Shefa Gems Regulatory News (SEFA)

Shefa Yamim (A.T. M.) Ltd

Avi Taub, Chief Executive Officer

+44 20 7618 9100

VSA Capital Limited - Financial Adviser and Broker

Andrew Raca, Stephanie Jury

+44 20 3005 5000

Luther Pendragon

Harry Chathli, Ana Ribeiro, Alexis Gore

+44 20 7618 9100

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

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)

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.

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

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)

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

- . -

- . -

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.

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).

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.

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.

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.

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.

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

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).

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.

d.

Issue of a package of securities

When securities are issued as a package, the consideration received is allotted (prior to issue expenses) to securities issued as a package in conjunction with the following order of allocation: financial derivatives and other financial items that are presented at fair value periodically. Subsequently, the fair value of the financial liabilities is determined, with the allotted consideration for capital instruments determined as the remaining value. Issue costs are allotted to each component in accordance with the ratio of amounts determined for each component of the package.

e.

Impairment in value of assets

At the close of every reporting period, the Company examines the book value of its tangible assets to determine any signs of loss from impairment in value of these assets. In the event that there are signs of impairment, the Company examines the realization value of the designated asset in order to determine the loss from impairment, if any.

The realization value is the higher of 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.

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.

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.

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.

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

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.

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.

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."

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

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