CONSOLIDATED GEMS, INC.

For fiscal 2016, net cash used in operating activities was A$228,911 (2015: A$24,030) primarily consisting of the net loss of A$316,703 (2015: A$109,510), offset by a non-cash charge for foreign currency exchange loss of A$2,360 (2015: A$14,072), a decrease in prepayments of A$nil (2015: A$2,660), an increase in receivables and deposits of A$3,344 (2015: decrease A$(11,510))  and an increase in accounts payable and accrued expenses of A$88,776 (2015: A$57,238).  Financing activities in 2016 consisted of a net repayment of an advance of A$757,768 (2015: A$21,976 advance) from AXIS and proceeds from an issuance of shares of A$986,652 (2015: A$nil).

During the year ended December 31, 2016, AXIS provided services in accordance with the Services Agreement and incurred direct costs on behalf of the Company of A$89,182 (2015: A$(21,977)), and advanced the Company A$123,900 (2015: A$443), and the Company repaid A$970,850 (2015: A$4,300). At December 31, 2016, the amount owed to AXIS was A$330,408 (2015: A$1,088,175).

In fiscal 2016, the Company conducted a private placement and received subscriptions for 24,558,333 shares of common stock at a price of A$0.04 for A$986,652.

On July 24, 2017, the Company entered into a Term Sheet with Lior Barash, Erez Glazer, Lior Wayn, and Lior Dolfin, (collectively, the ‘’Entrepreneurs”)  for the acquisition of all of the issued shares of the Cyber Security technology business “Attofensive”, a company incorporated under the laws of Israel.