of use assets in regard to assets 
     for exploration and evaluation of precious 
     stones                                                   (269)       450       364 
                                                       ============  ========  ======== 
    Loans assigned to capital                                    46     3,381     1,017 
                                                       ============  ========  ======== 
    Balance from a supplier that was assigned 
     to capital                                                   -         -        60 
                                                       ============  ========  ======== 
 

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 that was engaged in exploration for diamonds, 
                             precious stones and gold in Northern Israel. See 
                             also Note 7. 
                            As of December 31, 2021 the controlling party of 
                             the Company is Shani group. 
 
                       b.   During November 2020 the Company's board of directors 
                             decided to make organizational changes within the 
                             Company. In the framework of these changes, the 
                             prospecting and exploration operations in search 
                             for precious stones and gold, performed by the 
                             Company from its inception until March 2021, would 
                             be transferred to Shefa Israel (G.M) Ltd. 
 
                       c.   On August 9, 2021 the special meeting of the Company's 
                             shareholder approved the agreement signed between 
                             the Company and Shani group (hereinafter "the agreement". 
                             This agreement includes: 
 
                            1.    Distribution of shares of Shefa Israel (formerly 
                                   "the subsidiary)", directly to the Company's 
                                   shareholders, as a dividend in kind- 
                                  During January 2021, all exploration assets 
                                   and their attributed operations were transferred 
                                   to Shefa Israel. As consideration, Shefa Israel 
                                   allocated shares to the Company. As part as 
                                   the agreement, the shares were transferred to 
                                   an agreed trustee (Mr. Nathan Druckman, Adv.) 
                                   in order to enable him to allocate the Subsidiary's 
                                   shares on a pro-rata basis, to all the company's 
                                   shareholders at the determination date (August 
                                   10, 2021). Distribution will take place as part 
                                   of a dividend in-kind subject to and subsequent 
                                   to approval by the Court in the framework of 
                                   a request presented subsequent to presentation 
                                   of the financial statements. As of the date 
                                   of the financial statements, a request has not 
                                   yet been presented to the Court. 
                                  This distribution was recorded as a dividend 
                                   for distribution in the Company's financial 
                                   statements. See Note 4. 
                            2.    Allocation of Shares - 
 
                                  In the framework of the transaction, on September 
                                   6, 2021, the Company allocated to Shani group 
                                   and two unrelated parties an amount of 201,347,822 
                                   Ordinary Shares at the price of $ 0.0005 (GBP0.00031) 
                                   per share in consideration for $ 1,050,000 (GBP 
                                   756,000). This allocation reflects approximately 
                                   85% of the Company's authorized share capital 
                                   subsequent to allocation and fully diluted. 
                                  During August-September 2021, Shani group transferred 
                                   the amount of money to the Company. 
 
 

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

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 1:- GENERAL (cont.)

 
 
          3.     Advancement of the strategy for engagement in 
                  new operations- 
                 Subsequent to distribution of the shares involved 
                  in the mobilization of capital, the Company will 
                  become a cash wrapper that is searching for opportunities 
                  to acquire internet technology and software resources. 
                  In the event that this acquisition will be completed, 
                  the Company will become a reverse takeover, in 
                  accordance with registration regulations, and 
                  will present a request to have its shares registered 
                  and traded once again on the central London stock 
                  exchange. 
                 The Company has not as yet identified a qualifying 
                  acquisition but will concentrate especially on 
                  the key areas of potential high growth by providing 
                  digital services in areas such as leisure, finance, 
                  electronic trade and gaming. It will also attempt 
                  successful advances in disruptive technology, 
                  such as blockchain, and crypto-currency. In addition, 
                  the Company will investigate potential software 
                  technologies. 
                    In the event that the Company identifies a specific 
                     goal, then it will publish, in accordance with 
                     the registration requirements, a prospectus that 
                     will include all the required information to receive 
                     approval of a reverse acquisition. At the moment, 
                     it is not possible to guarantee that the Company 
                     will be able to identify a specific goal or be 
                     able to complete a prospective transaction. As 
                     a result, trade of the Company's shares on the 
                     London Stock Exchange is likely to be nullified. 
 
 
     d.   The Company's financial status 
            The Company does not have any operations. Further continuation of the Company's 
              operations is contingent upon its having successful operations in the future. 
              An agreement was signed between the Company and "Shani group" as detailed 
              in note 1. Company management is of the opinion that it will be able to 
              mobilize the financial sources for future Company operations, but there 
              is no certainty in this regard. 
             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". 
 
     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. 
 

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

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 1:- GENERAL (cont.)

 
   e.   Definitions (cont.) 
        "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   a. 
  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 May 31, 2022. 
 
 
           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, 
                                          2021      2020       2019 
                                        --------  --------  --------- 
  CPI in points (applicable) 
   *                                     127.67    124.20     125.06 
  CPI in points (known) 
   *                                     127.30    124.30     125.06 
  Exchange Rate of U.S. 
   $ in NIS                               3.11      3.215       3.456 
  Exchange Rate of British 
   GBP in NIS                             4.20      4.39        4.56 
 
 
 
 
                                   Year Ended December 31, 
                                ---------------------------- 
                                  2021      2020      2019 
                                --------  --------  -------- 
 Change in CPI (applicable)       2.8%     (0.7%)     0.6% 
 Change in CPI (known)            2.41%    (0.6%)     0.3% 
 Change in rate of exchange- 
  U.S. $                         (3.3%)      (7%)    (7.8%) 
 Change in rate of exchange- 
  Brit. GBP                      (4.3%)    (3.7%)    (4.9%) 
  * Base Index 2002 = 100. 
 

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 the exploration 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

 
    g.     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. 
 
             2.   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. 
 
             3.   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.)

 
   m.   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. 
 
   n.   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. 
   o.   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:-        INVESTMENT IN SHEFA IN ISRAEL (G. M.) LTD. 
                      Agreement between the Company and Shefa Israel (G.M.) Ltd. 
                       for transfer of ownership in regard to exploration assets 
                       equipment: 
                      On November 29, 2020 an agreement was signed between the 
                       company and Shefa Israel, for transfer of the exploration 
                       assets equipment from the Company to Shefa Israel by January 
                       1, 2021. Concurrently, Shefa Israel also received all related 
                       operating activity, including administrators, employees, 
                       agreements, suppliers, etc. In addition, it was agreed 
                       that all actual expenses related to exploration assets 
                       would be the responsibility of Shefa Israel, commencing 
                       March 1, 2021. 
                      Accordingly, all the exploration assets were actually transferred, 
                       including the Taglit Discovery Permit, the "Carmel" Exploration 
                       Permit "the Carmel", and the "Bat Shlomo" License, and 
                       are currently owned by Shefa Israel. This transfer of ownership 
                       received final approval on August 9, 2021 from the Mining 
                       Supervisor and from the legal division of the Ministry 
                       of Energy. Concurrently, all contracts, trademarks, professional 
                       equipment, goodwill and accumulated information were transferred 
                       as well. 
                      Commencing March 1, 2021 Shefa Israel assumed all the exploration 
                       expenses, as agreed. 
                      Commencing June 1, 2021, the employees and the professional 
                       management were transferred, including all their social 
                       benefits. 
                      In consideration for the abovementioned transfers, Shefa 
                       Israel allocated an amount of 201,247,822 Ordinary shares 
                       to the Company. These shares constitute 100% ownership. 
                      As of the date of the financial statements, the abovementioned 
                       Ordinary shares are held by a trustee until all the legal 
                       details for approval by the Court are completed for distribution 
                       of a dividend in-kind.(see note 1) The Company has no influence 
                       on Shefa in Israel (G.M.) Ltd. 
                       The investment is presented as dividend distribution in 
                       the company's equity. 
 
 

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

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

 
      NOTE 5:-         OTHER ACCOUNTS RECEIVABLE 
                                                                  December 31, 
                                                          ---------------------- 
                                                              2021        2020 
                                                          --------   ----------- 
       Advances to suppliers and others                          -            10 
       Prepaid expenses                                          8           210 
                                                                 8           220 
                                                          ========   =========== 
 
 
 
      NOTE 6:-              FIXED ASSETS, NET 
 
                                  Machines                    Office                      Leasehold 
                                    and                      Furniture                   Improvements 
                                 Laboratory     Vehicles        and        Computers     - Laboratory        Total 
                                 Equipment                   Equipment 
                               ------------   ----------   -----------   -----------   --------------   ------------ 
      Cost: 
  As of January 
   1, 2020                            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 
  Decrements 
   in regard to 
   exit from 
   consolidation                    (3,697)         (48)         (340)         (379)            (436)      (4,900) 
      As of December                                   -             -             -                -         - 
       31, 2021                           - 
                               ------------   ----------   -----------   -----------   --------------   ------------ 
 
      Accumulated 
       Depreciation: 
  As of January 
   1, 2020                            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 
  Decrements 
   in regard to 
   exit from 
   consolidation                    (2,723)         (48)         (333)         (369)            (420)      (3,893) 
      As of December                                   -             -             -                -         - 
       31, 2021                           - 
                               ------------   ----------   -----------   -----------   --------------   ------------ 
 
      Depreciated 
       Cost: 
      As of December                                   -             -             -                -         - 
       31, 2021                           - 
                               ============   ==========   ===========   ===========   ==============   ============ 
  As of December 
   31, 2020                             974        - . -             7            10               16       1,007 
                               ============   ==========   ===========   ===========   ==============   ============ 
 
 
 
 
      NOTE 7:-         LOAN TO THE PARENT COMPANY 
                       On August 11, 2020 the Company arrived at an arrangement 
                        for settling the debt. Nela Digital Ltd. (formerly "parent 
                        company" 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: 
                                                               2021                2020 
                                                         -----------   ---------------------- 
       Opening balance January 1                    -                                   1,117 
       Loan amortization                            -                                   1,091 
       Repayment in cash                            -                                   (330) 
       Repayment with shares available 
        for trade                                   -                                 (1,878) 
       Closing balance December 31                  -                                      - 
                                         ============                  ====================== 
 

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 
 
                      a.        During November 2020 the Company directors decided to 
                                 perform a reorganization so that every exploration procedure, 
                                 and exploration assets (see Note 3c) 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 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 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. 
 
 
                        Composition: December 31, 
                                                                               2021             2020 
                                                                           ------------      ---------- 
                   Purchase of exploration rights, 
                    fees and planning                                                 -           5,357 
                   Geologic research and laboratory 
                    maintenance **                                                    -          23,144 
                   Drilling for exploratory 
                    purposes                                            -                         5,690 
                   Headquarters operations expenses 
                    directly attributable to the asset 
                    (mainly to a related company) **                               -             25,583 
                   Other expenses                                       -                         5,733 
                   Amortization of exploration 
                    assets *                                               -                    (2,409) 
                                                            ----------------                 ---------- 
                                                                 -                               63,098 
                                                  ================                           ========== 
 
 

* During 2019, 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.

 
        b.        Impairment of Assets for Exploration 
                  In the framework of transfer of operations in regard 
                   to the exploration assets and distribution to its shareholders, 
                   the Company examined the exploration assets and evaluation 
                   of precious stones in order to determine whether there 
                   are any signs of decrement in regard to these assets 
                   and in order to present this operation in its fair value. 
                   In the framework of this examination, the Company received 
                   an assessment from an external independent assessor in 
                   regard to the operation of these exploration assets. 
                   The main setbacks facing this external assessor in this 
                   framework included the uncertainty, from a regulations 
                   standpoint, in regard to actual market value of the precious 
                   stones (including the exclusive stones in Israel that 
                   do not as yet have an open market), uncertainty in regard 
                   to valuation of assets that have not as yet been defined 
                   as a discovery, whether because the exploration has not 
                   been completed in the areas, or whether as a result of 
                   uncertainty in regard to their economic feasibility. 
 

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.) 
                        Impairment in regard to exploration assets was in the 
                         amount of about NIS 58 million and was included in expenses 
                         for amortization of exploration assets in the Company's 
                         statement of operations. 
                         As of December 31, 2021 regard to the decision by the 
                         Company to exercise operations of the assets for exploration, 
                         by a dividend in-kind to the shareholders (see detail 
                         in Note 4) the Company showed the abovementioned operations 
                         as a dividend for distribution that was calculated based 
                         on the fair value of these assets and liabilities net 
                         of cost of sales. 
 
 
      NOTE         SHORT - TERM CREDITS FROM BANK AND OTHERS 
      9:- 
 
                                                                                           December 31, 
                                                                             ---------------------------------- 
                    a.          Composition:                                    2021                     2020 
                                                                             ---------                 -------- 
                                Overdraft                                           -                         - 
                                Short-term bank credit                                      -               176 
                                Current maturities of loan from 
                                 interested party                                           -                62 
                                Loans from interested party (1.)                            -               500 
                                Loan from shareholders (2.)                                 -               586 
                                Current maturities of leases                                -               465 
                                                                          -------------------     ------------- 
                                                                                -                         1,789 
                                                              ===================                 ============= 
 
  b.           As of December 31, 2020 the Company has two loans from 
                interested parties: 
   A loan in the amount of NIS 145 thousand bearing interest 
    per annum of 10%. 
   A loan in the amount of NIS 417 thousand bearing interest 
    per annum of 5%. 
 
 
 
 
      NOTE 10:-    TRADE PAYABLES 
                                                            December 31, 
                                                     -------------------- 
                                                       2021          2020 
                                                     --------  ---------- 
       Checks payable                                       -         520 
       Open balances                                        9         161 
                                                            9         681 
                                                     ========  ========== 
 
 
       NOTE 11:-         OTHER ACCOUNTS PAYABLE 
                                                                     December 31, 
                                                              -------------------- 
                                                                2021          2020 
                                                              --------  ---------- 
       Salaries and related 
        items                                                        1         288 
       Accrued expenses                                             93         382 
                                                                    94         670 
                                                              ========  ========== 
 

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

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

 
      NOTE 12:-        LOANS CONVERTIBLE TO SHARES 
 
 
        a.        During November 2018 until June 2019, the Company received 
                   convertible loans from investors in the amount of approximately 
                   GBP 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 period of 24 month. 
 
                  Also, the Company received from an investor a convertible 
                   loan in the amount of approximately GBP 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 period of 24 month. 
                  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, an amount of approximately 
                    NIS 627 thousand (GBP 133 thousand) was recorded as 
                    a loan at fair value and an amount of NIS 924 thousand 
                    (GBP 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 
                    (GBP 164 thousand). In accordance with the loan agreement, 
                    the Company obligated to allocate to the lenders, of 
                    their choice, until March 31, 2021, 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 period 
                    of 24 month. 
                  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, an amount of approximately 
                   NIS 728 thousand (GBP 161 thousand) was recorded as 
                   a loan at fair value and an amount of NIS 14 thousand 
                   (GBP 3 thousand) was recorded as a loan at amortized 
                   cost. 
                  All the loans bear 5% interest per annum. 
        b.        During the first half of 2020, the Company received 
                   convertible loans in the amount of NIS 3,426 thousand 
                   (GBP 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. If 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 received 
                   convertible loans in the amount of NIS 295 thousand 
                   (GBP 126,945), that bear 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. Upon receiving 
                   the loans, an amount of GBP 11,525 was recorded as a 
                   loan at fair value and an amount of GBP 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 12:-        LOANS CONVERTIBLE TO SHARES (cont.) 
 
 
        b.        (cont.) 
                  On June 30, 2020 the Company issued 28,922,507 shares 
                   and Options to several 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. 
                  The value of the Options allocated in the framework 
                   of this issuance was GBP 5,384. 
 
                  On September 6, 2021 the Company repaid the convertible 
                   loan balances with 1,627,973 shares, at the price of 
                   0.09 pence per share and an Option was allocated per 
                   share at the exercise price of 10 pence for 12 months. 
                   As of December 31, 2021, all the loans were converted 
                   to shares. The balance of fair value is in regard to 
                   the yield component. 
 
 
                  c.         Activity:                   Loans at Amortized                 Loans and liability 
                                                                 Cost                          at Fair Value 
                                                  --------------------------------   --------------------------- 
                                                           2021               2020           2021           2020 
                                                                                     ------------   ------------ 
                             Opening Balance                181              1,134          6,466          1,792 
                             Additional 
                              convertible 
                              loans                           -              3,824              -            173 
                             Classification                                                     -              - 
                             from 
                             amortized cost 
                             to fair 
                             value                            -                  - 
                              Loans converted to 
                               shares                      (24)            (3,381)           (23)              - 
                              Financing (income) 
                               expenses                   (157)            (1,396)            888          4,501 
                                                  -------------   ----------------   ------------   ------------ 
                              Closing balance at 
                               Dec. 31,                       -                181          7,331          6,466 
                                                  =============   ================   ============   ============ 
 
 
 
      NOTE 13:-         LONG-TERM LOANS FROM INTERESTED PARTY AND OTHERS 
 
                                                                                 December 31, 
                                                                        ------------------------ 
                                                                          2021            2020 
                                                                        -------   -------------- 
                        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 14:-       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, 
                                   2021                          1,307                                   338                         1,645 
                                        Depreciation                   (214)                            (55)                        (269) 
                             Deductions in regard 
                              to exit from 
                              consolidation                    (1,093)                                      (283)                   (1,376) 
                                                      -------------------           -----------------------------   ----------------------- 
                                  Closing balance                      -                                        -                         - 
                                   Dec. 
                                   31. 2021 
                                                      ===================           =============================   ======================= 
 
 
 
                    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 
                                                     ==================   ===========   =========== 
 
 
 
                                                                                             December 31, 
                                                                          --------------------------------------------- 
                2.         Liability in regard to leasing:                          2021                        2020 
                                                                          ------------------------      --------------- 
        Liability                                                            -                                    1,767 
        Net of current maturities                                            -                                    (465) 
                                                                            -                                     1,302 
                                                    ============================                        =============== 
 
 
 
        b.   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 15:-         OPTIONS CONVERTIBLE TO SHARES 
 
                         a.         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 during 2021 the Options expired. 
 
                                    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 no fair value and during 2021 the Options expired. 
 
                                    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 GBP 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. 
 
                                    Value of the Options that were allocated during this issuance 
                                     is GBP 39,642. As of December 31, 2020 it is in the amount 
                                     of approximately NIS 5 thousand and during 2021 some 0ne 
                                     million Options expired and the remaining Options have 
                                     no value. 
 
                                    On September 6, 2021 the Company issued 1,627,973 shares 
                                     and Options to an investor as consideration for convertible 
                                     loans in the amount of NIS 46 thousand. The shares were 
                                     allocated according to the rate of 0.9 per share, and 
                                     every share received one Option at the exercise price 
                                     of 10 pence until June 30, 2022. 
 
                                    Value of the Options in the framework of this issuance 
                                     as of December 31, 2021 is GBP 49 which is approximately 
                                     NIS 209. 
 
                         b.         Parameters used in the fair value valuation: 
                                                                          December 31,         December 31, 
                                                                           2021                 2020 
         Projected fluctuations (in 
          percentages)                                                         100                  28 - 51 
                                    Life of the Option (in years)              1.5                0.36 - 1.5 
                                    Rate of non-risk interest             0.141 - 0.474         (0.10) - (0.15) 
                                     (in percentages) 
         Market price (in GBP)                                             0.475 - 0.9                0.2 
 
 
 

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

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

 
      NOTE 15:-                               OPTIONS CONVERTIBLE TO SHARES (cont.) 
 
             c. Composition of existing Options                                                                  Value of Options 
                                            Number of Options                  (NIS in Thousands) 
                                ----------------------------------  ---------------------------------- 
                                      31.12.2021        31.12.2020        31.12.2021        31.12.2020 
                                ----------------  ----------------  ----------------  ---------------- 
 
                       Options        -                 20,544,650        -                 - 
                     allocated 
                          Dec. 
                    18, 2017 * 
                    Options           -                 3,006,250         -                 - 
                    allocated 
                    Oct. 
                    31, 2018 
                    Options           -                 25,000,000        -                 - 
                    allocated 
                    May 
                    13, 2019 
                    Options           -                 5,061,055         -                 - 
                    allocated 
                    June 
                    30, 2019 
                       Options 
                     allocated 
                          June 
                      30, 2020        27,900,715        28,900,715        -                 5 
                     Options          1,627,973         -                 ** -              - 
                    allocated 
                      Sept. 
                     6, 2021 
                                ----------------  ----------------  ----------------  ---------------- 
                                      29,528,688 
                                       *                82,512,670        ** -              5 
 
                      *                During 2021 and 2020, an amount of 75,156,595 and 23,550,890 
                                        Options, respectively, expired. 
                    **                 Less than NIS 1,000. 
 
                   d.                  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                Quoted prices (unadjusted) on the active markets for 
                                        1 -                  identical assets or liabilities. 
                                       Level                Data that are not price quotes included in Level 1 abovementioned, 
                                        2 -                  that may be seen directly (that is, price quotes) or 
                                                             indirectly (that is, derivatives of price quotes). 
                                       Level                Data in regard to an asset or liability that are not 
                                        3 -                  based on market information that may be seen (unseen 
                                                             data). 
 
                                       As of December 31, 2021 and 2020, 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    SHARE CAPITAL 
      16:- 
                                              ---------------------------------------   --------------------------------- 
                   1. Equity                             December 31, 2021                      December 31, 2020 
                                              ---------------------------------------   --------------------------------- 
                                                             Number of                              Number of 
                                                           Ordinary Shares                        Ordinary Shares 
                                              ---------------------------------------   --------------------------------- 
                         Composition: 
                a.                                                         Issued                               Issued 
                                                    Authorized              and             Authorized           and 
                                                                        Outstanding                          Outstanding 
                                              --------------------   ----------------   ----------------   -------------- 
                         Ordinary shares 
                          without. par value     1,000,000,000,000      2,326,456,551      1,000,000,000      201,285,513 
                                                                                        ================   ============== 
 
          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 16:-   SHARE CAPITAL (cont.) 
                                      429,431,700 shares were allocated at a 15% discount from 
                                       the basic issuance price - GBP 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 GBP 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 1,385 thousand. 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.           On September 6, 2021 the meeting of shareholders approved 
                                      the dissolution of par value for the shares. This approval 
                                      has not as yet been recorded by the Israel Corporate Authority. 
 
                        i.           On September 6, 2021 the Company issued 1,627,973 shares 
                                      to an investor as consideration for a convertible loan 
                                      in the amount of NIS 47 thousand. The shares were allocated 
                                      at the rate of 0.9 pence per share. 
 
                        j.           On September 6, 2021 the Company issued 2,123,543,065 
                                      shares to various investors as consideration for an investment 
                                      of $ 1,050 thousand. (See Note 1c.) 
 
                        k.           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 16:-   SHARE CAPITAL (cont.) 
 
 
                    2. 
 
 
                                                                           August 09, 2021 
                                         Cash                                   3,775 
                                         Receivables                              113 
                                         Assets for exploration and 
                                          evaluation *                          6,110 
                                         Fixed assets                             831 
                                         Assets in regard to usage 
                                          rights                                1,376 
                                                                     --------------------- 
                                                                               12,205 
                                                                     ===================== 
 
 
 

* Includes inventory of precious stones in the amount of NIS 4 million.

 
 
 
                                                                                      August 09, 2021 
                                        Trade payables                                      475 
                                        Credit from bank and from 
                                         others                                             576 
                                        Other accounts payable                              531 
                                        Loans from interested parties                      5,983 
                                        Liability in regard to usage 
                                         rights                                            1,512 
                                        Liability in regard to severance 
                                         pay                                                290 
                                                                                --------------------- 
                                                                                           9,367 
                                                                                ===================== 
 
 
 
      NOTE 17:-        GENERAL AND ADMINISTRATIVE EXPENSES 
 
 
                                                                 Year Ended December 31, 
                                               ----------------------------------------------------- 
                                                   2021              2020                 2019 
                                               -----------  ---------------------  ----------------- 
       Management fees and participation 
        in expenses to an interested 
        party (see Note 22a) *                           -                     90                670 
       Salaries expense                                571                      -                  - 
       Salaries expense to an interested                 -                    683                  - 
        party 
       Other                                           242                    151                173 
       Depreciation                                     15                     48                 49 
       Office maintenance and office 
        expenses                                        49                     60                 58 
       Salaries to directors                           345                    280                612 
       Advertising and marketing                        56                     18                402 
       Travel abroad                                     -                      1                130 
       Office services to an interested 
        party (see Note 22a)                             -                     32                 67 
       Professional consultation                       770                    322                707 
       Fees                                            160                    230                255 
       Expenses for exploration assets                 608                      -                  - 
                                                     2,816                  1,915              3,123 
                                               ===========  =====================  ================= 
        * Includes share-based compensation              -                      -                 11 
                                               ===========  =====================  ================= 
 

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

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

 
      NOTE 18:-         OTHER INCOME (EXPENSES), NET 
                                                                           Year Ended December 31, 
                                                        -------------------------------------------------------- 
                                                            2021             2020                     2019 
                                                        -----------  --------------------  --------------------- 
       Revenues from sale of jewelry                              -                    33                   254 
       Expenses for jewelry 
        production                                            (171)                   (3)                  (161) 
                        Capital gain from sale 
                         of securities                          274                     -                     - 
                        Capital gain from sale                                                               - 
                         of fixed assets                          -                    75 
                                                        -----------  --------------------  --------------------- 
                                                                103                   105                     93 
                                                        -----------  --------------------  --------------------- 
       Income (expenses) regarding 
        bad debt from loan of the 
        parent company                                            -                 1,090                (1,116) 
                                                        -----------  --------------------  --------------------- 
 
                                                                103                 1,195                (1,023) 
                                                        ===========  ====================  ===================== 
 
 
      NOTE 19:-         FINANCING EXPENSES (INCOME), NET 
                                                                       Year Ended December 31, 
                                                                2021         2020          2019 
                                                            -----------  ------------  ----------- 
                        Finance expenses - 
       Adjustment of the value 
        of a financial liability 
        and loans according to fair 
        value, net                                                  840         3,395          438 
       Interest on convertible 
        loans                                                         -            96          419 
       Exchange rate differentials                                    -           119          235 
       Finance of convertible loans                                   -             -          210 
       Finance expense in regard 
        to leasing                                                    -           156          159 
       Interest on loans from interested 
        and related parties                                         532            19           16 
       Other                                                          -            31           57 
                        Bank fees and interest                       57             -            - 
                        Revaluation of shares available               -           952            - 
                         for trade 
                                                            -----------  ------------  ----------- 
                                                                  1,429         4,768        1,534 
                                                            -----------  ------------  ----------- 
 
 

Finance income -

 
       Financing of loans at amortized             -          1,310             - 
        cost 
       Adjustment of financial 
        liability in regard to Options 
        according to fair value                  (5)          (190)         (160) 
       Exchange rate differentials              (30)              -             - 
                                         -----------  -------------  ------------ 
                                                (35)        (1,500)         (160) 
                                         -----------  -------------  ------------ 
 
                                               1,394          3,268         1,374 
                                         ===========  =============  ============ 
 
 
      NOTE 20:-        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, 2021 in the amount of approximately 
                                  NIS 79 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 21:-              TRANSACTIONS WITH INTERESTED AND RELATED PARTIES 
 
                             a.            Transactions with interested parties: 
                                                                                       Year Ended December 31, 
                                                                           ----------------------------------------- 
                                                                              2021            2020             2019 
                                                                           ---------      -----------   ------------ 
                      Charged to statements 
                       of comprehensive income 
                       (loss): 
       Management fees and participation 
        expenses paid to "101"                                       -                             90            670 
                                                         =============                    ===========   ============ 
       Fees for office services 
        paid to "808"                                                -                             31             67 
                                                         =============                    ===========   ============ 
                      Salaries to interested 
                       parties                                                     -              757          - . - 
                                                                           =========      ===========   ============ 
       Finance expenses to shareholders                              -                             18              8 
                                                         =============                    ===========   ============ 
 
                        Charged to the statements 
                        of financial position: 
       Management fees and participation 
        in expenses to "101" capitalized 
        to exploration assets                                        -                            270            799 
                                                         =============                    ===========   ============ 
 
 
 
                     b.         Balances of interested and related parties: 
                                                                                      December 31, 
                                                               ----------------------------------------- 
                                                                     2021                    2020 
                                                              -----------------      ------------------- 
                                In the framework 
                                of 
                                current assets: 
                                Marketable securities                          -                     926 
                                                               =================     =================== 
                                In the framework 
                                of 
                                short-term 
                                liabilities: 
                                Interested parties                             -                      88 
                                                               =================     =================== 
                                Loan from interested 
                                 parties                                       -                   1,147 
                                                               =================     =================== 
                                In the framework 
                                of 
                                non-current 
                                liabilities: 
                                Loan from interested 
                                 parties                                       -                     433 
                                                               =================     =================== 
        c.         Commitments: 
         See Note 22a. 
 
        d.         Guarantees for the Company from interested parties: 
         See Note 22b. 
 
 

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

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

 
      NOTE 22:-        COMMITMENTS, GUARANTEES AND LIENS 
                       a.        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 22:-        COMMITMENTS, GUARANTEES AND LIENS (cont.) 
 
 
         b.        Information in Regard to Exploration and Mining Operations 
                    - 
                   During November 2020 the Company directors decided 
                    to perform a reorganization so that all exploration 
                    procedures and assets for exploration as defined above, 
                    will be transferred to Shefa Israel. 
                   The Company received exploration and discovery permits 
                    from the Mining Inspector in the Office of National 
                    Infrastructure in the Government of Israel with the 
                    permits granting exclusive rights to manage a geological 
                    exploration in certain areas of Northern Israel. 
                   Exploration and discovery of quarries in Israel is 
                    subject to the instructions of the Mining Ordinance 
                    and the mining amendments that were initiated in accordance 
                    with the Ordinance (hereinafter - "The Ordinance") 
                    and the mining guidelines (hereinafter - "The Guidelines") 
                    that were subsequently added. 
                   From the Company's inception in January 1999, the 
                    Company has received all the necessary permits and 
                    licenses that are required and is in compliance with 
                    the work plans that were determined in accordance 
                    with the Authorities as stated by the Mining Inspector 
                    in the Infrastructure Ministry. 
 
 
 
 
 NOTE 23:-   BASIC LOSS PER SHARE 
 
             Computation of the loss that is related to shareholders 
              of an Ordinary Company share of NIS 0.01 par value, 
              and the adjustments rendered in order to compute the 
              loss per share at basic and diluted calculations. 
 
 
 
                                                                           Year Ended December 31, 
                                                       --------------------------------------------------------- 
                                                              2021                2020                2019 
                                                       -----------------   -----------------   ----------------- 
                    Comprehensive loss for 
                     the year (NIS in thousands)                (62,672)             (3,988)             (7,929) 
                                                       =================   =================   ================= 
                    Weighted number of Ordinary 
                     shares                                  909,675,859         186,767,818         160,769,606 
                                                       =================   =================   ================= 
                    Basic and diluted loss 
                     per share (in NIS)                          (0.000)             (0.021)             (0.049) 
                                                       =================   =================   ================= 
 
 

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

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

 
 NOTE 24:-   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. 
 
 
 
                          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. 
 
 

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

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

 
 NOTE 24:-   FINANCIAL INSTRUMENTS (cont.) 
                  a.        Financial risk management (cont.) 
 
 
 
          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 and interest rates 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. 
 
                    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. 
 

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

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

 
 NOTE 24:-      FINANCIAL INSTRUMENTS (cont.) 
                     a.          Financial risk management (cont.) 
 
                                 5)         Market risks (cont.) 
                                             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                  Fixed                     Variable                Non-             Fixed              Non- 
                                              the                 Interest                   Interest              Interest          Interest          Interest 
                                              CPI                                                                                                                       Total 
                                      -------------       ----------------           -----------------      ---------------   ---------------   ---------------   ----------- 
                                                                                                    NIS in thousands 
                                      --------------------------------------------------------------------------------------------------------------------------------------- 
             31.12.2021 
             Financial 
              Assets: 
             Cash and 
              cash equivalents                                                                                           29                                 823           853 
                                      ------------------   --------   ------------------------------------  ---------------   ---------------   ---------------   ----------- 
             Receivables                                                                                                 41                                                41 
                                      ------------------   --------   ------------------------------------  ---------------   ---------------   ---------------   ----------- 
             Shares available 
              for trade 
                                      ------------------  ----------------  --------  ----------------      ---------------   ---------------   ---------------   ----------- 
 
             Financial 
              Liabilities: 
             Short-term credit 
              from banks and 
              others 
                                                          ----------------  --------  ----------------      ---------------   ---------------   ---------------   ----------- 
             Related parties 
                                                          ----------------  --------  ----------------      ---------------   ---------------   ---------------   ----------- 
             Shareholders' loans                                                                                        211                                               211 
                                                           --------   ------------------------------------  ---------------   ---------------   ---------------   ----------- 
             Trade and other 
              accounts payable                                                                                           10                                   6            16 
                                                           --------   ------------------------------------  ---------------   ---------------   ---------------   ----------- 
             Liability at fair 
              value                                                                                                                                       7,451         7,451 
                                                           --------   ------------------------------------  ---------------   ---------------   ---------------   ----------- 
             Loans convertible 
              to shares 
                                                       --------   ----------------------------------------  ---------------   ---------------   ---------------   ----------- 
             Financial leasing 
                                                       --------   ----------------------------------------  ---------------   ---------------   ---------------   ----------- 
 
 

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

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

 
 NOTE 24:-        FINANCIAL INSTRUMENTS (cont.) 
                      b.           Interest rate risks (cont.) 
                                                                            NIS                                                  Foreign Currency 
                                  ---------------------------------------------------------------------------------   --------------------------------- 
                                          Linked 
                                            to                   Fixed                   Variable            Non-             Fixed              Non- 
                                            the                 Interest                 Interest          Interest          Interest          Interest 
                                            CPI                                                                                                                 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 
                                                         ---------------  ------  ---------------   ---------------   ---------------   ---------------   ----------- 
            Loans from shareholders                                                                             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 
                                                         ---------------  ------  ---------------   ---------------   ---------------   ---------------   ----------- 
 
 
 
                 c.         Analysis of sensitivity 
                            1)         As of December 31, 2021 and 2020, the Company has 
                                        net liabilities with variable interest rates in 
                                        the amounts of NIS 410 thousand and NIS 175 thousand, 
                                        respectively. 
                                       An increase in the market annual interest rate 
                                        of 50% for the year ended December 31, 2021 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             5% Decrease 
                                                                          in Exchange             in Exchange 
                                                                             Rate                    Rate 
                                          -------------------      ------------------      ------------------ 
                       December 31, 2021                                    (339)                         339 
                                                                   ==================      =========================== 
 
                         December 31, 
                          2020                                              (391)                         391 
                                                                   ==================      =========================== 
 
 
 

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

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

 
 NOTE 24:-     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. 
 
 
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June 17, 2022 02:00 ET (06:00 GMT)

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