Annual Financial Report

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Annual Financial Report

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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™, 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).

A general meeting approved the terms of the transaction on 9^th August 2021 as described above.

Jerusalem, May 31, 2022

REPORT OF INDEPENDENT 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 of the Financial Statements

Alon Shani

CEO

Chairman of the Board of Directors

David Ben David

CFO

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

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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

			For the Year Ended December 31,
	Note		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

		Additional Paid-in Capital	Receivables on Account of Shares	Dividend for Distribution	Capital Reserve for Share- Based Payments	Capital Reserve from Transactions with Shareholder	Accumulated Deficit	Total Equity Attributed 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 parties	(16)	- . -	- . -
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

APPENDIX 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.

APPENDIX 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 subsidiary	3,775	-	-

APPENDIX 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 (£0.00031) per share in consideration for $ 1,050,000 (£ 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.)

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.

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".

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 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 £ 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. £	(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

Financial instruments (cont.)

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

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

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

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

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

Non-derivative financial liabilities

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

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

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

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

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

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

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (cont.)

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

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

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

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

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

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (cont.)

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

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

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

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

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

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

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (cont.)

Gain (Loss) per Share

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

Share Based Compensation

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

Financial Instruments

Financial Assets

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

The financial assets will be handled as follows:

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

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (cont.)

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

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

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

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (cont.)

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

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

NOTE 4:-	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 and Laboratory Equipment	Vehicles	Office Furniture and Equipment	Computers	Leasehold Improvements - Laboratory	Total
	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 9:-	SHORT - TERM CREDITS FROM BANK AND OTHERS

			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 £ 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 £ 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 (£ 133 thousand) was recorded as a loan at fair value and an amount of NIS 924 thousand (£ 196 thousand) was recorded as a loan at amortized cost.
		During October 2019 the Company received two additional convertible loans in the amount of NIS 742 thousand (£ 164 thousand). In accordance with the loan agreement, the Company obligated to allocate to the lenders, 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 (£ 161 thousand) was recorded as a loan at fair value and an amount of NIS 14 thousand (£ 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 (£ 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 (£ 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 £ 11,525 was recorded as a loan at fair value and an amount of £ 115,420 was recorded as a loan at amortized cost. Most of the loans were converted to shares on June 30, 2020.

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

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 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 £ 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 Cost		Loans and liability 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 £ 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 £ 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 £ 49 which is approximately NIS 209.

	b.	Parameters used in the fair value valuation:
			December 31, 2021	December 31, 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 (in percentages)	0.141 - 0.474	(0.10) - (0.15)
		Market price (in £)	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

	Number of Options		Value of Options (NIS in Thousands)
	31.12.2021	31.12.2020	31.12.2021	31.12.2020

Options allocated Dec. 18, 2017 *	-	20,544,650	-	-
Options allocated Oct. 31, 2018	-	3,006,250	-	-
Options allocated May 13, 2019	-	25,000,000	-	-
Options allocated June 30, 2019	-	5,061,055	-	-
Options allocated June 30, 2020	27,900,715	28,900,715	-	5
Options allocated Sept. 6, 2021	1,627,973	-	** -	-
	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.

Fair value hierarchy -

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

Level 1 -

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

Level 2 -

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

Level 3 -

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

As of December 31, 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 16:-	SHARE CAPITAL
	1. Equity			December 31, 2021		December 31, 2020
				Number of Ordinary Shares		Number of Ordinary Shares
	a.	Composition:		Authorized	Issued and Outstanding	Authorized	Issued and 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 - £ 1.10.
		The inclusive amount attributed to capital in accordance with the basic price per share is NIS 18,857 thousand (net of issuance expenses and fees in the amount of approximately NIS 4,470 thousand).

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

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

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

	f.	On June 30, 2020 the Company issued 28,922,507 shares to various investors in consideration for convertible loans in the amount of NIS 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 party	-	683	-
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 for trade	-	952	-
		1,429	4,768	1,534

Finance income -

Financing of loans at amortized cost	-	1,310	-
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

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.

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

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 24:-

FINANCIAL INSTRUMENTS (cont.)

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.)

Financial risk management (cont.)

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.

Interest rate risks

Exposures to interest rate risks and average weighted interest rates for financial assets and liabilities are detailed as follows:

NIS

Foreign Currency

Linked to the CPI

Fixed Interest

Variable Interest

Non-

Interest

Fixed Interest

Non-

Interest

Total

NIS in thousands

31.12.2021

Financial Assets:

Cash and cash equivalents

823

853

Receivables

Shares available for trade

Financial Liabilities:

Short-term credit from banks and others

Related parties

Shareholders' loans

211

Trade and other accounts payable

Liability at fair value

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 the CPI	Fixed Interest	Variable Interest		Non- Interest	Fixed Interest	Non- Interest	Total
					NIS in thousands
	31.12.2020
	Financial Assets:
	Cash and cash equivalents								15		468	483
	Receivables								220			220
	Shares available for trade								926			926

	Financial Liabilities:
	Short-term credit from banks and others							410		737		1,147
	Related parties										586	586
	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 in Exchange Rate	5% Decrease in Exchange 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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END

FR GPUCAQUPPGMQ

Date	17 Jun 2022
Time	07:00:04
Category	Results
ID	2163P

Date	17 Jun 2022
Time	07:00:04
Category	Results
ID	2163P

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.