Shefa Gems Regulatory News (SEFA)

B"H

2 September 2020

Shefa Gems Ltd.

("Shefa Gems" or the "Company")

Interim Results

Shefa Gems (LSE: SEFA), a company focused on advanced exploration and development of multi-gemstone mines in Northern Israel, announces its results for the six months ended 30 June 2020.

Although a quarantine was upheld in Israel during the months of March until May 2020, due to the Covid-19 Coronavirus pandemic, forcing the company to send all employees to "unpaid leave" - that delay did not have any significant effect on the company's schedule, when the quarantine was uplifted, all the company's employees were happy to return to work in full force.

Highlights

Development Progress of the 'Kishon Mid Reach' - The first Gemstone mine in the Holy Land

H1 2020

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

· Carried out consultations in order to accelerate the regulatory process, and negotiated with service providers in accordance with the guidelines of the certificate of discovery.

Post Period

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

· Published valuation of gemstone inventory, approximately US$4.8 million.

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

Development Progress of the other potential deposits on the Carmel area and the Kishon River, for additional Diamond and Gemstone potential mines:

H1 2020

· Awarded a renewed Prospecting Permit, covering a total of 314,478 Dunams (31,447 hectares) by the Commissioner of Mines at the Ministry of Energy, Natural Resources Administration in Israel.

Post Period

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

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

Development Progress of the 'Mine to Market' marketing strategy

H1 2020

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

· The preliminary Market Test in the USA performed by the 'Heaven on Earth' jewellery collection confirmed the value of the gems from the Holy Land in line with the company's estimates

Post Period

· Commenced a programme of gem visual testing, Initial branding and exposure, partnerships to build electronic certification and collaborations with international brands.

Corporate and Financial

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

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

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

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

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

Tali Shalem, CEO of Shefa Gems, said:

"Despite the crises the company went through with the untimely demise of the founder & CEO at the end of 2019, and with the Covid-19 crisis that is still in full swing, it has been a very encouraging first half of 2020 as the Company has achieved several key milestones.

Together with our professional team, we are implementing several immediate goals, including:

· Development of commercial mining in the Kishon Mid-Reach Zone 1+2

· Development of additional prospective diamond and gemstone deposits on the Carmel area and the Kishon River

· Development of the 'Mine to Market' marketing strategy

· Promoting new financing options (for regulation, development of exploration and commercial mining, and for the necessary marketing costs)

while trying to prevent further equity dilution and reducing any costs that are not directly beneficial to the company's goals"

- Ends -

Enquiries

Notes to Editors

About Shefa Gems Ltd

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

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

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

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

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

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

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

Overview

Despite the crises the company went through with the untimely demise of the founder & CEO at the end of 2019, and with the Covid-19 crisis that is still in full swing - Yet, it has been a very encouraging first half of 2020 as the Company has achieved several key milestones.

Operational Review

Development Progress of the 'Kishon Mid Reach' - The first Gemstone mine in the Holy Land:

One of the company's immediate goals is to start commercial mining at the first gemstone mine in the Holy Land, located in the 'Kishon Mid Reach' (Zone 1+2).

The actions listed below, which were mainly carried out in the H1 of 2020, significantly advance the company to this goal:

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

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

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

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

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

In July 2020, and despite the Covid's delays, the company completed its processing and published a Summary of Pre-commercial findings from the Kishon Mid-Reach (Zone 1 + 2) as follows:

Zone 1:

9,778 carats recovered from a total of 14 bulk samples and 6,384 tons of palaeo gravels giving a raw sampling grade of 153 carats per hundred tons.

The largest gems recovered were: 33.3ct Carmel sapphire™, 13.6ct Garnet, 5.7ct Sapphire, 6.2ct Spinel, 2.8ct Hibonite and 1.7ct Ruby

Zone 2;

8,319 carats recovered from a total of 30 bulk samples and 6,094 tons of palaeo gravels giving a raw sampling grade of 136.5 carats per hundred tons.

The largest gems recovered were: 6.9ct Spinel, 5.72ct Sapphire, 5.26ct Carmel SapphireTM and a 4.1mm of Natural Moissanite, the largest natural moissanite ever found.

Valuation of Gemstones in Stock

The total quantity of gemstones currently in the Company vaults, (before RNS 4468S), extracted during the exploration performed in the Kishon Mid Reach zone 1 and 2, (pre commercial mining), was 15,573 carat (as of December 31, 2019). This is expected to yield approximately 6,000 carat after cutting and polishing. The value of the polished gemstones is estimated at approximately US$4.8 million. Cutting and polishing costs are expected to be up to US$0.2 million. 

Following the financial statements of the year 2019, published by the Company on 25 June 2020 (RNS 9695Q) where the Company's gem inventory published was 15,573 carats - The updated gem inventory, after adding the Post Period last 5 bulk samples as stated in RNS 4468S (1,466 Carat) is 17,039 carats (pre valuation)

The rarity, location and limited supply all adds significant value to the Shefa Gems' exclusive Holy Land precious Gems.

Progressing to Commercial Mining in the Kishon Mid-Reach (Zone 1 + 2)

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

An initial application for mining rights must be filed by the Company within one year of grant of the Certificate of Discovery, that is by April 2021, subject to regulatory approval, Covid's delays and funding.

Exploration in Zone 3 of the Kishon Mid-Reach

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

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

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

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

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

Development Progress of the Primary Deposits on the Carmel area and the rest of the Kishon River, for additional Diamond and Gemstone potential mines:

In addition to the significant progress carried out by the company in the Kishon Mid-Reach area as described above, and since most of the activity left in that first mine (pre-commercial mining) is mainly regulatory - another one of Shefa Gems' goals is to expand its exploration efforts in the Primary Deposits on the Carmel area, for the purpose of achieving economically proven conclusions for each of the existing potential deposits.

In order to advance this goal, the Company has performed the following actions during and after the reporting period:

Renewal of Prospecting Permit Carmel

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

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

On February 2020, the Commissioner of Mines at the Ministry of Energy, Natural Resources Administration in Israel has renewed the Company's Prospecting Permit, covering a total of 314,478 Dunams (31,447 hectares).

The permit provides the Company prospecting rights for diamonds, gold and precious stones over the permitted areas for a period of a year and entitles the Company to conduct all required actions connected with prospecting for these minerals.

This new Prospecting permit replaces the expired permits (837A12 and 899A7) and combines them into one prospecting permit instead of two after reprioritization and reducing the area of the buried anomaly of Ramot Menashe and two volcanic bodies.

Post Period - Renewal of Exploration Permit 

On July 2020 the Commissioner of Mines at the Ministry of Energy, Natural Resources Administration in Israel has renewed exploration permit 869B11 for a further year. The renewed exploration permit, 869B13, includes four volcanic bodies on Mount Carmel; RMC (Rakefet Magmatic Complex), Muhraka, Har Alon and Beit Oren, the eastern slope of Mt. Carmel, Zevulun and west Yizre'el valleys, and part of the Kishon River. 

Exploration Permit 869B13 covers a total of 173,635 Dunams (17,363 hectares) and entitles the Company to continue conducting geological exploration at the site including further drilling and excavations.

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

Target working plan for the development Progress of the Primary Deposits

Promoting a professional segregation and prioritization of each of the Primary Deposits and potential areas that has different exploration data, different percentages of certainty, different development and exploration requirements.

After producing a detailed report on each potential area, which will include development viability, regulation viability and required costs for proving profitability for each location - the company intends to:

1. By the end of 2020, to apply to the Supervisor of Mines for a renewal of the Prospecting Permit only for the locations for which the conclusion in the above report were positive, and obtain his regulatory consent to the activity required in these locations.

2. By the end of H1 2021, to apply to the Supervisor of Mines for a renewal of the Exploration Permit only for the locations for which the conclusion in the above report were positive, and obtain his regulatory consent to the activity required in these locations.

3. After receiving each of the renewed permits - Define each of these relevant locations as a separate project, with a separate budget and separate financing options.

And in this way to facilitate the financing of each of the projects separately and prevent further direct dilutions to our shareholders - All with the aim of promoting as promptly as possible the development of these additional potential mines.

Marketing

The company continues to make efforts to advance its 'Mine to Market' development strategy, which includes 3 main goals:

· Increasing profitability percentages

· Maintaining the gem's preferable market value

· Maintaining brand values and ownership

In February 2019, the company launched a preliminary Market Test in order to obtain preliminary understanding of the market's ability to accept the valuation of the Holy Land Gems, and in particular for the new gems: the Carmel sapphire™ and the Natural Moissanite.

This preliminary Market Test was performed by the 'Heaven on Earth' jewellery collection designed by the international jewelry designer Mr. Yossi Harari and sold mainly at his flagship store in Dallas USA.

As of the date of this reports, it can be said that the customer (the American at this test), estimates the value of the gems from the Holy Land according to the company's estimates and even more.

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

Promoting world recognition:

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

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

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

Target working plan of the 'Mine to Market' development strategy

· Gem Visual Testing -

The company began in August 2020 to perform testing and examination processes in order to test what are the maximum visual qualities of each of the company's gem types.

In order to bring the natural visual qualities of the raw gem to a state of perfect radiate luxury gem - the treatment on the gem includes high-level polishing and in some cases soft heating in favor of enhancing the natural color or transparency.

The testing process can take up to 3 months (depends on the type of gem and the bast results) - At the end of which the company will receive a report that clarifies what is required (type of polish / time of heating) in order to achieve the most luxurious and marketable visual look for each of the gems types in the company's mine.

The cost at this stage of testing is negligible. The costs of the above treatment at the commercial quantities stage will be calculated and clarified after receiving the test results.

Good results can have a significant impact on profitability and marketing capabilities.

· Electronic Certification -

With changes in market demand, retailers are recognizing the need for transparency at every stage of the supply chain. As part of their in-store experience, consumers are gaining access to new technologies that offer transparency about the diamond/gemstone journey from the mines to the retailers.

Most of these technologies have been developed over the past few years. Blockchain technology, for example, is known for its apparent resistance to being tampered with. This technology is now being used to provide secure supply chain.

According to market developments, it seems that in the near future the existence of such a certificate will be the gem's only ticket to the market.

Additional benefits to building the right certificate for our stones already at this stage:

· Market entry ticket

· Unbreakable reliability

· Value Added Protection (Proof of Source)

· Protection of exclusivity

Additional future benefits at the commercial stage:

· Extra income (possibility of receiving a certain percentage every time a certificate is checked by a hand in a chain).

· Financial instrument (a valuable blockchain).

The company is currently negotiating with companies that provide the construction of the electronic certificates, and decisions will be made accordingly regarding the date of implementation and the method of financing.

· Initial Branding and Exposure -

Significant exposure requires significant expenses. Had it been made directly by the company - it could have significantly impaired profitability. That is, the company is interested that the significant marketing expenses will be reduced from the jewelry margin and not from the gem direct profits.

This conclusion requires the company to consider options for cooperation on a percentage basis or otherwise, with marketers, manufacturers, and retailers. And/or with big international brands that already have significant exposure and relevant audiences.

However and in order to reach those collaborations, we need to perform initial branding and exposure, and building the brands special "story". (ie graphics, copywriting, PR, registration, atc.).

The branding strategy will mainly transfer:

· The holy Land origin of the gems - relevant to all believers.

· The jewelry design and branding will also be inspired by spiritual elements related to the universal Bible.

Both fits perfectly to the spiritual wave going through the world in the face of the medical and economic crisis, and the need of customers for a product with spiritual added value within the luxury market.

On the basis of that branding we will prepare a "pitch" that will meet the standards of the international preferable collaborations.

The company is currently negotiating with companies that provide the services required, and decisions will be made accordingly regarding the date of implementation and the method of financing.

Only after implementing the Gem Visual Testing and Initial Branding and Exposure, we can proceed to Promoting international collaborations.

(Electronic Certification can be done in parallel)

Shefa Gems' first mine is expected to produce only about 3 million carats of gems. This limited supply combined with the exclusivity - places the brand as very attractive for the purposes of these collaborations.

· Financing marketing costs -

The foregoing relates both to the preliminary expenditure specified above, and to the production, marketing and distribution expenses required at the commercial stage.

The company intends to conduct (parallel to the above listed actions) a comprehensive professional examination of the advantages and disadvantages, in relation to profitability, taxation, benefits, scope of operation, etc. in order to make the best decision regarding future collaborations and financing options.

The basic guidelines for any decision made in accordance with the above conclusions, will include:

· Maintaining the gem's preferable market value

· Maximizing profitability percentage from the margin between the gems and the jewelry

· Maintaining brand values (will not violate Jewish sentiments)

· Maintaining brand ownership (Sales only under the exclusive brand)

Corporate Review

Appointment of new CEO

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

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

Board changes and AGM results

At the Annual General Meeting of the Company, held on August 5, all resolutions were duly passed, Including:

1. The re-appointment of Barzely & Co. as the Company's auditors and to authorise the directors of the Company to determine their remuneration.

2. The amendment of section 41 in the Company's Articles of Association (stating that: The Board of Directors of the Company shall consist of not less than four Directors nor more than eight Directors (including External Directors).

3. To re-elect Mr. Michael Rosenberg as an executive director of the Company. (Mr. Michael Rosenberg also serves as the Chairman of the company).

4. To re-elect Mr. Yosef Itshak Taub as an executive director of the Company. (Mr. Yosef Itshak Taub also serves as the Business Development Manager of the company).

5. To re-elect Mr. David Israel Nachshon as a non-executive director of the Company.

6. To re-elect Mr. Gershon Fraenkel as a non-executive director of the Company.

7. To re-elect Mr. James Campbell as a non-executive and external (Independent) director of the Company.

8. To re-elect Mrs. Nathalie Schwarz as a non-executive and external (Independent) director of the Company.

9. To confirm the appointment of Mr. Zvi Nemeth (ADV) as a non-executive director of the Company (Instead of Mr. Ehrlich, who did not renew his candidacy).

10. To appoint Mr. Natan Drukman (ADV) as a new executive director of the Company (Mr. Drukman also serves as the company legal secretary).

The Covid-19 Coronavirus Pandemic

During January 2020 the Covid-19 Coronavirus was released in China and has since spread worldwide, including in Israel, leaving chaos and uncertainty wherever it has touched civilization. The scope pf economic activity has been sharply reduced, including in Israel, and there exists a suspicion that there will be a global recession as a result. As part of the coping mechanism and efforts to restrain the virus from spreading, steps are being implemented, including in Israel, that are drastically limiting mobility and social gatherings.

Preparations of the Company for further expansions in the global economic environment as well as possible implications for these developments on Group operations are not under Company control, are uncertain and are based on information presently available to the Company, that is based, inter alia, on information in Israel and worldwide as well as on guidelines of the relevant Authorities that could possibly change at any moment. As long as the global crisis continues for a lengthy period of time, this is likely to result in significant deterioration of the operating results for the Company, including its financial ability to cope with the situation

Effect of the Coronavirus on the Company

The Company's recent efforts revolve around prompting extensive exploration work and working with the various Authorities in order to advance the planning and regulation procedures that will enable it to commence commercial mining. The Company does not know, at this point, what the effects of the Coronavirus will be on the time schedule for advancing and assumes that there will be minor delays in the scheduling, that are not within the Company's control.

During the months of March until may 2020, the company's employees were required to go on "unpaid leave" because the state demanded the closure of all factories and offices (state quarantine). But immediately when the quarantine was uplifted, all the company's employees returned to work in full force. And that delay did not have any significant effect on the company's schedule.

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

Financial Review

Over the last six months the Company recorded a comprehensive loss for the period, of TNIS (in thousands) 2,129 (2019: TNIS 2,573) equating to a loss per share of NIS 0.012 (2019: 0.017). The loss was attributed to general and administrative expenses, and financing expenses due to adjustment of the value of a financial liability at fair value. As of June 30, 2020, the Company's cash and cash equivalents stood at TNIS 1,034 (2019: TNIS 2,448).

General and administrative expenses

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

Financial expenses

Financing expenses were maintained at the same level.

Loan Conversions

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

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

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

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

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

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

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

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

Outlook

Looking ahead, the Company is focused on: Commencing commercial mining in the Kishon Mid-Reach Zone 1+2; Development of other potential Deposits on the Carmel area and the Kishon River, for additional Diamond and Gemstone potential mines; Development of the 'Mine to Market' marketing strategy; And facilitate the financing options.

Target H2 2020 Milestones: (Subject to regulatory approval, Covid's delays and funding)

· Progressing to Commercial Mining in the Kishon Mid-Reach (Zone 1 + 2) by promoting regulation procedures, namely filing initial application for mining rights by April 2021.

· Obtaining a comprehensive target working plan for the development of the Primary Deposits and other potential locations in the Prospecting Permit area by the end of 2020 - and accordingly  apply to the Supervisor of Mines for a renewal of the Prospecting Permit only for the locations for which the conclusion in the report were positive, and obtain his regulatory consent to the activity required in these locations.

· Obtaining a comprehensive target working plan for the development of the Primary Deposits and other potential locations in the Exploration Permit area by the end of H1 2021- and accordingly  apply to the Supervisor of Mines for a renewal of the exploration Permit only for the locations for which the conclusion in the report were positive, and obtain his regulatory consent to the activity required in these locations.

· Promoting the Target working plan of the 'Mine to Market' marketing strategy by the following actions to be implemented by the end of 2020:

o Obtaining the conclusions of the gem visual testing.

o Prompt negotiations with companies that provide the construction of an electronic certificates.

o Prompt negotiations with companies that provide the services required for the Initial Branding and Exposure.

· Promoting new financing options (for regulation, development of exploration and commercial mining, and for the needed marketing) while trying to prevent further direct dilution, and reducing costs that are not beneficial to the company's goals.

B"H

SHEFA GEMS LTD.

[Formerly Shefa Yamim (A.T.M.) LTD.]

CONDENSED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2020

(UNAUDITED)

Jerusalem, August 31, 2020

REVIEW REPORT OF INDEPENDENT AUDITORS

To the Shareholders of

SHEFA GEMS LTD.

[Formerly Shefa Yamim (A.T.M.) LTD.]

Introduction

We have reviewed the accompanying condensed interim financial statements of SHEFA GEMS LTD. (hereinafter - "the Company") [Formerly Shefa Yamim (A.T.M.) LTD.] comprising the condensed interim statements of financial position as of June 30, 2020 and the related condensed interim statements of comprehensive loss, changes in shareholders' equity and cash flows for the six month period then ended. The board of directors and management are responsible for the preparation and presentation of these condensed interim financial statements in accordance with IAS 34, "Interim Financial Reporting." Our responsibility is to express a conclusion on these interim consolidated financial statements based on our review.

Scope of the Review

We conducted our review in accordance with the Israeli Review Standard (2410), "Review of Financial Information for Interim Periods Performed by the Independent Auditor of the Entity" of the Association of Certified Public Accountants in Israel. A review of financial information for interim periods consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Auditing Standards accepted in Israel. Consequently, it does not enable us to obtain assurance that we would become aware of all the significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to suspect that the financial information abovementioned was not prepared, from all significant aspects, in accordance with International Accounting Standard 34.

Without qualifying our conclusion, we draw attention to Note 1c of the condensed interim financial statements - the Company is in the prospecting and exploration stage for diamonds, precious stones and gold and the Company has not as yet commenced commercial mining. Concurrently, the Company has a deficit in working capital as of June 30, 2020 in the amount of NIS 447 thousand. Financing of its operations has, until now, been performed by infusions of capital and/ or loans and the continued operations are dependent on further mobilizations.

In view of prior experience, the Company estimates that the financial sources will be mobilized to complete the explorations, but there is no certainty in this regard since mobilizations are dependent on additional sources. These facts raise significant doubt as to the continued existence of the Company as a "going concern."

These condensed interim financial statements do not include any adjustments to the value of the assets and liabilities and their classifications that would possibly be necessary in the event that the Company cannot continue as a "going concern."

Barzily & Co.

Certified Public Accountants

A Member of MSI Worldwide

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

In NIS in thousands

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

In NIS in thousands [except for loss per share]

* Restated.

The accompanying notes to these condensed interim financial statements are an integral part thereof.

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

In NIS in thousands

Audited

The accompanying notes to these condensed interim financial statements are an integral part thereof.

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

In NIS in thousands

The accompanying notes to these condensed interim financial statements are an integral part thereof.

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

In NIS in thousands

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

The accompanying notes to these condensed interim financial statements are an integral part thereof.

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

In NIS in thousands

NOTE 1:- GENERAL

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

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

In NIS in thousands

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (cont.)

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

In NIS in thousands

 NOTE 3:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD AND SUBSEQUENTLY

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

In NIS in thousands

NOTE 3:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD AND SUBSEQUENTLY (cont.)

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

In NIS in thousands

NOTE 3:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD AND SUBSEQUENTLY (cont.)