Final Results

RNS Number : 3293J

Shefa Yamim (A.T.M.) Ltd

29 March 2018

 

B"H

29 March 2018

Shefa Yamim (A.T.M.) Ltd

("Shefa Yamim" or the "Company")

Final Results for the year ended 31st December 2017

Shefa Yamim (LSE: SEFA), a precious stones exploration Company in Northern Israel, is pleased to announce final results for the year ended 31st December 2017. 

2017 Highlights

·    Kishon Mid-Reach ("the Project")

·    New bulk sampling programme in Zone 1 and 2 started in August 2017 with a total of 8 bulk samples and 4,107.86 tonnes of gravel collected during the period

·    Successfully treated 2,990 tonnes of gravel at its operational site in Akko, Northern Israel

·    Total Target Mineral Assemblage Suite ("TMA") found in the treatment during the period is 1,096.39 carats containing the Heavy Industrial Minerals ("HIM"); zircon, rutile, ilmenite and garnet and the DMCH Suite; diamond, natural moissanite and the gem corundum varieties of sapphire, ruby, Carmel Sapphire and Hibonite ("DMCH")

·    Applied and subsequently been granted exploration permit 869B7

·    Competent Persons Report ("CPR") updated and published in October 2017

·    Presence of Hibonite, an incredibly rare gemstone found only in limited locations globally, confirmed by work carried out by Shefa Yamim in collaboration with Prof. Griffin from Macquarie University, Australia. The Hibonite added to the DMC Suite of minerals and the geological models have been updated accordingly to DMCH

·    Corporate

·    Successful IPO on the Official List of the London Stock Exchange on 18th December 2017

·    Raised gross proceeds of £4.15 million, before expenses

·    Significantly strengthened the Board with the appointment of four Non-Executive Directors

·    Received a trade mark from the Israeli Government for the Carmel Sapphire™, a unique gemstone only found in Mt. Carmel, in Northern Israel

·    Post Period Highlights

·    Macquarie University results find Permo-Triassic-Jurassic rocks deep beneath Mount Carmel, refining the geological history of the region and expanding the exploration potential with a view to discover the primary source rock for the mineral suites

·    Upgrade of jigging system to expand sample processing facility

·    Announced bulk sample results for BS-1212, BS-1227 and BS-1226, which included the recovery of a 5.52ct Sapphire and a 4.86ct Carmel Sapphire™

Avi Taub, CEO of Shefa Yamim, said: "We are pleased to announce our maiden results following our listing on the Official List of the London Stock Exchange. In 2017 we made great progress with our operations and bulk samplings which has kept the Company on track to commence technical studies during the course of 2018. During the year, the total target mineral assemblage found amounted to 1,096.39 carats primarily of natural moissanite and gem corundum of sapphire, rubies, Carmel Sapphire™ and Hibonite as the Company conducted bulk samplings on the Kishon Mid-Reach Zone 1 area.

"In 2018, the Company has made good progress in upgrading our sample treatment facility and moving towards increasing our processing capacity to approximately 50 tonnes a day. We remain on track to achieve our targets for the year of concluding our bulk sampling in Kishon Mid-Reach Zone 1 and commencing technical studies for this area. We are also on track to progress with conducting our bulk sampling in the Kishon Mid-Reach Zone 2 and look forward to reporting on achieving our key milestones as we progress through the year."

-     Ends -

Enquiries

Shefa Yamim (A.T. M.) Ltd
Avi Taub, Chief Executive Officer	[phone]
VSA Capital Limited - Financial Adviser and Broker
Andrew Raca, Stephanie Jury	[phone]
Luther Pendragon
Harry Chathli, Ana Ribeiro, Alexis Gore	[phone]

A full audited report, including the consolidated Financial Statements is available on the Company's website at www.shefayamim.com

Operational Review

Kishon Mid-Reach

Zone 1 Bulk Sampling

In September 2017, Shefa Yamim completed a total of 3 new bulk samples in Zone 1 - BS-1226, 1227, 1228 in Zone 1.  The 3 bulk samples carried out in August in the Kishon Mid-Reach Zone are the last bulk samples planned for Zone 1.

Zone 2 Bulk Sampling

In August, the Company completed 5 bulk samples in the Kishon Mid-Reach Zone 2 including: BS-1223, BS-1224, BS-1225, BS-1229 and BS-1330.  In addition, 3 new bulk samples were excavated (BS-1223, BS-1224 and BS-1225) and 2 new bulk samples were done across the valley opposite to bulk samples BS-1223, BS-1224 and BS-1225 samples BS-1229 and BS-1230.

In all, a total of 8 bulk samples and 4,107.86 tonnes of gravels were collected and 2,990 tonnes of gravels were successfully treated at its operational site in Akko, Northern Israel.  Total Target Mineral Assemblage Suite ("TMA") found in the treatment during the period is 1,096.39 carats containing the Heavy Industrial Minerals ("HIM"); zircon, rutile, ilmenite and garnet and the DMCH Suite; diamond, natural moissanite and the gem corundum varieties of sapphire, ruby, Carmel Sapphire and Hibonite.

Bulk sample results announced post period, on the 20th March 2018, covering some of the bulk samples treated during the period, saw a shift from findings to date where the Carmel Sapphire™ has been the dominant gem mineral in most of Zone 1. The southernmost bulk samples of BS-1226 and BS-1227 have returned higher sapphire values than the Carmel Sapphire™. In BS-1227 the recovery of 55.3ct of sapphire was the highest for a single bulk sample to date, whilst the individual sapphire recovered weighing 5.52ct was close to the largest ever discovered by Shefa Yamim which was 5.72ct.

Processing and exploration

During 2017, the Company treated a total of 2,990 tonnes of gravel and is in the process of collecting the last two bulk samples from Zone 1 (BS-1228, BS-1208).  The Company will then start processing historical bulk samples gravels collected from the Kishon Mid Reach zone 2. Historical bulk samples to note in this area include BS-9820 which yielded a 6 carat natural moissanite, the largest found in our license areas to date.

During the period, the Company applied for and received a new exploration permit from the inspector of mines - Exploration permit 869B7 covering 173,888 Dunams and published an updated Competent Person's Report in October 2017.

In addition, and following a review by Macquarie University, led by Professor Griffin, and Shefa Yamim, the Company has confirmed the presence of hibonite in some of its bulk samples. Hibonite, is an incredibly rare gemstone only found in a few locations worldwide. Shefa Yamim has discovered examples intergrown with grossite, fluorite, spinel and native vanadium of varying quality and size; the largest of which was 2.83ct stone in historical bulk sample BS-1214 (Zone 1). Whilst quantitative data is not yet available, the Company believes that the discoveries to date indicate a further potentially valuable addition to the mineral assemblage.

Corporate Review  

During the year Shefa has achieved many important milestones, but one of the highlights of the year was the Company's successful listing on the Official List of the London Stock Exchange on the 18th December 2017, raising gross proceeds of £4.15 million, before expenses, through the conversion of existing loans and a placing and subscription at 110p per Ordinary Share ("Placing Price").  The funds raised will be used to advance exploration in the Kishon Mid-Reach Project, its priority target, it towards the completion of a pre-feasibility and defining a resource.

As part of the listing process the Company also took steps to strengthen its Board with the appointment of James AH Campbell, Michael Rosenberg, Nathalie Schwarz and Hanoch Ehrlich, as Non-Executive Directors.

On the 5 of November 2017, the Company applied and received a trade mark from the Israeli Government for the Carmel Sapphire™, a newly discovered corundum similar in appearance to a sapphire, but unlike any other gem corundum previous found. The Company intends to market the Carmel Sapphire™ as a precious stone to be used in jewellery.

Post period, the Company announced the results of studies conducted by Macquarie University, Australia, that provide a clearer understanding of why Shefa Yamim has been able to find a suite of gemstones in its exploration area, including natural moissanite and Carmel Sapphire™. The findings allow the Company to make more informed decisions with regards to future exploration.

Financial Review

Over the last 12 months, the Company recorded a loss of TNIS (in thousands) 16,258 (2016: TNIS 549), equating to a loss of NIS 1.703 (2016: 0.058) per share.  TNIS15,717 are attributed to financial expenses, including the fair market value of the Options/ Warrants granted to the convertible loan providers, pre-IPO. In addition, the Company paid fees and commission costs associated with the loans. All loans were converted to Company shares at the day of the IPO.  At the end of the year, the Company's cash and cash equivalents stood at TNIS 6,489.

Outlook

The Company's strategy for 2018 is to continue its exploration programme at the Kishon Mid Reach placer with the aim of delineating a mineral resource that is compliant with the South African Code for Reporting Exploration Results, Mineral Resources and Mineral Reserves (the "SAMREC"). To this end the Company plans to:

·    Conclude bulk sampling in the Kishon Mid-Reach Zone 1

·    Start technical studies of Zone 1 in Kishon Mid-Reach

·    Establish grade estimations & resource definition

·    Conduct bulk sampling in the Kishon Mid-Reach Zone 2

SHEFA YAMIM (A.T.M.) LTD.

    STATEMENTS OF FINANCIAL POSITION

    NIS in thousands

												December 31,
							Note					2017				2016
	ASSETS
	Non-Current Assets:
	Fixed assets							6				2,130				1,946
	Loans to Shefa-Yamim							7				2,342				1,116
	Interested party											77				77
	Assets for exploration and evaluation of precious stones							8				55,259				51,500
	Deferred issuance expenses											- . -				905
	Total non-current assets											59,808				55,544
	Current Assets:
	Cash and cash equivalents											6,489				1
	Deposit in bank							4				173				192
	Receivables							5				368				288
	Total current assets											7,030				481
	Total Assets											66,838				56,025
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' Equity							17			52,488				48,820
Non-current Liabilities:
Long-term loans from interested party and others							14			800				778
Financiel lease							15			49				91
Liability for severance pay							3i			118				120
Warrants							16			9,834				-   . -
Total Non-current Liabilities										10,801				989
Current Liabilities:
Short-term credit from bank and others							9			467				696
Trade payables							10			1,766				649
Interested parties							11			110				2,308
Other accounts payable							12			1,206				1,835
Loans convertible to shares							13			- . -				728
Total current liabilities										3,549				6,216
Total Shareholders' Equity and Liabilities										66,838				56,025
The accompanying notes are an integral part of the financial statements.
	March 28, 2018
	Date of Approval of the Financial Statements					Avraham (Avi) Taub CEO										David Ben David CFO

SHEFA YAMIM (A.T.M.) LTD. 

STATEMENTS OF COMPREHENSIVE LOSS

NIS in thousands (except for per share loss)

				For the Year Ended December 31,
	Note			2017		2016		2015
Costs and expenses -
General and administrative expenses	18			(541)		(914)		(1,028)
Capital gain				- . -		178		37
Operating loss				(541)		(736)		(991)
Financial expenses				(15,954)		(383)		(153)
Financial income				237		570		834
Financial income (expenses), net		19		(15,717)		187		681
Loss for the year and comprehensive loss attributed to the Company shareholders				(16,258)		(549)		(310)
Basic and diluted loss per share (in NIS) attributed to the Company shareholders		23		(1.703)		(0.058)		(0.033)

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

SHEFA YAMIM (A.T.M.) LTD.

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

NIS in thousands

	Share Capital		Additional Paid-in Capital		Capital Reserve for Share- based Payments		Capital Reserve from Transactions with Interested Party		Accumulated Deficit		Total Shareholders' Equity Attributed to Shareholders
Balance as of January 1, 2015	9,387		70,743		4,416		6,312		(49,937)		40,921
Comprehensive Loss for the year	- . -		- . -		- . -		- . -		(310)		(310)
Receipts for issue of shares during 2012 *	- . -		5,089		- . -		- . -		-		5,089
Balance as of December 31, 2015	9,387		75,832		4,416		6,312		(50,247)		45,700
Comprehensive Loss for the year	- . -		- . -		- . -		- . -		(549)		(549)
Share based compensation	- . -		- . -		875		- . -		- . -		875
Receipts for issue of shares during 2012 *	- . -		2,794		- . -		- . -		- . -		2,794
Balance as of December 31, 2016	9,387		78,626		5,291		6,312		(50,796)		48,820
Comprehensive Loss for the year	- . -		- . -		- . -		- . -		(16,258)		(16,258)
Issuance of shares	**4,518		** 14,339		- . -		- . -		- . -		18,857
Share based compensation	- . -		- . -		292		- . -		- . -		292
Receipts for issue of shares during 2012 *	- . -		777		- . -		- . -		- . -		777
Balance as of December 31, 2017	13,905		93,742		5,583		6,312		(67,054)		52,488
* See Note 1d, 17c. ** Net of issuance expenses and fees in the amount of approximately NIS 4,470 thousand. The accompanying notes are an integral part of the financial statements.

SHEFA YAMIM (A.T.M.) LTD.

S0TATEMENTS OF CASH FLOWS

NIS in thousands

	For the Year Ended December 31,
	2017		2016		2015
Cash flows from operating activities:
Loss for the year	(16,258)		(549)		(310)
Appendix A - Adjustments required to reconcile loss for the year to net cash provided by (used in) operating activities	17,114		(151)		(503)
Net cash provided by (used in) operating activities	856		(700)		(813)
Cash flows from investing activities:
Purchase of fixed assets	(531)		(305)		(1,346)
Consideration from sale of fixed assets	- .  -		180		91
Investment in exploration and evaluation assets	(4,375)		(2,638)		(3,233)
Loan rendered to Shefa Yamim	(1,177)		- . -		- . -
Interest received	188		530		794
Net cash used in investing activities	(5,895)		(2,233)		(3,694)
Cash flows from financing activities:
Consideration received for issuance of share capital  (including additional capital)	137		2,794		4,680
Increase in deferred issuance expenses	(4,707)		(239)		(56)
Receipt (Repayment) of credits from banks and others, net	(205)		168		(51)
Repayment of loans from interested parties, net	446		(101)		(95)
Receipt of loans convertible to shares	16,611		504		- . -
Receipt of long-term loans	- . -		- . -		200
Repayment of long-term loans	(40)		(46)		(70)
Interest paid	(458)		(157)		(101)
Net cash provided by financing activities	11,784		2,923		4,507
Linkage differences in regard to cash and cash equivalents	(257)		10		- . -
Increase in cash and cash equivalents	6,488		- . -		- . -
Cash and cash equivalents at the beginning of the year	1		1		1
Cash and cash equivalents at the end of the year	6,489		1		1

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

SHEFA YAMIM (A.T.M.) LTD.

STATEMENTS OF CASH FLOWS

NIS in thousands

APPENDIX A	For the Year Ended December 31,
Adjustments necessary to show the cash flows from current operations:	2017		2016		2015
Expenses (Income) not involving cash flows:
Depreciation *	60		72		88
Capital gain	- . -		(178)		(37)
Share based compensation	46		152		- . -
Finance expenses (income), net	15,717		(187)		(681)
	15,823		(141)		(630)
Changes in asset and liability items:
Increase in receivables	(64)		(174)		(60)
Increase (Decrease) in trade payables	1,403		(95)		116
Increase  in liability to an interested party	- . -		297		16
Increase (Decrease) in other accounts payable	(48)		(38)		55
	1,291		(10)		127
	17,114		(151)		(503)

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

APPENDIX B	For the Year Ended December 31,
Significant non-cash flow operations:	2017		2016		2015
Accounts payable in regard to exploration and evaluation assets for precious stones	1,550		1,024		949
Loan for acquisition of fixed assets	240		- . -		266
Loans assigned to capital	20,518		- . -		409
Loan assigned to an interested party	1,659		- . -		71
Balance from a supplier assigned to capital	1,152		- . -		50
Payables in regard to deferred issuance expenses	742		610		- . -
Assignment of the receivable balance from the chairman of the board of directors to Shefa -Yamim	640		- . -		- . -

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

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 1:-  GENERAL

1.	a.	The reported entity -
		Shefa Yamim (A.T.M.) Ltd. (hereinafter - "the Company") is an Israeli Company.
		The Company is held by Shefa Yamim Ltd. (hereinafter - "the top-co"). Until December 2017 the Company was held 75% by the top-co. As a result of the Company issuing shares on the London Stock Exchange on December 18, 2017, (see Note 17b) the top-co holdings were reduced. The top-co is a public company whose securities are registered for trade on the Tel Aviv Stock Exchange.
	b.	The Company engages in prospecting and exploration for diamonds, precious stones and gold ("precious stones") along the length of the Nahal Kishon riverbed in the Zevulun Valley, in Emek Yizrael, on designated slopes of Mount Carmel and in the Ramot Menashe and Migdal Haemek areas based on prospecting and exploration permits received from the Superintendent of Mining in the Office of National Infrastructure of the Government of Israel, in accordance with the Mines Ordinance.
		Proximate to date of approval of the financial statements, the Company continues to conduct prospecting and explorations in accordance with current valid permits granted for an inclusive area of approximately 614 thousand dunam.
		The Company has exclusive Prospecting Permit No. 869-B7 that is valid until June 5, 2018 and covers an inclusive area of 173,888 dunam. Concurrently, the Company has two additional Exploration Permits: Exploration Permit No. 837-A10, for an inclusive area of 327,551 dunam, that is valid until December 20, 2017, and Exploration Permit No. 899-A5, for an inclusive area of approximately 112,904 dunam, that is also valid until December 20, 2017. The Company is actively engaged in extending the validity of the Exploration Permits.
		The Company's goal is finding precious stones in the existing permitted areas and/or future areas in sufficient quantities to obtain exclusive mining rights and/or a mining contract. In the event of positive exploration and prospecting results, the Company will receive a "Discovery Certificate" and will be eligible to receive an exclusive mining license from the Government of Israel regarding diamonds, gold and precious stones.
		In accordance with the Mining Ordinance, subsequent to exposure of the mine and quarry of precious minerals, the Company will be required to pay royalties to the Israeli Government at the rate of at least 5% of the value of the mined minerals or their value while still unmined.

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 1:-  GENERAL (cont.)

c.	Since the operations of the Company are prospecting and exploration for gold, precious stones and diamond deposits and the Company has not yet commenced commercial mining, as a result, the Company does not as yet have revenues, rather only expenses. Financing of its operations has been performed until now by infusions of capital and/ or by loans and convertible loans received by the Company from third parties and from the Shefa Yamim and transferred in parts to the Company in accordance with the agreement between them (see Note 1d) and its continued operation is contingent upon the further similar infusions of capital. In view of past experience, the Company's management believes that it can mobilize the sources for money in order to complete the explorations, but there remains uncertainty in this regard since the mobilizations are dependent on other parties. 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."
d.	On February 22, 2012 the Tel Aviv-Yafo District Court approved the top-co request for a creditors arrangement in accordance with Sections 350 and 303 of the Corporate Ordinance - 1999.
	In the framework of the creditors arrangement, the top-co allocated 23,817,790,260 new shares without par value that constitute, subsequent to their allocation, 99% of the issued and outstanding top-co fully diluted share capital. 9% of this allocation was allocated to Pareto Mergers and Acquisitions Ltd. (hereinafter: "Pareto") and 90% (fully diluted) was allocated to shareholders of the Company.
	As consideration for the allocation of new shares, shareholders of the Company and Pareto invested an amount of NIS 1,250 thousand in the top-co (NIS 1,125 thousand from the Company's shareholders and NIS 125 thousand from Pareto). These amounts were transferred to the trustee's fund wherein all assets and liabilities of the top-co company have been assigned in the framework of the creditors arrangement.
	On April 4, 2012, in accordance with allocation of the shares to Pareto and to the Company shareholders as abovementioned, the Company allocated 7,040,700 ordinary shares to the top-co company so that upon completion of the transaction, the top-co held shares that constitute 75% of the Company's issued and outstanding share capital subsequent to the allocation (fully diluted).

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 1:-  GENERAL (cont.)

d.	(cont.)
	The Company is entitled to payment of NIS 280 million for this shares allocation (hereinafter: "the debt"). Amount of the debt is linked to the Consumer Price Index and bears interest of 4% per annum. The debt will be paid exclusively from future top-co mobilizations of capital, with the Company entitled to 85% of any future mobilized capital (net after expenses) until repayment of the entire debt.
	Until December 31, 2017, the Company received NIS 23,912 thousand (including NIS 2,637 thousand in interest) from mobilizations of capital. See Note 17.
	In the event that future mobilizations of capital will not complete repayment of the debt, this does not constitute grounds for nullification of the agreement or a change in its terms and the Company will have no recourse to collect from the top-co in any other manner.
	In view of the uncertainties in regard to the future mobilizations of capital of the top-co, the Company recorded the proceeds from the abovementioned issue in accordance with actual mobilizations of the top-co.
e.	On December 18, 2017 the Company completed its IPO on the Stock Market in London. In this framework, the Company registered for trade 4,517,456 Ordinary shares in consideration of approximately NIS 18 Million that were transferred mainly through convertible loans.
f.	Definitions -
	In these financial statements:
	International Financial Reporting Standards (IFRS) - Standards and interpretations adopted by the International Accounting Standards Board (IASB) that include international financial reporting standards (IFRS) and international accounting standards (IAS), and interpretations of these standards as determined by the International Financial Reporting Interpretations Committee (IFRIC) or interpretations determined by the Standards Interpretation Committee (SIC), respectively.
	"The Company" - Shefa Yamim (A.T.M.) Ltd.
	"top-co Company" - Shefa Yamim 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.

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

 NOTE 2:-  BASIS FOR PREPARATION OF THE FINANCIAL STATEMENTS

		a.	Declaration in regard to Implementation of International Financial Reporting Standards (IFRS)
			The Company's financial statements were prepared in accordance with International Financial Reporting Standards (hereinafter - "IFRS") and related clarifications published by the International Accounting Standards Board ("IASB"). The significant accounting principles detailed below were consistently implemented for all reporting periods presented in these financial statements except for changes in the accounting policies that derive from application of standards, amendments to standards and clarifications that became effective at the date of the financial statements. The financial statements were approved by the board of directors on March 28, 2018.
		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 currency of the main economic environment wherein the Company operates.
		c.	Basis for preparation of financial statements
			These financial statements are prepared on the basis of historical cost. The statement of comprehensive loss 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.
		d.	The operating turnover cycle
			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 the operating period are shown in the framework of current assets and current liabilities.
		e.	Foreign currency and linkage basis
			Balances 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.

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

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

		e.	Foreign currency and linkage basis (cont.)
			Detail in regard to the Consumer Price Index and the exchange rate of the U.S. dollar:

			December 31,
				2017	2016	2015
CPI in points (applicable) *				123.33	122.84	123.08
CPI in points (known) *				123.21	122.84	123.21
Exchange Rate of U.S. $ in NIS				3.467	3.845	3.902
Exchange Rate of British £ in NIS				4.682	4.725	5.784
* Base Index 2002 = 100.

		Year ended December 31,
		2017	2016	2015
Change in CPI (applicable)		0.40%	(0.20%)	(1.00%)
Change in CPI (known)		0.30%	(0.30%)	(0.90%)
Change in rate of exchange - U.S. $		(9.83%)	(1.46%)	0.33%
Change in rate of exchange - Brit. £		(0.91%)	(18.31%)	(4.62%)

	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.

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.)
		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.
		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) valuation of prospecting assets; 2) valuation 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 place and to 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 operations is calculated using the straight-line method over 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 YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

   NOTE 3:-  SIGNIFICANT ACCOUNTING POLICIES (cont.)

b.			Fixed assets (cont.)
			Depreciation expense for vehicles and laboratory equipment used during explorations are charged to cost of assets for exploration 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 evaluation of precious stones
			1.	The Company has adopted the "Successful Efforts Method" in regard to the accounting treatment of expenses incurred in exploration, 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 exploration and valuation stage and prior to receiving a permit are charged immediately to the statements of comprehensive loss when incurred.
				b)	Investments in explorations for precious stones during the exploration and valuation stages, relating to areas that it is 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 mining and extraction 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 stones." 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 loss. Investments in precious stones are amortized in the statements of comprehensive loss on the basis of amounts extracted in relation to total reserves for the precious stones asset, as valuated by an external assessor with expertise in this area.
				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 exploration 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 is estimated for the asset in accordance with IAS 36 (see Section 3f).

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 valuation of precious stones (cont.)
	2.		"Investments in Precious Stones" 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 loss 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 stones that have an existing technical plan are examined at each reporting period for any signs of a reduction in value. In the event that such signs exist, the realization value is computed in accordance with IAS 36 (see Sect. 3f).
	4.		The Group will recognize the liability and, correspondingly, the asset in regard to obligation of the Company 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 loss. The asset is initially measured at its present value and is depreciated over a period of time in the statement of comprehensive loss 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 loss.

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.

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.

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

    NOTE 3:-  SIGNIFICANT ACCOUNTING POLICIES (cont.)

	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 net fair value of the asset 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 or cash-yielding unit 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 loss.
		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 loss.
	f.	Financial instruments
		1.	Non-derivative financial instruments
			Non-derivative financial instruments comprise various accounts receivable and cash and cash equivalents.
			Non-derivative financial instruments are recognized initially on the trade date at which the Group becomes a party to the contractual provisions allowing the Group to receive the financial instrument. Investments in these instruments are initially presented at their fair value with the addition of transaction costs.
			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.	Loss 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.

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 3:-  SIGNIFICANT ACCOUNTING POLICIES (cont.)

		f.		Financial instruments (cont.)
				2.	Loss from impairment in value and write-off of non-derivative financial instruments (cont.)
					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 loss.
					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 and transaction costs that can be attributed. 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 legal enforceable right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 3:-  SIGNIFICANT ACCOUNTING POLICIES (cont.)

g.		Leases
		The criteria for determining whether leases are financial or operating are based on the essence of the agreements, examined at the time when contracted in accordance with the regulations determined in IAS 17.
		Leases that transfer all risks and benefits contained in ownership of the leased property are classified as financial leases.
		Other leases are classified as operating leases and leasing payments are recognized as an expense in the statements of comprehensive loss and are prorated currently using the straight line method over the lease period.
		Financial lease payments are divided between financing expense and amortization of the remaining liability.
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 projected time periods are charged to 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 virtual 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.

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.)
		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 benefits 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.
		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 balance sheet date. No actuarial computations of possible obligation and actual value of deposits with the restricted benefits 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 loss and interest income that is recognized upon accumulation, using the effective interest method.
		Financial expenses include interest on loans received 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.

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

  NOTE 3:-  SIGNIFICANT ACCOUNTING POLICIES (cont.)

	k.	Deferred Taxes
		The Company creates deferred taxes in regard to temporary differences of value for tax purposes of assets and liabilities and their value 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.
	m.	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 volume 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.
	o.	Share Based Compensation
		In share based compensation, transactions with employees (including officers and others who provide similar services) that are cleared by Group 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 growth in share capital, straight-line over the vesting period of the capital instrument that was granted, so that every sub-granting is considered as a graded vesting. In transactions involving share based compensation with renderers of services, the Group measures the expense in accordance with the value of the services received. In share based compensation transactions cleared by cash payment, the Group 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 Group remeasures the fair value of the liability at every reported period and upon clearance, so that any changes are recognized in the statement of comprehensive loss for the period.

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

  NOTE 3:-  SIGNIFICANT ACCOUNTING POLICIES (cont.)

	p.	Initial Implementation of New Amendments
		During January 2016 the International Accounting Standards Board (IASB) published amendments to IAS 7 for the statement of cash flows (hereinafter: "the Amendments") that require additional disclosures regarding the financial liabilities. These amendments require showing the activity between the opening balance and the closing balance of financial liabilities, including changes that derive from the cash flow financial operations, from the acquisition or the loss of control in regard to held companies, from changes in the exchange rates and from changes in fair value.
		The Amendments will be applicable commencing with the annual periods that start on January 1, 2017 or thereafter. It is not necessary to include disclosures as abovementioned in regard to the comparative figures for prior periods. Early adoption of the Amendments is permissible.
		For disclosures in regard to changes in the liabilities that derive from Company financial operations, see Note 24f.
	q.	Amendments, Interpretations and Corrections Applicable to Standards that have been published and are no longer valid, that were not adopted early by the Group, and that are expected to have an effect on future periods
		(1)	IFRS 9 (2014) "Financial Instruments"
			IFRS 9 (2014) "Financial Instruments" (hereinafter: "the Standard" is the final Standard of the Financial Instruments package. This Standard includes classification and measurement instructions for financial instruments as published in the first stage during 2009 and that were amended in this version. It also includes the classification and measurement regulations for financial liabilities, suggests an updated model that is based on principles in regard to hedging and presents a new model for examining a projected loss from decrement as detailed hereinafter.
			The Standard determines that all financial instruments shall be handled as follows:
		·	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 derive 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.

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

  NOTE 3:-  SIGNIFICANT ACCOUNTING POLICIES (cont.)

q.

Amendments, Interpretations and Corrections Applicable to Standards that have been published and are no longer valid, that were not adopted early by the Group, and that are expected to have an effect on future periods (cont.)

		·	Upon initial recognition, one may designate financial instruments at fair value through other comprehensive income. These instruments that will be designated in that manner, will not be subject any longer to the test of decrement, 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 Amendment. 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 Obligations
		The Standard determines also the following procedures in regard to financial obligations:
		·	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.
		Hedging
		The Standard determines new hedging procedures and provides the possibility to choose as an accounting policy whether to implement the new procedures detailed summarily below, or alternatively, those that exist in IAS 39. When the hedging project will be completed at a future date, the International Accounting Standards Board (IASB) will reexamine the possibility of choosing the abovementioned procedure.

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

  NOTE 3:-  SIGNIFICANT ACCOUNTING POLICIES (cont.)

	q.	Amendments, Interpretations and Corrections Applicable to Standards that have been published and are no longer valid, that were not adopted early by the Group, and that are expected to have an effect on future periods (cont.)
		In the framework of the Standard, the three hedging types of accounting remain in place: hedging of cash flows, fair value, and net investment in foreign activities. Notwithstanding, significant changes were instituted in regard to the types of transactions appropriate for hedging accounts, especially expansion of the risks related to hedging accounts for non-financial items. Concurrently, changes also occurred in how to handle futures contracts and derivative Options when they constitute hedged instruments. In addition, some of the effective hedging examinations were changed in the basic examination that is based on "economic relationships." The exposure requirements in regard to Company risk management operations were expanded in the framework of the new Standard.
		Decrements
		The new model for decrement 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 decrement 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. The Standard adds policies for disclosure and presentation in regard to decrement of financial instruments.
		Starting Date
		The Standard will take effect in accordance with the annual reporting periods commencing January 1, 2018. The Company does not foresee a significant effect from implementation of this Standard on its financial situation or on the results of its operations.
	(2)	IFRS 16 "Leasing"
		In January 2016 the IASB published IFRS 16 in regard to leasing (hereinafter: "the new Standard"). In accordance with the new Standard, a lease is defined as a contract, or part of a contract, that transfers the right to use the asset for a defined period of time in return for a consideration. Following are the terms of the new Standard:

		·		The new Standard requires all lessees to recognize an asset against a liability in the statement of financial position (except for certain circumstances) so that the treatment will be similar to a financial lease, in accordance with the existing IAS 17 - "leases."

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

  NOTE 3:-  SIGNIFICANT ACCOUNTING POLICIES (cont.)

	q.		Amendments, Interpretations and Corrections Applicable to Standards that have been published and are no longer valid, that were not adopted early by the Group, and that are expected to have an effect on future periods (cont.)
		·		Lessees will recognize a liability in regard to lease payments and will recognize an asset that is the right of usage. Concurrently, the lessees will recognize related interest and depreciation expenses, separately.
		·		Variable lease payments that are not dependent on the Consumer Price Index (CPI) or on interest but are based on performance or usage (e.g., a percentage of the redemption) will be recognized as an expense by the lessees or as income by the lessor upon occurrence.
		·		In the event of a change in variable lease payments that are linked to the CPI, the lessee must recalculate the liability in regard to leasing with the effect of the change being attributed to the asset - right of usage.
		·		The new Standard includes two exceptions wherein the lessees are permitted to handle the leases in accordance with the accounting treatment for operating leases; in the event that the leasing is for assets that have small monetary value or in the event that the leasing is for a period up to one year.
		·		The accounting treatment for the lessor remains without significant change as compared with the existing Standard, that is, classification as financial or operating leasing.
		The new Standard will be applicable commencing with the annual periods that start on January 1, 2019 or thereafter. Early adoption is possible, as long as IFRS 15 - "Recognition of Revenues from Contracts with Clients" is applied concurrently.
		The new Standard allows lessees to choose a retroactive approach for implementation, either completely or partially, with certain allowances in regard to leases that exist during the transfer period, which will not require reclassification of the comparative figures.
		The Company is examining the possible effects of the new Standard. At this stage, the Company has not yet completed its evaluation of the possible effects on its financial position and the results of its operations, but it does not expect a significant effect.

NOTE 4:-	DEPOSIT IN BANK
	A short-term deposit in foreign currency, bearing interest at 0.11% (December 31, 2016 - 0.03%).  See also Note 9b.

NOTE 5:-	RECEIVABLES
		December 31,
		2017		2016
	Interested parties	16		- . -
	Prepaid expenses	84		18
	Advances to suppliers and others	268		270
		368		288

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 6:-			FIXED ASSETS
					Machines and Laboratory Equipment *		Vehicles **		Office Furniture and Equipment		Computers		Leasehold Improvements - Laboratory		Total
	Cost:
	As of January 1, 2016				3,088		599		330		342		436		4,795
	Additions				157		- . -		8		11		- . -		176
	Decrements				(317)		(247)		- . -		- . -		- . -		(564)
	As of December 31, 2016				2,928		352		338		353		436		4,407
	Additions				603		23		- . -		8		- . -		634
	Decrements				- . -		- . -		- . -		- . -		- . -		- . -
	As of December 31, 2017				3,531		375		338		361		436		5,041
	Accumulated Depreciation:
	As of January 1, 2016				1,413		310		275		325		232		2,555
	Depreciation for the year				345		51		20		14		38		468
	Decrements				(317)		(245)		- . -		- . -		- . -		(562)
	As of December 31, 2016				1,441		116		295		339		270		2,461
	Depreciation for the year				339		51		15		8		37		450
	Decrements				- . -		- . -		- . -		- . -		- . -		- . -
	As of December 31, 2017				1,780		167		310		347		307		2,911
	Depreciated Cost:
	As of December 31, 2017				1,751		208		28		14		129		2,130
	As of December 31, 2016				1,487		236		43		14		166		1,946

             * In regard to equipment with liens, see Note 22b4.

            ** Includes a vehicle that was given to the Company under financial leasing terms and a lien in favor of the leasing company was placed on the vehicle as part of the leasing terms. See also Note 22b5.

NOTE 7:-	LOANS TO THE TOP-CO
	A loan that is linked to the Consumer Price Index and bears annual interest at the rate of 4%. Terms of repayment are as yet undetermined.

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.	The Company is the first and only company in Israel that is engaged in exploration (prospecting and exploration) related to precious stones (diamonds, gemstones and gold) since 1999, in the northern area of Israel.
		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 Acco) of the various findings using the most advanced methods known worldwide in order to assess the economic potential of the findings at each site that is part of the permit areas in order to raise expectations and reduce the risk level, and to identify the exact location where it will be possible to open a "mineralogical resource" and a commercial mine.
		The Company's operating area is along the southern Acco industrial zone (Barbour Junction) that stretches over an area of approximately 6,000 sq. m. The area handles, currently, earth and rock samples ranging in size from 1 kg. up to 600 tons and more, that includes rinsing, straining, identification of minerals and their classification.  The potential for storage of earth samples in the operating area that is adjacent to the exploration areas reaches approximately 3,500 tons in total (approximately 500 tons for each sample).
		The exploration operations of the Company are performed in parallel to the original sources for finding precious minerals that are located in the volcanic areas of the Carmel mountain range, the Ramot Menashe area and the Lower Galilee area (primary source) and also in the alluvial secondary deposit area canals located in the Zevulun Valley and in Emek Yizrael.
		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 that are performed worldwide by other exploratory companies.
		The exploratory Company operations are accompanied by a staff of geologists from abroad who are experts in their fields (hereinafter: "Company advisors from abroad") who have proven expertise in the fields of earth sciences, geology, geochemistry and geophysics, especially within the field of dynamic special explorations wherein the Company operates - prospecting for precious stones. At the beginning of 2014, the Company advisors from abroad developed a dynamic geologic module that is from Source to Sink in order to guide further Company procedures for identifying precious minerals that are known by the Company as the TMA (Target Mineral Assemblage) and to find a link between the Primary Sources and the Secondary Deposits.

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 8:-	ASSETS FOR EXPLORATION AND EVALUATION OF PRECIOUS STONES (cont.)
		The module is based on geologic guidelines as well as on data and Company findings and it points to areas that will, logically, contain concentrations of precious minerals. Since the work is performed parallel to the volcanic areas (Primary Sources) as well as in the drainage canals and their seams (Secondary Sources), the module allows for a three dimensional encompassing approach to the findings and to the mining of material from the source to the areas of accumulation.
		During the last few years, the Company is progressing with bulk samples gathered in the Kishon area known as the "Mid-Reach Area." The strata in this area have yielded TMA samples, which are shallow and close to the surface being explored. As a result of the unique construction of this area, it was chosen as a preferred exploration area that is defined as an approachable Transient Deposit.

		During the first quarter of 2015 and on the basis of the geological module, the Mid-Reach area of the Kishon riverbed constitutes an Exploration Target that is approachable for heavy and precious minerals. Analysis of initial results performed to date shows that the Mid-Reach area of the Kishon stretches over approximately 4.5 km. length and approximately 150 m. width (minimal) with a thickness of 0.5 - 4 m. of mineralized basal gravel. The exploration target in the Kishon area has been to potentially and conservatively mine approximately 1.1 million tons of potentially mineralized gravel.
		The Company has founded the TMA based on two leading mineral suites. These minerals, all or partially, were found initially by the Company at their primary sources of volcanoes on the Carmel mountain range, Ramot Menashe and the secondary sources, the alluvial drainage basin areas of the Kishon Mid-Reach area.
		1.   The precious minerals package known as the HDMC Suite includes: diamond, sapphire, ruby as well as the rare natural mineral known as moissanite, hibonite and the Carmel Sapphire™, a mineral that to the best of Company's knowledge, exists only in Israel. 2.   The heavy industrial minerals include minerals that have a high specific gravity that can be used in manufacturing, such as Zarconite, rotil, ilmenite and granite.
		Exploration of the volcanic sources on the Carmel mountain range (that constitute a Primary Source) shows that some of the sources have a constitution similar to kimberlite (a rock that is a source of diamonds) based on indicators of kimberlite sources. Moreover, a positive identification of a micro-diamond by the team of geologists from De Beers, in a sample found and handled by them from one of the volcanic entities of the Carmel (Rakefet) shows that these, at least in part, contain diamonds.

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 8:-	ASSETS FOR EXPLORATION AND EVALUATION OF PRECIOUS STONES (cont.)
		The existence of indicators for kimberlite and for diamonds in the alluvial Kishon riverbed (Secondary Source) shows the existence of local primary sources in the Kishon riverbed and its seams. Thus, the erosion of rivers that sank in the streams of the Northern valleys contains material that is thin and sandy whose source is the Carmel mountains, valleys and its ranges. The map of ranging found by the Company guides the exploration in the direction of favored places, mainly in accordance with the mineral findings of the kimberlites. (we note that the diamonds were found mainly in the distal segment - the erosions of the Kishon river area in accordance with the Company's geological module).
		During 2015, scientific discoveries were uncovered in regard to the in-depth construction of the earth where the Company is operating. These discoveries relate to the Company's findings (heavy and precious minerals) that were crystallized under the earth's surface and were raised by outbursts of lava (volcanic outbursts) to the surface.
		A scientific exploration for the past two years that has been conducted by Prof. Bill Griffin, who is an expert on the earth's geology at Macquarie University, Australia, centers around the crystallization of the corundum and the derivation of the precious stones therefrom, the ruby and the sapphire, as sampled from primary sources on the Carmel mountain and logically related to the rare natural mineral, moissanite. The exploration and the results contribute to the key question in regard to the geologic makeup of the deep earth's area in the zones where the Company operates. Results of the exploration and its conclusions were shown by Prof. Griffin during January 2016 and in that framework it was determined, inter alia, that in view of the fact that the corundum stones found by the Company contain rare minerals, these stones are really gemstones. Upon the recommendation of Prof. Griffin, the corundum gemstones found by the Company were recorded and renamed by the Israel Patents Office as "the Carmel Diamond."
		On February 2, 2017, subsequent to completion of the annual work plan and presentation of the summary report thereto, the Company received two Exploration Permits from the Superintendent of Mining at the Natural Resources Authority in the Energy Ministry of the Government of Israel for prospecting and exploration in regard to diamonds, gemstones and gold, as follows:
		Exploration Permit 837A10 - the Carmel area - that stretches over 327,551 dunam;
		Exploration Permit 899A5 - the Ramot Menashe area - that stretches over 112,904 dunam (hereinafter: "the Extended Permits").
		The Extended Permits are for a one year period that ends on December 20, 2017 and they replace the expired permits (Exploration Permit 837A9 and Exploration Permit 899A4) and relate to the same areas of exploration as the expired Permits.
		In December 2017, the Company presented summary reports for the abovementioned Permits in accordance with and subsequent to completion of the work plans that were attached to the Permits, and requested an extension for an additional year. We note that the Company chose not to reduce the work areas of the Permits in view of a survey that was performed by Prof. Bill Griffin, with results that show that these areas contain the greatest potential for the Company's goals. As of the date of these financial statements, approval was not yet received from the Superintendent in regard to extension of the Permits for an additional year.

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.)
		a.	(cont.)
			On July 30, 2017, subsequent to completion of the annual work plan and presentation of a report, the Company received from the Superintendent Prospecting Permit 869B7 for identification of precious stone deposits, diamonds and gold. Prospecting Permit 869B7 (that replaces Permit 869B6) is valid until June 5, 2018. The prospecting area of the Permit is 173,888 dunam and includes, inter alia, the Zevulun Valley areas, the northern part of Emek Yizrael and the eastern area of the Mount Carmel slopes.
			Subsequent to balance sheet date, and after infusion of capital from the issue of shares, the Company updated the machinery and the equipment in use for handling and straining samples. In this framework, the Company also updated the jigs used for classification so that one classifies samples from 1 mm. to 8 mm. while a second one classifies those that are from 8 mm. to 25 mm. This change has already proven its efficiency and raised the level of exactitude for examinations. Concurrently, the Company is engaged in additional updates for the exploration systems in order to raise the quantity of treated material per day from 20 tons to 50 tons.
			In the framework of explorations performed in the abovementioned permitted areas, the Company is supposed to complete the treatment of the latest samples that were collected from the Kishon Mid-Reach Zone 1 and, upon completion, the Company plans to start examination of the economic worth of this deposit.
			For additional detail in regard to the Prospecting and Exploration Permits, see Note 22c.
		b.	Composition:
												December 31,
												2017		2016
			Purchase of exploration rights, fees and planning									4,496		4,164
			Geologic research and laboratory maintenance *									17,627		15,479
			Drilling for exploratory purposes									5,352		5,124
			Headquarters operations expenses directly attributable to the asset (mainly to a related company) **									23,000		22,231
			Other expenses									4,784		4,502
												55,259		51,500

                                  * Includes share based compensation in 2017 and 2016, in the amounts of approximately NIS 371 thousand and approximately NIS 266 thousand, respectively.

                                ** Includes share based compensation in 2017 and 2016,  in the amounts of approximately NIS 597 thousand and approximately NIS 457 thousand, respectively.

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 9:-	SHORT - TERM CREDIT FROM BANK AND OTHERS
						December 31,
	a.	Composition:				2017				2016
		Short-term bank credits				205			330
		Short-term bank loan *				- . -			80
		Short-term loan from shareholder **				109			109
		Current maturities of long-term liabilities				153			177
						467			696
		* As of December 31, 2016, includes an unlinked loan that bears annual interest at the rate of 7.75%  (Prime + 6.15%).
		** A loan that is linked to the U.S. dollar and bears annual interest at the rate of 10%.
	b.	As of December 31, 2017, the Company has a steady bank credit framework of NIS 200 thousand (December 31, 2016 - in the amount of NIS 300 thousand). The overdraft account is secured by the personal guarantee of interested parties. Concurrently, the Company deposited an amount in a foreign currency account, as a guarantee for repayment of the credit framework. (See also Note 4).

NOTE 10:-	TRADE PAYABLES
					December 31,
					2017		2016
	Checks payable				689		389
	Open balances  *				1,077		260
					1,766		649

                              * In 2017, Includes an amount of approximately NIS 683 thousand in regard to suppliers related to the issue on the London Stock Exchange.

NOTE 11:-	INTERESTED PARTIES
					December 31,
	a.  Composition:				2017		2016
	Current debt				- . -		1,866
	Current debt linked to the U.S. dollar				- . -		336
	Current maturities of long-term loan				110		106
					110		2,308

                                 b.  During December 2017 the Company converted debt to interested parties in the amount of NIS 1,365 thousand against the issuance of 320,856 Ordinary Company shares and 962,568 warrants,  in the framework of a Pre - IPO on the Stock Exchange in London. See also Note 17b.

                               c.  In regard to covenants with "101" and with "808" - see Note 22a.

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 12:-	OTHER ACCOUNTS PAYABLE
					December 31,
					2017		2016
	Accrued expenses *				663		1,351
	Salaries and related items				205		219
	Liability in regard to severance pay				338		265
					1,206		1,835

                                * As of December 31, 2016 - Includes to an interested party in the amount of NIS 640 thousand (see Note 22a3).

NOTE 13:-

LOANS CONVERTIBLE TO SHARES

	a.	During December 2016 to  October 2017, the Company contracted ten loan agreements, in a scope of approximately NIS 17 million (£3,641 thousand) that are convertible to shares on the date of completion of an issuance that is planned in London. The loans bear annual interest at the rate of 5% and are scheduled for repayment, in the event that the issuance will not be completed, with the addition of interest at the end of a year from the date of signing the agreement.
		In the event that the issuance will be completed, then the loans will be converted to shares at a price that is 15% lower than the issuance share price. In addition, the lenders will be issued non-marketable Options for each share, exercisable in accordance with the following timetable:
		For seven lenders, in a scope of approximately NIS 1 million (£251 thousand), one Option for each lender commencing with the issuance date for a period of 18 months at the share price upon issuance.
		For three lenders, in a scope of approximately NIS 16 million (£3,390 thousand), three Options for each lender that are exercisable:
		-	One Option for each lender commencing with the issuance date for a period of 18 months at 15% less than the share price upon issuance.
		-	A second Option commencing with the issuance date for a period of 24 months at the share price upon issuance.
		-	A third Option commencing with the issuance date for a period of 36 months at the share price upon issuance with the addition of 25%.
		On December 18, 2017 the Company completed its issuance of shares on the main London Stock Market, see Note 17b.
	b.	Until December 31, 2016, an amount of NIS 504 thousand ($131 thousand) was received on account of the loan agreements. In accordance with a valuation by an independent external assessor, it was determined that the fair value of the financial liability at fair value through profit and loss as of December 31, 2016 is in the amount of NIS 728 thousand ($183 thousand). During the reported year, the rest of the amount in respect of the aforementioned agreements was received, the value of the benefit in respect to conversion of the loans at a price that is 15% lower than the issuance price amounted to NIS 2.9 million and was recorded in financing expenses.

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 13:-

LOANS CONVERTIBLE TO SHARES (cont.)

		c.
	Activity (NIS in thousands):
	Balance as of January 1, 2016						-  . -
	Receipt of loans convertible to Company shares						504
	Revaluation						224
	Balance as of December 31, 2016						728
	Receipt of loans convertible to Company shares						16,247
	Revaluation (including exchange rate differences)						3,196
	Interest						347
	Conversion to shares						(20,518)
	Balance as of December 31, 2017						- . -

NOTE 14:-	LONG-TERM LOANS FROM INTERESTED PARTY AND OTHERS
	Composition:								December 31,
									2017		2016
	Loan from interested party (1)								781		883
	Loan from supplier (2)								240		137
									1,021		1,020
	Net of current maturities								(221)		(242)
									800		778
	(1)                                (1)	Loan from an interested party -
		a.  A loan in NIS bearing annual interest of Prime + 3.6%.
	b.  Payment dates of the loan:								As of December 31, 2017
									Principal		Principal and Interest
			First year -  current installment						110		146
			Second year						116		146
			Third year						122		146
			Fourth year						128		146
			Fifth year and beyond						305		340
									781		924

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 14:-

LONG-TERM LOANS FROM INTERESTED PARTY AND OTHERS (cont.)

(2)	Loan from a supplier -
	a. A loan for purchase of a tractor (Shovel), that was received during December 2017 and is payable in 24 equal monthly installments. The loan is in NIS and bears annual interest of 5%.
	b.    Payment dates of the loan:
			As of December 31, 2017
			Principal		Principal and Interest
		First year -  current installment	111		120
		Second year	129		133
			240		253

NOTE 15:-	FINANCE LEASE
							December 31,
							2017		2016
	a.	Composition:
		Liability					91		131
		Net of current maturities					(42)		(40)
							49		91

b.

The amount of the liability was computed by capitalization of the leasehold payments for the payments period at an annual interest rate of 6.9%. The amounts are linked to the Consumer Price Index.

NOTE 16:-		WARRANTS CONVERTIBLE TO SHARES
		a.	On December 18, 2017, the Company completed its Initial Public Offering (IPO) on the London Stock Exchange in the framework of which convertible loans (see Note 13) were converted to 3,973,461 shares and an amount of 6,589,331 non-marketable Options. In accordance with the valuation of an independent external assessor, the Options have a fair value of approximately NIS 11 million as of December 18, 2017 and, they have a value as of December 31, 2017 of approximately NIS 10 million.
		b.	Parameters used in the fair value valuation:
				December 31, 2017
			Projected fluctuations (in percentages)	53 - 61
			Life of the Option (in years)	1.5 - 3
			Rate of non-risk interest (in percentages)	0.45 - 0.55
			Fair value (in £)	1.1

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 16:-	OPTIONS CONVERTIBLE TO SHARES  (cont.)
	c.	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, 2017 the liability in regard to allocation agreements and the liability in regard to convertible loans were measured using a valuation technique based on Level 2 while basing itself on visual market data.

NOTE 17:-

SHARE CAPITAL

December 31, 2017

December 31, 2016

Number of Ordinary Shares

Number of Ordinary Shares

a.

Composition:

Authorized

Issued and Outstanding

Authorized

Issued and Outstanding

Ordinary shares of NIS 1 par value.

100,000,000

13,905,056

10,000,000

9,387,600

b.

On December 18, 2017 the Company completed its IPO on the London Stock Exchange in the framework of which 4,517,456 Ordinary Company shares were registered for trade as follows:

3,973,461 shares were allocated as a result of loan conversions to shares (see Note 13c).

320,856 shares were allocated to an interested party in the framework of a debt conversion (see Note 11b).

202,230 shares were allocated in consideration for payment of debts to issuance advisors.

20,909 shares were allocated to subscribers on the issuance date.

4,294,317 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).

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 17:-

SHARE CAPITAL (cont.)

	c.		On April 4, 2012 the Company allocated to the top-co, Shefa Yamim Ltd., 7,040,700 shares that constituted, subsequent to issuance, 75% of the Company share capital. In accordance with the agreement (see Note 1d), the amount received in consideration of the issuance from the agreement date until the balance sheet date is NIS 21,275 thousand.
	d.		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.
	e.		In regard to agreements with interested parties - see Note 22a.

	f.	On August 26, 2015 the general meeting of the top-co approved the decision of the board of directors that was rendered on July 16, 2015 in regard to granting 2,160,000 Options convertible to shares of the top-co to officers, directors and Company employees. As of the date of approval of the financial statements, the Options were not yet allocated.
			1)	Division of Options by Offerees -
					Number of Options
				Officer - CFO	360,000
				Officer - Project Manager	195,000
				4 Directors	408,000		(102,000 Options each)
				7 Employees	1,197,000		(6 employees, 195,000 Options each + one employee 27,000 Options)
					2,160,000
			2)	Each Option may be exercised to one Company share. Price per share as of date of approval by the general meeting is NIS 1.18.

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 17:-		SHARE CAPITAL (cont.)
	f.		(cont.)
				3)	Maturation Dates -
					The right to receive Options will crystallize in three rounds of 33.33% each. The first round was on July 19, 2016, the second round will occur on July 19, 2017 and the third round on July 19, 2018.
					The right to exercise each round of Options will be available to every offeree for a one year period from the date of formulation of the entitlement to obtain the relevant round.
				4)	Exercise price -
					Exercise price for the first round - NIS 3.
					Exercise price for the second round - NIS 4.
					Exercise price for the third round - NIS 6.
					However, the exercised Options will be without payment of the exercise price. Rather, they will be allocated to the offerees of allocated shares in an amount that will reflect the component benefit grossed up within those Options that are exercised, as will be computed on the exercise date.
				5)	Fair Value -
					In accordance with the valuation by an independent external assessor, it was determined that the fair value of the Options is in the amount of NIS 561 thousand.
					Fair value of the first round -     NIS   70 thousand.
					Fair value of the second round - NIS 243 thousand.
					Fair value of the third round -    NIS 248 thousand.

NOTE 18:-

GENERAL AND ADMINISTRATIVE EXPENSES

			Year Ended December 31,
			2016		2016		2015
	Management fees  to interested party (see Note 21a, 22a) **		389		* 467		* 315
	Other items		157		96		85
	Depreciation		60		71		88
	Office maintenance and office expenses		53		33		31
	Office services to an interested party (see Note21a, 22a2)		32		35		36
	Salaries and related items		- . -		- . -		194
	Participation in expenses of the top-co		(150)		212		279
			541		914		1,028
	* Net of participation by the top-co in expenses		- . -		105		105
	** Includes share based compensation		46		152		- . -

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 19:-	FINANCING (EXPENSES) INCOME, NET
		Year Ended December 31,
		2017		2016		2015
	Finance expense -
	Adjustment of the value of a financial liability according to fair value	12,867		223		- . -
	Issuance and fees expenses in regard to Options	1,884		24		- . -
	Exchange rate differentials	702		- . -		- . -
	Interest on convertible loans	347		- . -		- . -
	Other expenses	111		91		66
	Interest to a company that is an interested party	43		45		50
	Interest to interested parties	- .-		- . -		37
		15,954		383		153

                            Finance income -

	Interest income from the top-co	237		570		834

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 2017 was 24%. For 2016, the rate was 25% and during 2015 it was 26.5%.
				At the end of December 2016, the Knesset passed the Economic Efficiency Law (Amendments in order to achieve Budget Goals for the Budgeted Years 2017 and 2018) - 2016, (hereinafter: "the Law").  In the framework of the legislation, the corporate tax rate was reduced to 24% for the year 2017 and to 23% for 2018 and thereafter.
	b.	The Company received final assessments from the Income Tax Authorities through 2012.
	c.	The Company has a carryforward loss for tax purposes as of December 31, 2017 in the amount of approximately NIS 68 million. The tax benefit in this regard will be included in the financial statements at the time when realization is expected.

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,
					2017		2016		2015
			Charged to statements of comprehensive loss:
			Management fees paid to "101"		389		467		315
			Fees for office services paid to "808"		32		35		36
			Finance expenses paid to "101"		43		45		50
			Interest income received from the top-co		237		570		834
			Finance expenses to an interested party		249		- . -		37
			Charged to the statement of financial position:
			Capitalized management fees and participation in expenses to "101"		630		1,724		1,034

		b.		Transactions with interested and related parties:
							December 31,
						2017			2016
			In the framework of current assets:
			Receivables			16			- . -
			In the framework of long-term assets:
			Interested parties			77			77
			Loan to the top-co			2,342			1,116
			In the framework of short-term liabilities:
			Interested parties			110			2,308
			Expenses payable to the Chairman of the Board of Directors			- . -			640
			In the framework of non-current liabilities:
			Loan from interested parties			671			883
		c.	Commitments:
			See Note 22a.
		d.	Guarantees from interested parties for the Company's benefit:
			See Note 22b.

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 22:-	COMMITMENTS 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 holds at balance sheet date 3.39% of the Company shares and 5.91% fully diluted, in the framework of management agreements. In view of the issuance of Company shares in London, the Company had to separate the general administration and the financial management between the Company and the top-co. Therefore, on December 6, 2017 a new management agreement was signed between "101" and the Company only (without the management of the top-co), for a new period of thirty six months commencing January 1, 2017 until December 31, 2019. In accordance with the new agreement, "101" will provide for the Company management services that will include a Chairman, a CEO, secretarial services for management as well as office space that is owned by "101". These services will be rendered for a consideration of NIS 85 thousand per month with the addition of Value Added Tax (VAT) in accordance with the prevailing law (not including refund of expenses for maintaining a vehicle and a telephone for the CEO and refund of expenses for travel abroad in order to locate potential investors. Concurrently, the Company is obligated to cover insurance for "101" employees who engage in rendering the abovementioned services to the Company.
		On December 18, 2017, date of the London IPO, the Company converted a debt to "101" in the amount of approximately $300 thousand (approximately £231 thousand) into 247,059 shares and 741,177 Options.

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 22:-	COMMITMENTS AND LIENS (cont.)
	a.		Commitments with interested parties (cont.):
		2.		Commitments regarding "808":
		On January 1, 2005, the Company signed an agreement with "808", an interested party in the Company, whereby "808" will assist in finding potential investors. In addition, "808" will provide collection services regarding the investment money of investors for a consideration of 2% of the total gross investment by each investor in the Company that was found by "808".
		In addition, "808" will provide office services to 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, 2017 under the same terms.
		On December 18, 2017, the IPO date in London, the Company converted a debt to "808" in the amount of approximately $90 thousand (approximately £69 thousand) into 73,797 shares and 221,391 Options.
		3.		Commitment with the chairman of the board of directors:
				In accordance with the approval of the board of directors and a meeting of the shareholders in August 2010, the Company signed an agreement on December 7, 2011, with a corporation (hereinafter: "the corporation") owned entirely by the chairman of the board of directors. In accordance with this agreement, the corporation will offer management and supervisory services for the Company businesses that are mainly in regard to the chairman serving as an active director of the Company.
					The following are the main points of the agreement:
				a)	Engagement period is for five years, commencing May 1, 2010 until May 31, 2015.
				b)	In consideration for performance of these services, the corporation will be entitled to monthly management fees in the amount of NIS 20 thousand + VAT. In addition, the chairman of the board of directors will be entitled to a refund of reasonable expenses.
				c)	In addition, the agreement requires the Company to provide an Options plan for its employees in the framework therein the chairman will be entitled to untraded convertible Company Options at a rate that will provide him with 1.5% of the Company share capital at the date the agreement is signed. These Options will have identical terms as the Options initially to be issued to the public on one of the worldwide stock exchanges.
				During April 2012, the Company assigned the agreement to the top-co. On June 30, 2017, the Company assigned to the top-co a debt of NIS 640 thousand in regard to the abovementioned agreement to be offset by 240 thousand shares of the Company held by the top-co. This amount was charged on account of a payment in regard to shares - see Note 17c.
				In September 2017, the chairman of the board of directors resigned from the Company.

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

 

NOTE 22:-	COMMITMENTS AND LIENS (cont.)
	b.		Guarantees and Liens:
			1.	The Company gave a guarantee through a bank in the amount of approximately NIS 7 thousand to a third party.
			2.	The interested parties are personal guarantors (for an unlimited amount) to a bank in order to guarantee the Company's liabilities. Balance of the Company's liabilities as of December 31, 2017 that is guaranteed by the interested parties is in the amount of approximately NIS 205 thousand. See also Note 9b.
			3.	A lien in favor of the bank was placed on a foreign currency deposit of the Company. See also Note 9b.
			4.	Engineering equipment at a cost of NIS 775 thousand had a charge placed on it in favor of the supplier of the equipment.
			5.	A lien in favor of the leasing company was placed on a vehicle that was rendered to the Company under financial leasing terms - see Note 6. As of the date of the financial statements, Mr. Avraham Taub, Company CEO, personally guaranteed the Company's liability to the leasing company.
	c.			Information in Regard to Exploration and Prospecting Permits:
				The Company received exploration and prospecting permits from the mining Inspector at the Government of Israel National Infrastructures Ministry. These exploration permits grant exclusive rights to perform geological explorations in specific areas of northern Israel. Prospecting and discovery of minerals in Israel is subject to the statutes detailed in the Mining Ordinance and Mining Amendments added thereto as well as the Mining Regulations subsequently appended.
				Since commencement of the Company's operations in January 1999, the Company has acquired all necessary permits and licenses and maintains its schedule of operations determined in accordance with these licenses by the mining Inspector in the National Infrastructures Ministry.
				Prospecting permit:
				A prospecting permit grants to its holder the right to enter any area included in the permit, in order to verify the presence or absence of minerals in the area and to dig up to two meters and tunnel up to a depth of ten meters. A prospecting permit holder is not allowed to drill or perform any other actions that have the intent or directly result in removal of minerals, unless other special terms were designated by the Inspector. The prospecting permit is also limited in regard to the exploration area and to the minerals that may be prospected. The permit does not grant exclusive rights to its holder in regard to the area and to the minerals that are permitted to be prospected. The prospecting permit is for an initial twelve month period and may then be renewed for an unlimited amount of months, subject to terms and conditions to be determined. Concurrently, the prospecting permit is not transferable.

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 22:-	COMMITMENTS AND LIENS (cont.)
	c.	Information in Regard to Exploration and Prospecting Permits (cont.):
		Exploration permit:
		An exploration permit grants exclusive rights to its holder for exploring in the area designated in the permit.  An exploration permit may cover an area up to 500 sq. km. and is valid for a two-year period. The holder of an exploration permit is required to employ expert geologists and other trained individuals who are approved by the Inspector and have been hired to explore in accordance with the general guidelines published periodically by the Inspector. In addition, these individuals explore the rocks, minerals, quarries, ground and water supply in the area in accordance with the Inspector's opinion and they furnish reports, maps or other information as requested.
		The Inspector has the right to nullify an exploration permit, completely or partially, without any compensation to the holder of the permit, in the event that the Inspector determines that the holder of the exploration permit is not conducting a survey of the area with proper expertise, as required by the Ordinance and instructions of the Inspector.
		Prospecting License:
		Subject to the limitations designated in the Ordinance and in the event that the prospecting that is conducted in accordance with the prospecting permit is completed satisfactorily, the holder of a prospecting permit may request a "prospecting license" for certain areas that he chooses from those areas designated in the prospecting permit. The Inspector may choose to grant a prospecting license to an individual, subject, inter alia, to the fact that this person holds an exploration permit or a prospecting permit for the area that he requested and that this individual presented sufficient proofs that the minerals for which he wants to explore do exist in the requested license area.
		In the event that the prospecting is for non-precious quarries, the prospecting license area will not exceed 1% of the prospecting permit area granted to the holder. In the event that the prospecting is for precious stones, then the prospecting license area will not exceed 0.5% of the prospecting permit area. (Precious stones are defined in the Ordinance as including gems, as well as diamonds, precious metals and metal ores.) In the event that the requestor does not hold a prospecting permit, then the area requested will not exceed 50 hectares (0.5 sq. km) for exploration of non-precious minerals; and will not exceed 20 hectares (0.2 sq. km.) if the individual wishes to explore for precious minerals in the determined area.
		A prospecting license is granted for a period from one up to five years. However, in the event that the license is granted for a period of less than one year, then the Inspector may decide to renew the license for a period of up to five years.

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 22:-	COMMITMENTS AND LIENS (cont.)
	c.	Information in Regard to Exploration and Prospecting Permits (cont.):
		A prospecting license grants to its holder the exclusive right to explore the designated area and for this purpose, he is permitted, inter alia, to dig, drill or perform other work required to determine whether the area contains "sufficient quantities" of minerals for which the license was granted (that would enable continued operations on a commercial level) and to establish and maintain machinery and equipment and pave roads necessary for performance of the exploration.
		The holder of a prospecting license is required to operate efficiently and with proper expertise. Failure to conform to these requirements can result in the nullification of the license. The transfer to a third party of the license or any other right granted therein is subject to obtainment of written consent from the Inspector.
	d.	Consultation agreements:
		On November 27, 2016 the Company contracted with GEM Global Yield Investment Fund (hereinafter - "GEM") in order to receive a framework for capital withdrawals in a scope that is not in excess of £ 7 million subject to completion of the stock issuance in London.
		As compensation for each withdrawal, the Company will issue to GEM ordinary shares at a price per share that is equivalent to 90% of the average market price for the shares during the 15 days subsequent to notice of the withdrawal. In addition, the Company is obligated to pay GEM a commission in the amount of £140 thousand that will be paid subsequent to a year from the issuance date, in the event that the Company will decide that it is interested in bringing to fruition the contract and subject to signing of a detailed contract, as abovementioned.

NOTE 23:-	LOSS PER SHARE
					Year Ended December 31,
					2017		2016		2015
			Comprehensive loss for the year (NIS in thousands)		(16,258)		(549)		(310)
			Weighted number of Ordinary shares		9,548,938		9,387,600		9,387,600
			Basic and diluted loss per share (in NIS)		(1.703)		(0.058)		(0.033)

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 the use of financial instruments:
			•	Credit risk
			•	Liquidity risk
			•	Market risk
			This Note will render information in regard to Company exposure for each of the risks abovementioned, 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 and control while supervising the risks and compliance with limitations. The policies and methods for risk management are surveyed currently in order to reflect changes in the market conditions and the Company operations. The Company utilizes training and management procedures in order to develop a control environment that is efficient, wherein all employees understand their roles and responsibilities.
		3)	Credit risk
			Credit risks arise from cash and cash equivalents, deposits in banks and receivable balances that are as yet unpaid. Company balances of cash and cash equivalents are deposited in a bank. The Company considers credit risks for unpaid receivable balances to be insignificant.
		4)	Liquidity risk
			Liquidity risk is the danger that the Company will not be able to pay its obligations related to its financial liabilities that are cleared by cash payments or payment of another financial asset. The Company's approach to management of its liquidity risks is to assure, as much as possible, the necessary liquidity to meet its obligations on time, under ordinary terms and when pressured, without encountering undesired losses or damage to its reputation.

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 24:-

FINANCIAL INSTRUMENTS (cont.)

a.

Financial risk management (cont.)

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

5)

Market risks

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

The Company is exposed to the following risks:

Exchange rate risks:

Part of the Company's liabilities and mobilizations of capital are measured in dollars. Therefore, the Company is exposed to changes in the exchange rate of the U.S. dollar. The Company has not utilized any protective measures against this exposure.

Risks of falling market prices for diamonds, gold and precious stones:

The Company is exposed to changes in market prices for diamonds, gold and precious stones. Despite the fact that the Company is still in the pre-production stage for the minerals, significant changes in the future market prices can and may have an effect on the preparation to repay investments in exploration and mining.

b.

Interest rate risks

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

NIS

Foreign Currency

Linked to the CPI

Fixed Interest

Variable Interest

Non- Interest

Fixed Interest

Non- Interest

Total

NIS in thousands

31.12.2017

Financial Assets:

Cash and cash equivalents

6,489

6,489

Deposit in bank

173

173

Receivables

284

284

Interested party

77

77

top-co

2,342

2,342

Financial Liabilities:

Short-term credit from banks and others

205

109

314

Trade and other accounts payable

1,858

776

2,634

Long-term loans from bank and others

240

781

1,021

Financial leasing

91

91

SHEFA YAMIM (A.T.M.) LTD.

NOTES TO THE FINANCIAL STATEMENTS

NIS in thousands

NOTE 24:-				FINANCIAL INSTRUMENTS (cont.)
			b.		Interest rate risks (cont.)
						NIS									Foreign Currency
						Linked to the CPI		Fixed Interest		Variable Interest			Non- Interest		Fixed Interest		Non- Interest		Total
						NIS in thousands
		31.12.2016
		Financial Assets:
		Cash and cash equivalents															1		1
		Deposit in bank													192				192
		Receivables											270						270
		Interested party											77						77
		top-co				1,116													1,116
		Financial Liabilities:
		Short-term credit from banks and others									410				109				519
		Trade and other accounts payable											2,219						2,219
		Interested parties											1,866				336		2,202
		Long-term loans from bank and others						137			883								1,020
		Financial leasing						131											131

	c.	Analysis of sensitivity
		1)	As of December 31, 2017 and 2016, the Company has net liabilities with variable interest rates in the amounts of NIS 986 thousand and NIS 1,293 thousand, respectively.
			An increase in the market annual interest rate of 50% for the year ended December 31, 2017 is likely to increase interest expense in the amount of approximately NIS 8 thousand; to decrease net profit and shareholders' equity in the amounts of approximately NIS 8 thousand. A decrease in the market interest rate of 50% would decrease the interest and increase net profit and shareholders' equity by identical amounts. This analysis was performed assuming that there will not be any changes in other factors.
		2)	A stronger New Israel Shekel (NIS) against the U.S. dollar would increase (decrease) the shareholders' equity and net income or loss as follows. This analysis was performed assuming that all other variables, especially interest rates, will remain fixed.
					Date		5% Increase in Exchange Rate		5% Decrease in Exchange Rate
				December 31, 2017			289		(289)
				December 31, 2016			(13)		13

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.2 above. Information regarding repayment dates of long-term loans is shown in Note 14.

		f.			Changes in the liabilities resulting from financing operations
			Bank and Other Credits				Deferred Issuance Expenses		Financial Obligations at Fair Value		Loans from Interested Parties		Financial Leasing		Receipts on Account of Shares		Other		Total Flow from Financing Operations
Balance 1.1.2017			(519)				905		(504)		(3,086)		(131)		(20,498)		- . -		- . -
Consideration from issue of shares and Options (including additional paid-in capital), net															(777)		- . -		(777)
Increase in deferred issuance expenses							4,707										- . -		4,707
Repayment of loans from banks and others			205														- . -		205
Receipt of loans from interested party, net											(446)						- . -		(446)
Receipt of loans convertible to shares									(16,611)								- . -		(16,611)
Repayment of long-term loans													40				- . -		40
Interest paid									347								111		458
			205				4,707		(16,264)		(446)		40		(137)		111		(11,784)
Issue expenses attributable to P&L							(1,884)
Issue expenses attributable to paid-in capital							(4,470)
Increase in suppliers in regard to issue expenses							683
Increase in payables in regard to issue expenses							59
Conversion of convertible shares									20,518
Revaluation of finance obligations									(3,750)
Finance paid to interested parties											(292)
Conversion of a debit balance to shares											1,659
Reduction of a debit balance attributable to exploration assets											1,400
Conversion of a debit balance to the chairman of the board of directors of the top-co															(640)
Balance as of 31.12.2017				(314)			- . -		- . -		(765)		(91)		(21,275)		- . -		- . -

 

END

 

 

FR SEIEFAFASEID