Full Results for the year ended December 2020

B"H

30 June 2021

Shefa Gems Ltd.

("Shefa Gems" or the "Company")

Full Year Results for the year ended 31 December 2020 

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

2020 Highlights

Development Progress

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

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

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

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

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

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

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

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

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

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

Corporate and Financial

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

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

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

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

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

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

Post Period

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

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

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

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

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

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

Tali Shalem, CEO of Shefa Gems, said:

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

- Ends -

Enquiries

Notes to Editors

About Shefa Gems Ltd

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

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

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

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

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

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

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

Overview

Operational Review

Development Progress:

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

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

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

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

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

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

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

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

Exploration in Zone 3 of the Kishon Mid-Reach

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

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

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

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

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

Renewal of Prospecting Permit and Exploration Permit

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

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

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

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

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

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

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

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

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

Promoting Marketing strategy

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

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

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

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

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

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

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

Corporate Review

Appointment of new CEO

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

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

Board changes and 2020 AGM results

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

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

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

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

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

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

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

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

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

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

The Covid-19 Coronavirus Pandemic

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

Effect of the Coronavirus on the Company

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

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

Financial Review

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

General and administrative expenses

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

Financial expenses

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

Loan Conversions

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

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

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

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

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

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

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

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

Outlook

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    NIS in thousands

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

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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

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

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