REG - Shefa Gems Ltd - Annual Financial Report
17/06/2022 07:01
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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).
Should the Company identify a suitable target, it will, in accordance with the
Listing Rules, publish a prospectus containing all information required for
the approval of a reverse takeover. At present, there can be no assurance that
the Company will be able to identify a suitable acquisition target or that it
will be able to complete any contemplated transaction and, as a consequence,
the Company's admission to the Standard Listing segment of the Official List
and trading on the London Stock Exchange's Main Market for listed securities
may be cancelled.
A general meeting approved the terms of the transaction on 9(th) August 2021
as described above.
Jerusalem, May 31, 2022
REPORT OF 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 David Ben David
CEO CFO
Chairman of the Board of Directors
SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
NIS in thousands (except for income (loss) per share)
For the Year Ended December 31,
Note 2021 2020 2019
(3,123)
General and administrative expenses 17 (2,816) (1,915)
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 (3,988)
(62,672) (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
Dividend for Distribution
Capital Reserve for Share- Based Payments Capital Reserve from Transactions with Shareholder
Additional Paid-in Capital Receivables on Account of Shares Total Equity Attributed to Shareholders
Accumulated
Deficit
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 58,565 - 2,409
stones
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.)
3. Advancement of the strategy for engagement in new operations-
Subsequent to distribution of the shares involved in the mobilization of
capital, the Company will become a cash wrapper that is searching for
opportunities to acquire internet technology and software resources. In the
event that this acquisition will be completed, the Company will become a
reverse takeover, in accordance with registration regulations, and will
present a request to have its shares registered and traded once again on the
central London stock exchange.
The Company has not as yet identified a qualifying acquisition but will
concentrate especially on the key areas of potential high growth by providing
digital services in areas such as leisure, finance, electronic trade and
gaming. It will also attempt successful advances in disruptive technology,
such as blockchain, and crypto-currency. In addition, the Company will
investigate potential software technologies.
In the event that the Company identifies a specific goal, then it will
publish, in accordance with the registration requirements, a prospectus that
will include all the required information to receive approval of a reverse
acquisition. At the moment, it is not possible to guarantee that the Company
will be able to identify a specific goal or be able to complete a prospective
transaction. As a result, trade of the Company's shares on the London Stock
Exchange is likely to be nullified.
d. The Company's financial status
The Company does not have any operations. Further continuation of the
Company's operations is contingent upon its having successful operations in
the future.
An agreement was signed between the Company and "Shani group" as detailed in
note 1. Company management is of the opinion that it will be able to mobilize
the financial sources for future Company operations, but there is no certainty
in this regard.
These factors create significant doubts in regard to continued operation of
the Company as a "going concern".
These financial statements do not contain any adjustments for valuation of
assets and liabilities or their classification that would likely be necessary
in the event that the Company is unable to continue its operations as a "going
concern".
e. Definitions -
In these financial statements:
International Financial Reporting Standards (IFRS) - Standards and
interpretations adopted by the International Accounting Standards Board (IASB)
that include international financial reporting standards (IFRS) and
international accounting standards (IAS), and interpretations of these
Standards as determined by the International Financial Reporting
Interpretations Committee (IFRIC) or interpretations determined by the
Standards Interpretation Committee (SIC), respectively.
e.
Definitions -
In these financial statements:
International Financial Reporting Standards (IFRS) - Standards and
interpretations adopted by the International Accounting Standards Board (IASB)
that include international financial reporting standards (IFRS) and
international accounting standards (IAS), and interpretations of these
Standards as determined by the International Financial Reporting
Interpretations Committee (IFRIC) or interpretations determined by the
Standards Interpretation Committee (SIC), respectively.
SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)
NOTES TO THE FINANCIAL STATEMENTS
NIS in thousands
NOTE 1:- GENERAL (cont.)
e. Definitions (cont.)
"The Company" - SHEFA GEMS LTD.
The parent company - Nela Digital Ltd. (formerly - Shefa Yamim Ltd.).
The subsidiary company - Shefa in Israel (G.M.) Ltd.
"Related Party" - As defined in IAS 24 and by the International Accounting
Standards Board (IASB).
"Interested Party" - as defined in the Securities Act - 1968, and its
Amendments.
"101" - One Hundred One - Gold Holdings Ltd. - An interested party
(hereinafter: "101").
"808" - Eight O Eight Global Corp. - An interested party (hereinafter: "808").
"Index" - The Consumer Price Index published by the Central Bureau of
Statistics.
"Dollar" or $ - The U.S. dollar.
NOTE 2:- BASIS FOR PREPARATION OF THE FINANCIAL STATEMENTS
Declaration in regard to Implementation of International Financial Reporting a.
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
g. Financial instruments (cont.)
The Company classifies its financial assets as loans and receivables. This
classification is determined in accordance with the purpose for holding the
financial asset, when initial recognition of the financial asset occurs.
2. Losses from impairment in value and write-off of non-derivative financial
instruments
Financial instruments not classified at fair value through profit and loss are
examined at each reporting period as to whether there are signs of impairment
in value. Impairment occurs when there is objective evidence that as a result
of a specific incident or occurrences, occurring subsequent to initial
recognition date of the financial asset, a negative effect exists on the
projected cash flows for the investment in this asset.
In regard to financial assets that are included at amortized cost (mainly
loans and receivables), the amount of impairment in value is the difference
between the book value of the financial asset and the present value of the
estimated future cash flows projected to derive from the asset, discounted at
the original effective interest rate for the asset. This amount is charged to
the statement of comprehensive income.
In the event that during a parallel period to that when a loss was recorded
for impairment in value for a financial asset included at amortized cost there
are indications that the amount of the loss from impairment in value is less
and is objectively related to an event occurring subsequent to recognition of
the impairment, then the prior impairment loss will be written off, in part or
completely, to profit and loss. The amount written off is limited so that the
book value of the investment in the financial asset at the time of write-off
of the loss from impairment in value does not exceed the amortized cost of the
asset at the cancellation date had there not been a prior recognition of
impairment in value.
3. Non-derivative financial liabilities
The Company initially recognizes debt securities issued on the date that they
originated. All other financial liabilities (including financial liabilities
designated at fair value through profit and loss) are recognized initially on
the trade date at which the Company becomes a party to the contractual
provisions of the instrument.
Financial liabilities are reduced when the obligation of the Company, as
specified in the agreement, expires or when it is discharged or written off.
Financial obligations are initially recognized in accordance with their fair
value with the addition of attributable transaction costs. Subsequent
measurement of financial liabilities is mainly on the basis of amortized cost
using the effective interest method.
The Company has the following non-derivative financial liabilities: loans and
credit from banks and others, and trade and other payables.
Financial assets and liabilities are offset and the net amounts are presented
in the statement of financial position when the Company currently has a
legally enforceable right to offset the recognized amounts and intends either
to settle on a net basis or to realize the asset and settle the liability
simultaneously.
SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)
NOTES TO THE FINANCIAL STATEMENTS
NIS in thousands
NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (cont.)
h. Provisions
Provisions are recognized when the Company has a current obligation (legal or
derived) as a result of a past occurrence that can be reliably measured, that
will in all probability result in the Company being required to provide
additional benefits in order to settle this obligation. The amount recognized
as a provision reflects the best estimate by management of the amount that
will be required to settle the obligation currently at financial statements
date, while taking into account the risks and uncertainties related to
obligations. When provisions are determined by capitalization of projected
cash flows in order to settle the obligation, the provision is the current
value of the projected cash flows. Changes in the time value are recognized in
the statement of comprehensive income or loss. When the entire sum or a
portion thereof necessary for current settlement of the liability will likely
be repaid by a third party, the Company recognizes an asset for the return, up
to the amount of the recognized provision, only when there is actual certainty
that the amount will be received and it can be reliably estimated.
i. Liability in regard to employee benefits
The Company has several benefit plans for its employees:
1. Short-term employee benefits -
Short-term employee benefits include salaries, vacation days, recreation and
employer deposits to the National Insurance Institute that are recognized as
expenses when rendered. A liability for a cash bonus or a plan for
participation in Company earnings is recognized when the Company has a legal
or derived responsibility for payment of the amount for services rendered in
the past by the employee and the amount can be reliably measured.
2. Benefits upon retirement -
These plans generally are funded by deposits to insurance companies and
pension funds and are classified as restricted deposit plans or as restricted
benefit plans.
Some Company employees have restricted deposit plans, in accordance with
Section 14 of the Severance Pay Law, whereby the Company pays fixed amounts
without bearing any legal or derived responsibility to pay additional amounts
thereto even if the fund did not accumulate enough amounts to pay the entire
benefit amount to the employee that relates to the services he rendered during
the current and prior periods. Deposits to the restricted plan are classified
for benefits or for compensation, and are recognized as an expense upon
deposit to the plan concurrent with receiving services from the employee and
no additional provision is required in the financial statements.
Concurrently, the Company operates a restricted benefit plan for severance pay
as required by the Severance Pay Law. In accordance with the Severance Pay
Law, employees are entitled to compensation upon retirement or upon
termination of their employment.
SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)
NOTES TO THE FINANCIAL STATEMENTS
NIS in thousands
NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (cont.)
i. Liability in regard to employee benefits (cont.)
The financial statements include a provision in the amount of the difference
that the Company would be required to pay in the event that the employees
would be entitled to severance pay at the date of statements of financial
position. No actuarial computations of possible obligation and actual value of
deposits with the restricted benefit plan were made since, in the opinion of
Company management, such computation would not have a material effect on the
Company's financial statements.
j. Financial income and expenses
Financial income includes interest in regard to invested amounts, revenues
from exchange rate differences that are recognized in the statements of
comprehensive income and revenues from adjustments of fair value of
liabilities. Interest income is recognized upon accumulation, using the
effective interest method.
Financial expenses include interest on loans received, finance expenses in
regard to fair value of liabilities and changes in the time estimates of
provisions.
Gains and losses from exchange rate differences are reported net. Costs of
credit are recognized as an expense during the period of their inception, in
accordance with the effective interest methodology.
k. Deferred Taxes
The Company creates deferred taxes in regard to temporary differences of value
for tax purposes of assets and liabilities and their values in the financial
statements. These deferred tax balances (asset or liability) are computed
according to the projected tax rates occurring upon realization, based on tax
rates and regulations in force or legislated fully at the date of the
statements of financial position. Deferred tax liabilities are recognized,
generally, for all temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used
for taxation purposes.
A deferred tax asset is recognized on the books for carryforward losses, tax
benefits and temporary differences that are deductible to the extent that it
is probable that future taxable profit will be available against which the
temporary differences can be offset. Deferred tax assets are reviewed at every
reporting date and, in the event that the related tax benefits will not be
utilized, they are deducted.
In the absence of certainty regarding taxable income in the future, there was
no recording of a tax deferred asset in regard to carryforward losses on the
Company books of account.
l. Statement of Cash Flows
The statement of cash flows from current operations is presented using the
indirect method, whereby interest amounts paid and received by the Company are
included in the cash flows in the framework of finance operations.
SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)
NOTES TO THE FINANCIAL STATEMENTS
NIS in thousands
NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (cont.)
m. Gain (Loss) per Share
The Company computes the basic revenue or loss per share in regard to gain or
loss that is attributed to the Company shareholders by dividing the income or
loss, attributable to ordinary shareholders of the Company, by the weighted
average of ordinary shares that exist in the turnover during the reported
period. The Company does not have any securities that are convertible to
shares that would have a potential effect on the diluted income per share.
n. Share Based Compensation
In share based compensation, transactions with employees (including officers
and others who provide similar services) that are cleared by parent company
capital instruments, the costed benefit of capital instruments granted is
based on their fair value at grant date. The costed fair value upon granting
of Options is measured on the basis of the Black-Sholes model. The
abovementioned benefit is attributed to expenses in the profit and loss
against a straight-line growth in share capital, over the vesting period of
the capital instrument that was granted, so that every sub-granting is
considered as a separate graded vesting. In transactions involving share based
compensation with renderers of services, the Company measures the expense in
accordance with the value of the services received. In share based
compensation transactions cleared by cash payment, the Company measures the
services acquired and the liability that was created, in accordance with the
fair value of the liability. Until the liability is cleared, the Company
remeasures the fair value of the liability at every reported period and upon
clearance, so that any changes in the fair value are recognized in the
statement of comprehensive income for the period.
o. Financial Instruments
Financial Assets
Financial assets are measured at fair value on their initial recognition date.
In addition, the transaction costs that are directly attributable to
acquisition of the financial asset are included, except where the financial
asset is measured at fair value through profit and loss, so that the
transaction costs are charged to profit and loss.
The financial assets will be handled as follows:
o.
Financial Instruments
Financial Assets
Financial assets are measured at fair value on their initial recognition date.
In addition, the transaction costs that are directly attributable to
acquisition of the financial asset are included, except where the financial
asset is measured at fair value through profit and loss, so that the
transaction costs are charged to profit and loss.
The financial assets will be handled as follows:
SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)
NOTES TO THE FINANCIAL STATEMENTS
NIS in thousands
NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (cont.)
o. Financial Instruments (cont.)
· Debit instruments will be classified and measured subsequent to initial
recognition under one of the following alternatives: depreciated cost, fair
value through profit and loss or fair value through other comprehensive
income. Determination of the measurement model will take into account the
business model of the entity in regard to management of financial assets and
in accordance with the characteristics of the projected cash flows that will
be derived from those financial assets.
· A debit instrument that was measured by depreciated cost or by fair value
through other comprehensive income may be designated for fair value through
profit and loss, but only if the designation will nullify lack of consistency
in recognition and measurement that would be created if the asset was measured
by depreciated cost or by fair value through other comprehensive income.
· As a rule, the financial instruments will be measured at fair value through
profit and loss.
· Upon initial recognition, one may designate financial instruments at fair
value through other comprehensive income. Those instruments that will be
designated in that manner, will not be subject any longer to the test of
impairment, and profit or loss in their regard will not be transferred to
profit or loss, including upon realization.
· ???? Embedded derivatives will not be separated from the existing contract found at
the beginning of the Standard. Alternatively, mixed contracts will be measured
generally at depreciated cost or at fair value, in accordance with the testers
of the business model and the projected cash flows.
· Debt instruments will be reclassified only when the entity changes its
business model to management of financial assets.
· Investments in capital instruments that do not have a quoted price on a
functioning market, including the derivatives of these instruments, will be
measured at fair value. The alternative measurement according to cost under
certain circumstances is hereby nullified. However, the Standard declares that
under certain circumstances the cost should be a proper measure of the fair
value.
Financial Liabilities
The Standard determines also the following procedures in
regard to financial liabilities:
· The change in fair value of financial liabilities that is intended, upon
initial recognition, to be fair value through profit or loss, which is
attributed to changes in the credit risk of the liability, will be directly
charged to other comprehensive income unless such attribution will create or
increase lack of consistency - an accounting mismatch.
· When a financial liability is paid or cleared, the amounts charged to other
comprehensive income will not be classified to profit or loss.
· All the derivatives, whether they are assets or liabilities, will be measured
at fair value through profit or loss, including a derived financial instrument
that constitutes a liability related to an unquoted capital instrument that we
are unable to measure its fair value in a reliable manner.
SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)
NOTES TO THE FINANCIAL STATEMENTS
NIS in thousands
NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (cont.)
o. Financial Instruments (cont.)
Impairments
The new model for impairment is based on projected credit losses and will be
implemented for the debit instruments that are measured at depreciated cost or
at fair value through other comprehensive income, receivables in regard to
leasing, contract assets that are recognized according to IFRS 15 and written
obligations for rendering loans and financial guarantee contracts.
The provision for impairment will be in regard to reasonable projected losses
within the following twelve months (the coming year), or reasonable failure to
repay during the entire lifetime of the financial instrument. Examination for
the entire lifetime of the instrument is necessary in the event that the
credit risk for the asset rose significantly since the date of initial
recognition. An alternative approach will be enforced if the financial asset
was created or acquired when it was already credit impaired.
NOTE 4:- INVESTMENT IN SHEFA IN ISRAEL (G. M.) LTD.
Agreement between the Company and Shefa Israel (G.M.) Ltd. for transfer of
ownership in regard to exploration assets equipment:
On November 29, 2020 an agreement was signed between the company and Shefa
Israel, for transfer of the exploration assets equipment from the Company to
Shefa Israel by January 1, 2021. Concurrently, Shefa Israel also received all
related operating activity, including administrators, employees, agreements,
suppliers, etc. In addition, it was agreed that all actual expenses related
to exploration assets would be the responsibility of Shefa Israel, commencing
March 1, 2021.
Accordingly, all the exploration assets were actually transferred, including
the Taglit Discovery Permit, the "Carmel" Exploration Permit "the Carmel", and
the "Bat Shlomo" License, and are currently owned by Shefa Israel. This
transfer of ownership received final approval on August 9, 2021 from the
Mining Supervisor and from the legal division of the Ministry of Energy.
Concurrently, all contracts, trademarks, professional equipment, goodwill and
accumulated information were transferred as well.
Commencing March 1, 2021 Shefa Israel assumed all the exploration expenses, as
agreed.
Commencing June 1, 2021, the employees and the professional management were
transferred, including all their social benefits.
In consideration for the abovementioned transfers, Shefa Israel allocated an
amount of 201,247,822 Ordinary shares to the Company. These shares constitute
100% ownership.
As of the date of the financial statements, the abovementioned Ordinary shares
are held by a trustee until all the legal details for approval by the Court
are completed for distribution of a dividend in-kind.(see note 1) The
Company has no influence on Shefa in Israel (G.M.) Ltd.
The investment is presented as dividend distribution in the company's equity.
SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)
NOTES TO THE FINANCIAL STATEMENTS
NIS in thousands
NOTE 5:- OTHER ACCOUNTS RECEIVABLE
December 31,
2021 2020
Advances to suppliers and others - 10
Prepaid expenses 8 210
8 220
NOTE 6:- FIXED ASSETS, NET
Machines and Office Furniture and Equipment Leasehold Improvements - Laboratory
Laboratory Equipment
Vehicles Computers 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 - -
- -
(24) (3,381)
Loans converted to shares (23) -
(157) (1,396)
Financing (income) expenses 888 4,501
- 181 7,331 6,466
Closing balance at Dec. 31,
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 (283) (1,376)
(1,093)
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
Value of Options
Number 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.
d. Fair value hierarchy -
Measurement of fair value of financial instruments is performed using a fair
value hierarchy that reflects the data that was used in performance of a
measurement of fair value. The hierarchy of fair value is based on the
following three levels:
Level 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.
*
During 2021 and 2020, an amount of 75,156,595 and 23,550,890 Options,
respectively, expired.
**
Less than NIS 1,000.
d.
Fair value hierarchy -
Measurement of fair value of financial instruments is performed using a fair
value hierarchy that reflects the data that was used in performance of a
measurement of fair value. The hierarchy of fair value is based on the
following three levels:
Level 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 Number of
Ordinary Shares Ordinary Shares
a. Composition:
Issued and Outstanding Issued and Outstanding
Authorized Authorized
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 - 270 799
exploration assets
b. Balances of interested and related parties:
December 31,
2021 2020
In the framework of current assets:
Marketable securities - 926
In the framework of short-term liabilities:
Interested parties - 88
Loan from interested parties - 1,147
In the framework of non-current liabilities:
Loan from interested parties - 433
c. Commitments:
See Note 22a.
d. Guarantees for the Company from interested parties:
See Note 22b.
SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)
NOTES TO THE FINANCIAL STATEMENTS
NIS in thousands
NOTE 22:- COMMITMENTS, GUARANTEES AND LIENS
a. Commitments with interested parties:
1. Commitment regarding "101":
Since 1999, when the Company was established, it has been managed by 101 Gold
Holdings (hereinafter - "101"), an interested company, that, at balance sheet
date, holds 2.73% of the Company shares and 3.90% fully diluted shares, in the
framework of management agreements.
On January 1, 2020 a new agreement was signed between the Company and "101",
whereby "101" provided office services to the Company in return for an amount
of approximately NIS 60 thousand with the addition of VAT, in accordance with
the law. (This amount does not include refund of expenses related to travel
abroad for the purpose of mobilizing investors.)
This agreement supersedes any previous agreement between the
companies. The agreement is for a three month period with an option for
extension for an additional three months. The Company did extend the agreement
in accordance with the option, until June 30, 2020. On that date, the
agreement expired and the parties chose not to renew it.
2. Commitments regarding "808":
On January 1, 2005 the Company signed an agreement with "808", an interested
party, whereby "808" will assist in finding potential investors. In addition,
"808" will provide collection services regarding the investment money of
investors that were found by "808"for a consideration of 2% of the total gross
investment by each such investor in the Company.
In addition, "808" will provide office services to the Company representatives
in the United States for a fixed monthly retainer in the amount of $ 770. The
Company and "808" agreed that the agreement will be valid until December 31,
2015. Each party has the right to bring the agreement to an early termination
upon written notification six months in advance. The agreement was extended
until December 31, 2020 under the same terms.
SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)
NOTES TO THE FINANCIAL STATEMENTS
NIS in thousands
NOTE 22:- COMMITMENTS, GUARANTEES AND LIENS (cont.)
b. Information in Regard to Exploration and Mining Operations -
During November 2020 the Company directors decided to perform a reorganization
so that all exploration procedures and assets for exploration as defined
above, will be transferred to Shefa Israel.
The Company received exploration and discovery permits from the Mining
Inspector in the Office of National Infrastructure in the Government of Israel
with the permits granting exclusive rights to manage a geological exploration
in certain areas of Northern Israel.
Exploration and discovery of quarries in Israel is subject to the instructions
of the Mining Ordinance and the mining amendments that were initiated in
accordance with the Ordinance (hereinafter - "The Ordinance") and the mining
guidelines (hereinafter - "The Guidelines") that were subsequently added.
From the Company's inception in January 1999, the Company has received all the
necessary permits and licenses that are required and is in compliance with the
work plans that were determined in accordance with the Authorities as stated
by the Mining Inspector in the Infrastructure Ministry.
NOTE 23:- BASIC LOSS PER SHARE
Computation of the loss that is related to shareholders of an Ordinary Company
share of NIS 0.01 par value, and the adjustments rendered in order to compute
the loss per share at basic and diluted calculations.
Year Ended December 31,
2021 2020 2019
Comprehensive loss for the year (NIS in thousands) (62,672) (3,988) (7,929)
Weighted number of Ordinary shares 909,675,859 186,767,818 160,769,606
Basic and diluted loss per share (in NIS) (0.000) (0.021) (0.049)
SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)
NOTES TO THE FINANCIAL STATEMENTS
NIS in thousands
NOTE 24:- FINANCIAL INSTRUMENTS
a. Financial risk management
1) General
The Company is exposed to the following main risks arising from use of
financial instruments:
• Credit risk
• Liquidity risk
• Market risk
In this Note, we will render information in regard to Company exposure for
each of the risks abovementioned, as well as Company goals, policies and
procedures regarding gauging and management of these risks. Additional
quantitative disclosure is included throughout these financial statements.
2) Framework for risk management
Company policy for risk management was formulated in order to identify and
analyze the risks confronting the Company, to determine sufficient limitations
to the risks, control while supervising the risks and compliance with
limitations. The policies and methods for risk management are surveyed
currently in order to reflect changes in the market conditions and the Company
operations. The Company utilizes training and management procedures in order
to develop a control environment that is efficient, wherein all employees
understand their roles and responsibilities.
3) Credit risk
Credit risks arise from cash and cash equivalents, deposits in banks and
receivable balances that are as yet unpaid. Company balances of cash and cash
equivalents are deposited in a bank. The Company considers credit risks for
unpaid receivable balances to be insignificant.
SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)
NOTES TO THE FINANCIAL STATEMENTS
NIS in thousands
NOTE 24:- FINANCIAL INSTRUMENTS (cont.)
a. Financial risk management (cont.)
4) Liquidity risk
Liquidity risk is the danger that the Company will not be able to pay its
obligations related to its financial liabilities that are cleared by cash
payments or payment of another financial asset. The Company's approach to
management of its liquidity risks is to assure, as much as possible, the
necessary liquidity to meet its obligations on time, under ordinary terms and
when pressured, without encountering undesired losses or damage to its
reputation.
Hitherto, Company financing has been maintained by issuance of share capital,
receiving of loans and use of credit from interested parties (management fees
have been paid in accordance with the Company's abilities).
5) Market risks
Market risks include the risk that changes in market prices, such as the
exchange rates of foreign currencies, the Consumer Price Index and interest
rates will have an effect on the value of Company holdings of financial
instruments. The intent of market risk management is to manage and supervise
exposure to market risks in the framework of accepted parameters, while
maximizing yields.
The Company is exposed to the following risks:
Exchange rate risks:
Part of the Company's liabilities and mobilizations of capital is measured in
dollars and pounds sterling. Therefore, the Company is exposed to changes in
the exchange rates of the U.S. dollar and the British pound sterling. The
Company has not utilized any protective measures against this exposure.
SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)
NOTES TO THE FINANCIAL STATEMENTS
NIS in thousands
NOTE 24:- FINANCIAL INSTRUMENTS (cont.)
a. Financial risk management (cont.)
5) Market risks (cont.)
Risks of falling market prices for diamonds, gold and precious stones:
The Company is exposed to changes in market prices for diamonds, gold and
precious stones. Despite the fact that the Company is still in the
pre-production stage for the minerals, significant changes in the future
market prices can and may have an effect on the preparation to repay
investments in exploration and mining.
b. Interest rate risks
Exposures to interest rate risks and average weighted interest rates for
financial assets and liabilities are detailed as follows:
NIS Foreign Currency
Linked to the CPI Total
Fixed Interest Variable Interest Non- Fixed Interest Non-
Interest Interest
NIS in thousands
31.12.2021
Financial Assets:
Cash and cash equivalents 29 823 853
Receivables 41 41
Shares available for trade
Financial Liabilities:
Short-term credit from banks and others
Related parties
Shareholders' loans 211 211
Trade and other accounts payable 10 6 16
Liability at fair value 7,451 7,451
Loans convertible to shares
Financial leasing
SHEFA GEMS LTD. (Formerly Shefa Yamim A.T.M. LTD.)
NOTES TO THE FINANCIAL STATEMENTS
NIS in thousands
NOTE 24:- FINANCIAL INSTRUMENTS (cont.)
b. Interest rate risks (cont.)
NIS Foreign Currency
Linked to the CPI Total
Fixed Interest Variable Interest Non- Fixed Interest Non-
Interest Interest
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 737 1,147
410
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.
5% Increase in Exchange Rate 5% Decrease in Exchange Rate
Date
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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