CORPORATE PROFILE

Sarine Technologies Ltd. develops, manufactures, markets and sells precision technology products for the processing, grading and trade of diamonds, utilised throughout the diamond industry value chain. Following is a brief profile of our offerings. For a comprehensive description of our products and services, please refer to the Business Review section of this Annual Report.

Rough Stone Evaluation and Source Registration (the "Upstream”)

We assist diamond mining companies, also termed "producers", to evaluate and track their inventory of rough stones. Our DiaExpert® family of platforms accurately model a rough diamond's external geometry. The revolutionary Galaxy® family of internal inclusion mapping systems for rough diamonds, based on patented technology, provides high resolution (optionally at microscopic-level), fully automated, fast and comprehensive identification and mapping of a rough stone's internal features – inclusions, cracks, etc. As announced in early 2022, Sarine offers producers the unique capability of utilising these two systems and applying sophisticated software algorithms, which can discern the optimal polished diamonds derivable from the rough stone. These virtual polished stones are then priced in accordance with current price lists, generating the rough stone's realistic potential value in actual dollar terms. Thus, we provide the producer a means to fully assess the intrinsic value of its rough material. The producer can then choose what level of the available comprehensive information pertaining to the stones to provide to prospective customers. Disclosing this information reduces the buyer's risk associated with acquiring rough stones lacking full knowledge of their characteristics, and thus empowers bidders to offer a higher premium for the tendered goods. This directly yields increased profitability for the producer. In addition, the provision of such data in a digital form enables producers to reach a broader scope of potential buyers, without necessitating travel and other expenses. Various producers, as well as leading wholesalers of rough diamonds, which serve as marketing channels for smaller mines as well as conduits of rough stones in the secondary market, such as Bonas in Antwerp, Belgium, and Choron, Gem Auctions, Koin and Star Gems in Dubai, have adopted these technologies to facilitate and empower digital tenders. Additional producers and wholesalers continue to evaluate this paradigm, also due to its seamless integration with the inventory control and traceability solutions discussed in the following paragraph.

In 2022 we also launched a new system – the Sarine AutoScan™. It assists producers and manufacturers alike in the control and analysis of the overall produced/processed rough stones inventory. No less importantly, in today's value chain where the demonstration of sustainable operations is essential, the AutoScan™ provides a high-speed initial data collection point for the rough diamond's source registration for our Sarine Diamond Journey™ traceability paradigm, described in detail in subsequent sections. Capable of scanning rough diamonds of half a carat and up in under 6 seconds per stone, the Sarine AutoScan™ is now in commercial use at our service centre in India, serving as the initial data entry point for our expanding number of retail customers' traceability programmes. It will soon also be installed in Belgium, to enable Bonas to register their various mining customers' inventory's source data into the Sarine Diamond Journey™ traceability database. We expect producers will ultimately acquire the Sarine AutoScan™ system to scan diamonds at the actual mining site, to both address the growing demand by consumers for documentation of a diamond's sourcing, as well as the miner's internal need for tighter inventory control. Today, as the rough output from mines is initially registered only at the producer's central sorting facility, which may be days later following multiple shipping and handling stations, inventory loss is often significant.

Rough Diamond Polishing (the "Midstream")

Our products and services provide industry-leading automated solutions for every stage of the rough diamond polishing process:

  1. High-precision geometrical modelling and internal inclusion and tension mapping of the rough stone;
  2. Optimal planning of the cutting and polishing solution so as to derive the best possible polished gems, based on their true dollar value and market trends, or as per criteria specified by the user;
  3. Efficient laser cutting and shaping with minimal risk and loss of material; and
  4. Real-time quality control of the actual making and faceting of the polished jewel, so as to minimise and timely correct human errors.

Our aforementioned DiaExpert® family of platforms and the copyrighted Advisor® software are the de-facto worldwide standard for planning the optimal utilisation of rough diamonds, in order to produce polished gems with the highest possible values based on optimisation of the four “C” parameters (Carat, Clarity, Color and Cut) and light performance parameters.

The patented Galaxy® family of internal inclusion mapping systems for rough diamonds facilitates the optimisation of the Clarity grade of the polished diamonds, which could only be roughly estimated prior to this technology's introduction in 2010. To allow the industry to fully benefit from this cutting edge technology, various models (see the Business Review section) offer inclusion mapping of rough stones across the entire spectrum of sizes – from below 10 points (0.10 carats) to over 200 carats. To further support affordability and flexibility, we offer per-use inclusion scanning services at wholly-owned or affiliated service centres in all the major diamond polishing and trading centres – Mumbai and Surat (India), Antwerp (Belgium), Dubai, Gaborone (Botswana), Guangzhou (China), Johannesburg (South Africa), Moscow, New York, Ramat-Gan (Israel) and Windhoek (Namibia). As of 2019, our Galaxy® systems can be upgraded with an add-on hardware kit, which enables the mapping of the internal tension (stress) of the rough stone’s crystal structure, reducing the risk of damage or breakage during the cutting and polishing stages.

Our third-generation Quazer® 3 green-laser system, integrated with our planning systems by way of the Strategist® setup station, is the industry’s most cost-effective high-end solution for the laser cutting and shaping of rough stones, as well as for the initial cutting ("dicing") of CVD-type Lab-Grown (so called "synthetic") Diamonds ("LGD"). The Quazer® 3’s main advantage is its ability to perform complicated non-linear cutting, like pie sawing, with a single setup, providing more accurate results and saving significant time. We also offer rough diamond cutting and shaping services on a per-use basis at our service centres in India.

The Instructor® software assists in the real-time quality control and optimisation of the actual diamond faceting process. It specifies remedial polishing solutions, when deviations from the original planned optimal polishing solution are discerned. By re-analysing the semi-polished stone the Instructor® identifies the corrective actions necessary to re-optimise the polishing process, including application of unique asymmetrical methods, if necessary. Here too, as in planning, conventional 4Cs optimisation can be enhanced by light performance optimisation for ultimate polishing results, if so specified.

The combination of these technologies has redefined the art of diamond polishing into a science. It has raised the optimally achievable yield of the polished stones combined weights from historically around 37.5% of the rough stone’s original weight to often over 50%, a benefit nearing 33%. But no less important, it allows the manufacturer to select planning options which best suit actual demand at any given time for any specific geographic market – e.g., trading off between the polished diamond's weight, typically a key criterion in US markets, and its quality, more emphasised in Asia Pacific (APAC) markets. It also facilitates meeting any individual manufacturer's internal criteria, or their end-customer retailer's needs for polished stones sought for setting in specific lines of jewellery, so called "programmes". These technologies are equally effective on natural and lab-grown diamonds (LGD).

Polished Diamond Grading and Trade (the "Downstream")

Grading

Sarine pioneered the technology-derived automated grading of a polished diamond in 1992 with the introduction of the DiaMension® system for the grading of its Cut grade. The current generation DiaMension® HD (High Definition) and the complementing Instructor® software are today the industry’s de-facto standard for measuring a polished diamond's proportions and assessing its Cut grade worldwide. The latest derivative, the DiaMension® Axiom 3, based on revolutionary technology with micron level accuracy, was specifically developed to meet (it actually exceeds) Tiffany & Company’s ("Tiffany") most stringent requirements for extra-fine diamond quality assessment including Symmetry grading.

We introduced the industry's most accurate technological system for measuring a polished diamond's actual light dispersion ("light performance") in 2013 – the Sarine Light™. The Sarine Light™ has today become the most widely used system for light performance analysis and grading in the Asia Pacific (APAC) market – in Japan it has all but become the fifth “C”. We offer light performance grading services independently or as a key element in the Sarine Profile™, detailed below. The Sarine Light™ enables the automatic, accurate, consistent and quantified measurement of a polished diamond’s light performance, in order to provide additional criteria by which to appreciate the diamond's quality:

  • Brilliance – the intense bright light that shines from the diamond.

  • Sparkle – the dramatic flashes that burst out of the diamond.

  • Fire – the vivid colours of the rainbow that radiate from within the diamond.

  • Light symmetry – the equal distribution of the light that reflects from the diamond.

In 2017 we announced the world's first automated method to derive a polished diamond's Clarity grade, as well as a system for automatically discerning its Color grade, based on two additional cutting-edge platforms, the Sarine Clarity™ and the Sarine Color™, powered by sophisticated artificial intelligence (“AI”) based algorithms. The ability to provide technologically-derived automated grading of a polished stone's Clarity is an industry first. Clarity grading is a very complex multi-dimensional classification. It is dictated by the number of inclusions identified in the stone under 10-times magnification, their sizes, types and locations, along with other parameters. Clarity grading has always been a subjective and manual labour-intensive process. Typically two graders manually grade each stone, and it is not unusual for a third expert opinion to be required, if the initial two do not agree. Even so, manual Clarity grading is not consistent. It is not uncommon to have significant disparities between diverse parties' opinions on the prescribed grade, often resulting in it being contested. Our analyses have shown that a statistically significant reference team of proficiently trained graders will often assess a stone's Clarity with variances spread over two or even three different grades. The utilisation of technology enables more accurate, objective and consistent grading, which, as the AI-based algorithms are self-learning, continuously improves over time. We are already providing numerous customers with our automated grading, including luxury brands (e.g., Boucheron, as announced in early 2022), and are working with others to adapt our grading to their specific guidelines and criteria. We have also entered into a joint initiative with China's largest and most important gemmological laboratory, the National Gemstone Testing Center (NGTC), in order to develop automated grading standards for a polished diamond's 4Cs and its light performance (the latter already released in 2022) for the Chinese trade.

In 2020 we announced the next revolution of polished diamond grading – e-Grading™. Currently in commercial rollout in India, our above-mentioned hardware platforms and AI-based software, enhanced by unique in-process inter-system control and verification software, allow on-site grading, replacing the need to send stones offsite to third-party gemmological laboratories. This provides a midstream polisher a number of key benefits:

  1. Significantly less direct costs, as the grading is executed by less-skilled personnel operating equipment, rather than by highly-skilled gemmologists;
  2. Virtually no indirect costs – no shipping, insurance, etc.;
  3. A substantially shorter process – minutes to hours vs. days to weeks; and
  4. Operational flexibility – a manufacturer can independently prioritise his stones' grading sequence and schedule, as necessary to meet delivery deadlines, etc.

e-Grading™ will also facilitate the significant expansion of the New York based gemological laboratory, the Gem Certification and Assurance Lab, GCAL, with which we are partnering and in which we intend to take a majority stake, as announced. To guarantee its impeccable record of consistent quality work, GCAL has always operated out of a single location in New York. However, by implementing Sarine's unique AI-derived cloud-based automated e-Grading, GCAL will be able to expand its services globally to diamond centres in India, Botswana and Dubai. It will also allow GCAL to significantly develop its services to U.S. retailers and wholesalers, without compromising its renowned stringent levels of quality and consistency and without incurring the additional costs of training and retaining numerous highly qualified gemmologists and accommodating them with expensive work space in the centre of New York City.

e-Grading™ is also uniquely suitable to LGD grading, as its lower cost allows its commercially efficient application to the lower-valued LGD, and what is more natural than grading a stone created by technology using technology!

Ultimately, we intend to facilitate the automated on-site fine-sorting of key parameters of a polished diamond in accordance with industry-accepted criteria e.g., “eye-clean”, “no black inclusions”, “no inclusions under the table”, "no milkiness", issues of tinge, etc., so as to facilitate more accurate matching to the retail customer's needs, reducing rejects and bolstering profitability.

Retail Trade

We provide technologically advanced standard-setting solutions for key aspects of the polished diamond retail trade, whether natural stones or LGD. In today's evolving retail world, channel and product branding and differentiation, as well as providing a captivating digital experience on an online portal, are key to a retailer's success. In the 2022 holiday season online sales grew by just over 3.5%. This continued expansion followed on significant growth by over 25% in 2021 and phenomenal growth of almost 50% in 2020, primarily as a solution to Covid-19 related impediments to traditional retail sales. The ability to create a unique story online showcasing your polished diamond and demonstrating its unique features, distinguishing it from near-commoditised standard cuts and stones, are becoming universal goals amongst high end luxury brands, as well as other retailers and e-tailers alike. Non-intuitive data, as formulated in the historic 4Cs, are no longer sufficient for the younger generation of internet and social media savvy buyers.

Our pioneering Sarine Profile™ addresses the retailers' needs for a compelling online presence, by providing a suite of tools supporting the presentation of engaging imagery and video information pertaining to the offered diamond's appearance, beauty and quality. The Sarine Profile™ allows the wholesaler and retailer to display their inventory according to their own specific branding goals, as best suited to the merchandise being sold and the market in which it is sold. Each user, whether wholesaler or retailer, online or brick and mortar by nature, can create its unique branding message by utilising our various tools:

  1. Imaging, video or still, as provided by the Sarine Loupe™, at various levels of 3 to 40 times magnification and from various simulated distances and perspectives;
  2. Light performance video analyses and grading, as provided by the Sarine Light™;
  3. Other graphic information such as
    1. Hearts and Arrows depictions;
    2. Cut proportions in 2D or 3D;
    3. Laser inscription viewing; and more.

The Sarine Profile™, of course, also presents the stone’s 4Cs and its provenance information, textually and graphically, as generated by our Sarine Diamond Journey™ (see below). More uniquely, the Sarine Profile™ can integrate into all the above the retailer's promotional branding material and even the end-consumer's personalisation message (e.g., proposal) to the ultimate recipient of the jewellery.

The Sarine Profile™ is distinctive in that it caters to the new generation of buyers' engrossment with their mobile devices and their passion for social media, allowing retailers to connect with them and engage them on their media of choice. Doing so enables online transactions with a completely new level of confidence. But it also enhances the in-store buying experience by empowering the consumer to make a truly informed decision.

In today's fastidious, even "activist", marketplace, responsible and sustainable sourcing and manufacturing are also key to a brand's success. The Sarine Diamond Journey™ addresses this need by uniquely providing concrete verifiable documentation of the rough diamond's provenance and its audited journey from rough stone to polished jewel. Critical to its unique proposition as the only provenance solution in the industry based on factual data (and not declaratory by nature), is Sarine's access to the actual data generated during the entire polishing process, enabled by Sarine's uniquely extensive presence in the diamond industry's midstream, wherein the transition from rough stone to polished diamond occurs. In 2022, 35 million rough diamonds were scanned for inclusion mapping using our Galaxy® -family systems (up from 33 million in 2021, notwithstanding the overall reduction in the number of rough diamonds entering the value chain pipeline as a result of Ukraine-related U.S. sanctions on the primary Russian producer, Alrosa). Over 70 million rough diamonds were planned using our online Advisor® cloud-based software (including our older versions of the Advisor® software, which are not online, we estimate over 100 million stones in total were planned on our systems in 2022). These systems can record the actual planning stages for the Sarine Diamond Journey™, thus exclusively providing a comprehensive actual testimonial of the polished stone's derivation, with no need to rely on declaratory information provided by the involved parties.

The rough stone's mined source data is, preferably, provided by the producer, either directly or by its wholesale channel of distribution, using our scanning technologies, e.g., the Sarine AutoScan™. If not, the necessary data pertaining to the rough diamond's weight, form, inclusions, etc., are derived upon receipt at the polishing facility by our scanning technologies integrally utilised for the planning process, and its mined source is manually verified from official data (e.g., customs manifests, Kimberly Process documentation, etc.). Already today various mines collaborate with us directly, or indirectly via their distribution channels, to provide mine/source information for various categories and sizes of their rough stones.

The Sarine Diamond Journey™ verifies for the consumer where their diamond was mined and how and by who it was polished, reinforcing their confidence in the sustainable sourcing of their unique jewel. Beyond that, the Sarine Diamond Journey™ also offers consumers insight into the sophisticated technology and painstaking craftsmanship that went into creating their unique gem in an engaging visual format. The Sarine Diamond Journey™ was adopted in 2022 by leading brands – the Maison Boucheron and the Aura blockchain consortium, a not-for-profit organisation aimed at providing tools to enhance transparency and trust in the luxury industry, for a greater good, comprised of LVMH, Cartier, Prada and OTB. Other high-end luxury brands are also evaluating our solution, including executing actual pilot projects. We expect additional adoptions during 2023.

Upon the polishing process's completion, proprietary technology for “fingerprinting” the polished stone, TruMatch™, can also be engraved on the stone without denigrating from its beauty or value. TruMatch™ can subsequently be used to singularly verify the identity of the polished stone in the retail outlet, whether it is loose or mounted in a setting, and link it to its Sarine Diamond Journey™ record, so as to further bolster the consumer's confidence in his/her stone's provenance. This so-called digital twin, for the authentication of the purchased item, is readily retrievable, and can also be utilised by retailers offering extended warranties, providing cleaning and repair services or proposing "buy-up" exchanges, as well as by financial institutions or insurers in need of reliable unequivocal identification of the item.

Finally, an additional technology we offer for the retail environment is the 3D-Origin™. It is a true-to-form 3D-printed model of the rough diamond, from which the specific polished diamond was fashioned. Typically, it is offered to the consumer provided boxed together with his/her polished gem, creating a unique fascinating conversation piece.