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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED: September 30, 2022

 

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

Commission File Number: 333-240161.

 

CREATIONS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   84-2054332
(State or other jurisdiction of
incorporation or organization)		   (I.R.S. Employer
Identification No.)

 

c/o Sichenzia Ross Ference LLP

1185 Avenue of the Americas, 31st Floor

New York, NY 10036

(Address of principal executive offices, Zip Code)

 

212-930-9700

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Ticker symbol(s)   Name of each exchange on which registered
N/A   N/A   N/A

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
    Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

 

As of November 21, 2022, there were 3,544,242 shares of common stock, par value $0.0001 per share, issued and outstanding.

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page
PART I  
     
Item 1. Financial Statements. F-1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 2
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 5
Item 4. Controls and Procedures. 5
     
PART II  
     
Item 1. Legal Proceedings. 6
Item 1A. Risk Factors. 6
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 6
Item 3. Defaults Upon Senior Securities. 6
Item 4. Mine Safety Disclosures. 6
Item 5. Other Information. 6
Item 6. Exhibits. 6
     
SIGNATURES 7

 

i

 

 

CREATIONS INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2022

 

 

 

 

CREATIONS INC. AND ITS SUBSIDIARIES

 

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2022

 

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

  Page
   
Condensed Consolidated Statements of Financial Position F-2
   
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) F-3
   
Condensed Consolidated Statements of Changes in Stockholders’ Equity F-4
   
Condensed Consolidated Statements of Cash Flows F-5
   
Notes to the Condensed Consolidated Financial Statements F-6- F-10

 

F-1

 

 

CREATIONS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(U.S. dollars in thousands except share data)

 

         
   September 30,   December 31, 
   2022   2021 
   Unaudited     
ASSETS          
Current assets          
Cash and cash equivalents   487    503 
Marketable securities   169    152 
Bank deposit   18    47 
Accounts receivable   104    102 
Other current assets   41    28 
Total current assets   819    832 
           
Non-current assets          
Property and equipment, net   37    44 
Intangible assets, net   220    309 
Goodwill   570    649 
Loans granted to stockholders   12    14 
Operating right of use assets   9    55 
Total non-current asset   848    1,071 
           
Total assets   1,667    1,903 
           

LIABILITIES AND STOCKHOLDERS’ EQUITY

          
Current liabilities          
Accounts payable   57    92 
Related parties   108    120 
Operating lease liability – current portion   9    55 
Total current liabilities   174    267 
           
Non-current liabilities          
Deferred taxes   51    71 
Total non-current liabilities   51    71 
           
Total liabilities   225    338 
           
Stockholders’ Equity          
Common Stock of $0.0001 par value - Authorized: 100,000,000 shares at September 30, 2022 and December 31, 2021; Issued and outstanding: 3,544,242 shares at September 30, 2022 and December 31, 2021   -    - 
Additional paid-in capital   3,162    3,162 
Accumulated other comprehensive income (loss)   (28)   155 
Accumulated deficit   (1,692)   (1,752)
Total stockholders’ equity   1,442    1,565 
           
Total liabilities and stockholders’ equity   1,667    1,903 

 

The accompanying notes are an integral part of the condensed consolidated financial statements

 

F-2

 

 

CREATIONS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(U.S. dollars in thousands except share data)

 

   2022   2021   2022   2021 
  

For the period of

three months ended

September 30,

  

For the period of

nine months ended

September 30,

 
                 
   2022   2021   2022   2021 
   Unaudited   Unaudited 
                 
Revenues   627    564    1,750    1,455 
Cost of revenues   (351)   (305)   (964)   (849)
Gross profit   276    259    786    606 
                     
Operating expenses:                    
Marketing expenses   (47)   (38)   (173)   (159)
General and administrative expenses (related parties $79, $78, $284 and $304)   (148)   (161)   (533)   (611)
                     
Operating income (loss)   81    60    80    (164)
                     
Other loss from marketable securities   (21)   -    (30)   - 
Financial income (expenses), net   (2)   (1)   1    2 
Income (loss) before taxes on income   58    59    51    (162)
                     
Income tax benefit   3    5    9    13 
                     
Net income (loss) for the period   61    64    60    (149)
Other comprehensive income (loss): Foreign currency translation adjustments   (19)   11    (183)   (4)
Comprehensive income (loss)   42    75    (123)   (153)
                     
Basic and diluted net income (loss) per share   0.02    0.02    0.02    (0.04)
                     
Weighted average number of Common Stock used in computing basic and diluted loss per share   3,544,242    3,544,242    3,544,242    3,544,242 

 

The accompanying notes are an integral part of the condensed consolidated financial statements

 

F-3

 

 

CREATIONS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(U.S. dollars in thousands except share data)

 

   Number   Amount   Capital   Income   Deficit   equity 
  

 

 

Common Stock

  

 

Additional paid-in

  

Accumulated other comprehensive

  

 

 

Accumulated

  

 

Total stockholders’

 
   Number   Amount   Capital   Income   Deficit   equity 
   Unaudited 
                         
Balance as of July 1, 2021   3,544,242    -    3,162    91    (1,862)   1,391 
                               
Foreign currency translation adjustments   -    -    -    11    -    11 
Net income for the period   -    -    -    -    64    64 
Balance as of September 30, 2021   3,544,242    -    3,162    102    (1,798)   1,466 

 

  

 

 

Common Stock

  

 

Additional paid-in

  

Accumulated other comprehensive

  

 

 

Accumulated

  

 

Total stockholders’

 
   Number   Amount   Capital   Income (loss)   Deficit   equity 
   Unaudited 
                         
Balance as of July 1, 2022   3,544,242    -    3,162    (9)   (1,753)   1,400 
                               
Foreign currency translation adjustments   -    -    -    (19)   -    (19)
Net income for the period   -    -    -    -    61    61 
Balance as of September 30, 2022   3,544,242    -    3,162    (28)   (1,692)   1,442 

 

  

 

 

Common Stock

  

 

Additional paid-in

  

Accumulated other comprehensive

  

 

 

Accumulated

  

 

Total stockholders’

 
   Number   Amount   Capital   Income   Deficit   equity 
   Unaudited 
                         
Balance as of January 1, 2021   3,544,242    -    3,162    106    (1,649)   1,619 
                               
Foreign currency translation adjustments   -    -    -    (4)   -    (4)
Net loss for the period   -    -    -    -    (149)   (149)
Balance as of September 30, 2021   3,544,242    -    3,162    102    (1,798)   1,466 

 

  

 

 

Common Stock

  

 

Additional paid-in

  

Accumulated other comprehensive

  

 

 

Accumulated

  

 

Total stockholders’

 
   Number   Amount   Capital   Income (loss)   Deficit   equity 
   Unaudited 
                         
Balance as of January 1, 2022   3,544,242    -    3,162    155    (1,752)   1,565 
                               
Foreign currency translation adjustments   -    -    -    (183)   -    (183)
Net income for the period   -    -    -    -    60    60 
Balance as of September 30, 2022   3,544,242    -    3,162    (28)   (1,692)   1,442 

 

The accompanying notes are an integral part of the condensed consolidated financial statements

 

F-4

 

 

CREATIONS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

 

   2022   2021 
  

For the period of nine months ended

September 30,

 
   2022   2021 
   Unaudited 
Cash flows from operating activities:          
Net income (loss)   60    (149)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:          
Depreciation and amortization   57    55 
Amortization of operating right of use asset   46    42 
Other loss (income) – capital gain from marketable securities   30    (2)
Deferred taxes   (9)   (12)
Changes in operating assets and liabilities:          
Accounts receivable   (11)   (66)
Other current assets   (21)   32 
Accounts payable   (25)   70 
Operating right of use liability   (46)   (42)
Related parties   4    - 
Net cash provided by (used in) operating activities   85    (72)
Cash flows from investing activities:          
Maturity of (investment in) bank deposit   26    (12)
Investment in marketable securities, net   (69)   (85)
Purchase of property and equipment   (3)   (4)
Net cash used in investing activities   (46)   (101)
           
Foreign currency translation adjustments on cash and cash equivalents   (55)   - 
           
Change in cash and cash equivalents   (16)   (173)
Cash and cash equivalents at beginning of the period   503    625 
Cash and cash equivalents at end of the period   487    452 

 

The accompanying notes are an integral part of the condensed consolidated financial statements

 

F-5

 

 

CREATIONS INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in thousands)

 

NOTE 1- GENERAL

 

  A. Creations Inc. (hereinafter: the “Company”) was established as a private company under the laws of the State of Delaware on May 13, 2019. The Company’s core business is providing investment services for Israeli mutual funds. It operates as a portfolio manager through its wholly owned subsidiaries.

 

The Company has three wholly owned subsidiaries. Ocean Yetsira Ltd. (previously called Yestsira Holdings Ltd. (until April 28, 2021)) (hereinafter: “Ocean Yetsira”) which was established as a private Israeli corporation in December 2017, Yetsira Investment House Ltd. (hereinafter: “Yetsira”) which was established as a private Israeli corporation in November 2016 and Ocean Partners Y.O.D.M (hereinafter: “Ocean”) following its acquisition.

 

On January 29, 2018 Ocean Yetsira became the sole stockholder of Yetsira by means of a share exchange agreement (the “Yetsira Exchange”), under which the issued and outstanding shares of Yetsira were exchanged for shares of Ocean Yetsira on a one-to-one basis.

 

On July 3, 2019 the Company entered into a share exchange agreement (the “Holdings Exchange”) pursuant to which all of the outstanding shares of Ocean Yetsira were exchanged for shares of the Company at a rate of 1:809 (the “Exchange Ratio”), with Ocean Yetsira stockholders each receiving the same proportional ownership in the Company as they had held in Ocean Yetsira immediately prior to the agreement. On the execution of the agreement and exchange of shares, Ocean Yetsira became a wholly owned subsidiary of the Company.

 

  B. On August 19, 2020, Ocean Yetsira entered into share purchase agreement with certain shareholders of Ocean, an Israeli corporation that provides mutual funds investment management services for several mutual funds, under which upon consummation of certain conditions Ocean Yetsira would purchase 7.5% of the outstanding and issued shares of Ocean for total cash consideration of NIS 300 (approximately $87) (the “Cash Consideration”).

 

On September 7, 2020, Ocean Yetsira entered into a share exchange agreement (the “Share Exchange Agreement”) by and among Ocean Yetsira, Ocean, and certain shareholders of Ocean (“Ocean Shareholders”), under which upon the consummation of certain conditions, Ocean Yetsira would purchase the remaining 92.5% of the shares of Ocean for a total equity consideration which represents 35.4% of the issued share capital of the Company on a fully diluted basis as of the Closing Date (as defined below) (the “Equity Consideration”), which comprised of the following:

 

  1. 1,254,498 shares of common stock of the Company.
     
  2. 1,254,498 warrants to purchase the same number of shares of common stock of the Company (the “Warrants”). The Warrants are convertible into shares of Common Stock over a period of three-years at an exercise price of $1.00 per share, with the price per share subject to standard anti-dilution adjustments.

 

F-6

 

 

CREATIONS INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in thousands)

 

NOTE 1- GENERAL (CONT.)

 

Ocean Yetsira consummated the aforesaid acquisition on September 28, 2020 (the “Closing Date”). The financial position and results of operation relating to periods following the Closing Date include the financial position and results of operations of Ocean.

 

  C. On August 31, 2020, the Company’s registration statement on Form S-1 was declared effective by the U.S. Securities and Exchange Commission. As at the date of filing this report, the Company’s shares have not begun to be quoted on the OTCQB.
     
  D. The figures in the financial statements are stated in U.S. Dollars in thousands unless otherwise mentioned.

 

NOTE 2- SIGNIFICANT ACCOUNTING POLICIES

 

The interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with Rule 8-03 of Regulation S-X. The interim financial statements do not include a full disclosure as required in annual financial statements and should be read with the annual financial statements of the Company as of December 31, 2021 from which the accompanying condensed consolidated statement of financial position dated was derived. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine and three months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The accounting policies implemented in the interim financial statements is consistent with the accounting policies implemented in the annual financial statements as of December 31, 2021, except of the following accounting pronouncement adopted by the Company.

 

Recently Issued Accounting Pronouncements, not yet adopted

 

In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”), which is intended to address issues identified as a result of the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. For convertible instruments, ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stocks, and enhances information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share guidance on the basis of feedback from financial statement users. ASU 2020-06 is effective for fiscal years, and interim periods in those fiscal years, beginning after December 15, 2023 (effective January 1, 2024) for smaller reporting companies. The Company is determining the adoption of this new accounting guidance and the effect on its consolidated financial statements throughout the period until implementation.

 

F-7

 

 

CREATIONS INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in thousands)

 

NOTE 2- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

 

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326)” (“ASU 2016-13”), which significantly changes how entities will account for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces the existing incurred loss model with an expected credit loss model that requires entities to estimate an expected lifetime credit loss on most financial assets and certain other instruments. Under ASU 2016-13 credit impairment is recognized as an allowance for credit losses, rather than as a direct write-down of the amortized cost basis of a financial asset. The impairment allowance is a valuation account deducted from the amortized cost basis of financial assets to present the net amount expected to be collected on the financial asset. Once the new pronouncement is adopted by the Company, the allowance for credit losses must be adjusted for management’s current estimate at each reporting date. The new guidance provides no threshold for recognition of impairment allowance. Therefore, entities must also measure expected credit losses on assets that have a low risk of loss. For instance, trade receivables that are either current or not yet due may not require an allowance reserve under currently generally accepted accounting principles, but under the new standard, the Company will have to estimate an allowance for expected credit losses on trade receivables under ASU 2016-13. ASU 2016-13 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2022 for smaller reporting companies. Early adoption is permitted. The Company is currently assessing the impact ASU 2016-13 will have on its consolidated financial statements.

 

  A. Use of Estimates in Preparation of Financial Statements

 

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

 

  B. Principles of consolidation

 

The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

 

  C. Functional currency

 

The functional currency of the Company is the U.S. dollar, which is the currency of the primary economic environment in which it operates. In accordance with ASC 830, “Foreign Currency Matters” (ASC 830), monetary balances denominated in or linked to foreign currency are stated on the basis of the exchange rates prevailing at the applicable balance sheet date. For foreign currency transactions included in the statement of operations, the exchange rates applicable on the relevant transaction dates are used. Gains or losses arising from changes in the exchange rates used in the translation of such transactions and from the remeasurement of monetary balance sheet items are carried as financing income or expenses.

 

The functional currency of Ocean Yetsira, Yetsira and Ocean is the New Israeli Shekel (“NIS”) and their financial statements are included in the consolidation based on translation into US dollars. Accordingly, assets and liabilities were translated from NIS to US dollars using year-end exchange rates, and income and expense items were translated at average exchange rates during the year. Gains or losses resulting from translation adjustments are reflected in stockholders’ equity, under “Accumulated Other Comprehensive Income”.

 

   September 30,   September 30, 
   2022   2021 
Official exchange rate of NIS 1 to US dollar   0.282    0.310 
Exchange rate change in the period   (12.2)%   (0.4)%

 

F-8

 

 

CREATIONS INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in thousands)

 

NOTE 2- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

 

D.Revenue recognition

 

The Company accounts for revenue under ASC 606, Revenue from Contracts with Customers (“ASC 606”). Under the guidance, the Company determines revenue recognition through the following five steps:

 

  ■ Identification of the contract, or contracts, with a customer;
  ■ Identification of the performance obligations in the contract;
  ■ Determination of the transaction price;
  ■ Allocation of the transaction price to the performance obligations in the contract; and
  ■ Recognition of revenue when, or as, the Company satisfies a performance obligation.

 

Asset Management and Investments Fees (Gross): The Company earns Asset management and investment fees from its contracts with its clients. These fees are primarily earned over time on a daily basis and are generally assessed based on fixed percentage of the Assets Under Management (AUM). Other related services provided include investment banking and consulting for which the Company’s fees, which are based on a fixed fee schedule, are recognized when the services are rendered.

 

All of the Company’s revenues is from contracts with customers. Customers are invoiced at the end of the month.

 

E.Intangible assets

 

Intangible assets consist of existing customer relationships from the acquisition of Ocean in August and September 2020 for the cost amount of $364. The Company accounts for intangible assets at their historical cost and records amortization utilizing the straight-line method based upon their estimated useful lives. The estimated useful life of customer relationships was determined internally by the management at 5.25-years period. Amortization expenses for both of the three months ended September 30, 2022 and 2021 amounted to $19 thousand and $17 thousand, respectively. Amortization expenses for the nine months ended September 30, 2022 and 2021 amounted to $54 thousand and $52, respectively. Impairments, if any, are based on excess of the carrying amount over the fair value of the asset. There was no impairment charge in September 30, 2022 and December 31, 2021.

 

F.Goodwill

 

Goodwill represents the excess of the acquisition cost of businesses over the fair value of the identifiable net assets acquired. The goodwill amount of $570 on September 30, 2022 and $649 on December 31, 2021 relates to the acquisition of Ocean. The difference of the amounts for these dates is due to foreign currency adjustments only.

 

Goodwill is not amortized, but is tested at least annually for impairment, or if circumstances occur that more likely than not reduce the fair value of the reporting unit below its carrying amount.

 

The Company has determined that there has been no impairment of goodwill as of both September 30, 2022 and December 31, 2021.

 

G.Earnings (Loss) per Share

 

Basic earnings (loss) per share (“EPS”) is computed by dividing the net income (loss) applicable to common stockholders by the weighted-average number of shares of common stock outstanding for the period.

 

For purposes of calculating diluted earnings per common share, the denominator includes both the weighted-average number of shares of common stock outstanding during the period and the number of common stock equivalents if the inclusion of such common stock equivalents is dilutive. There were no dilutive securities for any periods presented.

 

F-9

 

 

CREATIONS INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in thousands)

 

NOTE 3 - RELATED PARTIES BALANCES AND TRANSACTIONS

 

A.Balances with related parties

 

   September 30,   December 31, 
   2022   2021 
         
Assets:          
Loans granted to stockholders  $12   $14 
           
Liabilities:          
Management fee payable to related parties  $108   $120 

 

B.Transactions with related parties

 

  

Three months ended

September 30,

 
   2022   2021 
         
Income:          
Interest income in respect to loans granted to stockholders  $-*  $-*
           
Expenses:          
Management fee  $79   $78 

 

  

Nine months ended

September 30,

 
   2022   2021 
         
Income:          
Interest income in respect to loans granted to stockholders  $-*  $-*
           
Expenses:          
Management fee  $284   $304**

 

*Less than $1 thousand.
**Includes $43 thousand related to 2020.

 

NOTE 4- MATERIAL EVENTS DURING AND AFTER THE REPORTED PERIOD

 

A.

On April 17, 2022, the board of directors approved a resolution as to matters of ongoing conduct such as signatory rights, voting etc. In addition, compensation of officers was updated. Also, non-committal guidelines for future transactions regarding sale of main activity to related parties and sale of holdings by those parties were discussed, these guidelines are pursuant to completion of legal structuring, compliance issues and more.

 

B.

The Company is in the process of finalizing an agreement between itself and a group of buyers (led by Yaniv Aharon director and shareholder in Creations Inc.) to sell all of the capital stock in its subsidiary Ocean Yetsira Ltd in exchange for 4.227M ILS and the repurchase of all shares of the Company owned by the Buyers. Following the sale of Ocean Yetsira, the Company is reviewing several alternatives to maximize shareholders return. Including selling the Company to a new buyer in order to place a new business in the Company or other alternative that will result in distribution of the proceeds received to the shareholders of the Company.

 

F-10

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

This Quarterly Report contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control, which may include statements about our:

 

  ● business strategy;
     
  ● financial strategy;
     
  ● intellectual property;
     
  ● production;
     
  ● future operating results; and
     
  ● plans, objectives, expectations and intentions contained in this report that are not historical.

 

All statements, other than statements of historical fact included in this report, regarding our strategy, intellectual property, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this report, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date of this report. You should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this report are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. These statements may be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as in this report generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur.

 

Organizational History

 

Creations, Inc. was incorporated in May 2019. On July 1, 2019, Creations, Inc., acquired a 100% interest in Ocean-Yetsira Ltd (formerly Yetsira Holdings Ltd), through a share swap agreement. Ocean Yetsira is an Israeli Corporation incorporated in December 2017, which in turn owns 100% of Yetsira Investment House (“Yetsira”), which was incorporated in November 2016.

 

On August 19, 2020, the Company purchased 7.5% of the outstanding and issued shares of Ocean Partners Y.O.D.M Ltd., an Israeli corporation (“Ocean”) for total cash consideration of approximately $87,000. On September 7, 2020, the Company entered into a share exchange agreement by and among Yetsira, Ocean, and certain shareholders of Ocean, pursuant to which the Company acquired the remaining 92.5% of the capital stock of Ocean in exchange for an aggregate of 1,254,498 shares of common stock of the Company, $0.001 par value, and 1,254,498 warrants to purchase shares of common stock of the Company (the “Warrants”) issued to the certain Ocean shareholders by the Company. The Warrants are convertible into shares of our common stock over a period of three-years at an exercise price of $1.00 per share. The Company completed the acquisition on September 28, 2020.

 

Following the acquisition of Ocean, all the investment management business of the group is managed through Ocean.

 

On April 17, 2022, the board of directors approved a resolution as to matters of ongoing conduct such as signatory rights, voting etc. In addition, compensation of officers was updated. Also, non-committal guidelines for future transactions regarding sale of main activity to related parties and sale of holdings by those parties were discussed, these guidelines are pursuant to completion of legal structuring, compliance issues and more.

 

The Company is in the process of finalizing an agreement between itself and a group of buyers (led by Yaniv Aharon director and shareholder in Creations Inc.) to sell all of the capital stock in its subsidiary Ocean Yetsira Ltd in exchange for 4.227M ILS and the repurchase of all shares of the Company owned by the Buyers. Following the sale of Ocean Yetsira, the Company is reviewing several alternatives to maximize shareholders return. Including, selling the Company to a new buyer in order to place a new business in the Company or other alternative that will result in distribution of the proceeds received to the shareholders of the Company.

 

2

 

 

Our continued focus is on our core business of mutual fund management, while increasing our number of managed funds and private portfolio and increasing of our AUM. Part of our growth depends on the strength of our brand, which the Company intends to strengthen by increasing our exposure to the general public, especially through investment advisors in the commercial banks, which constitute the main channel for funds distribution in Israel. We also plan to increase public relations activities and advertising. We also continue to examine the expansion of our areas of activity, through cooperation, locating synergistic opportunities for our existing areas of activity and establishing additional parallel investment opportunities. In addition, we may pursue the acquisition of other unrelated businesses in the financial sector.

 

Through our wholly owned subsidiary, Ocean, we operate as a portfolio manager, licensed by the Israel Securities Authority (“ISA”). Ocean currently offers and manages nine mutual funds branded as Ocean-Yetsira funds, and 107 private portfolios with approximately $284M in assets, currently under management (“AUM”).

 

We generate revenue primarily from management fees paid by our unitholders or clients, which fees are based upon a certain percentage of their assets in the funds. Our expenses are mainly comprised of payments for distribution, commissions to banks, third-party platform user fees, salary commissions and expenses, and commissions to the ISA and the Israeli Stock Exchange. We conduct our business exclusively through Ocean Yetsira and exercise effective control over the operations of Ocean and Yetsira pursuant to a series of contractual arrangements, under which we are entitled to receive substantially all of its economic benefits.

 

Recently Issued Accounting Pronouncements

 

Management reviewed currently issued pronouncements during the nine months ended September 30, 2022, and does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements.

 

Results of Operations for the Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021 (In Thousands)

 

Revenue

 

For the nine months ended September 30, 2022, and 2021, the Company generated revenues in the amount of $1,750 and $1,455 respectively. The increase was attributable to an increase in our AUM.

 

Assets Under Management and Investment Performance

 

The following table reflects the changes in our AUM for the nine months ended September 30, 2022 and 2021.

 

(In millions)

 

  

Nine Months Ended

September 30, 2022

  

Nine Months Ended

September 30, 2021

 
Beginning Balance  $282.70   $174.50 
Gross inflows/ outflows, net   122.15    62.77 
Market appreciation (depreciation)(1)   (120.16)   28.44 
Additional AUM from acquisitions   -      
           
End Balance  $284.69   $265.70 

 

  (1) Market appreciation (depreciation) includes investment gains (losses) on assets under management, the impact of foreign exchange rates and net reinvested dividends.

 

3

 

 

Our total AUM increased by $1.99 million during the nine months ended September 30, 2022, from $282.7 million as of December 31, 2021 to $284.69 million as of September 30, 2022, or a 0.07% increase on our total AUM. The increase was a result of net AUM inflows of $122.15 million, market depreciation of $120.16 million.

 

Cost of Revenues

 

For the nine months ended September 30, 2022 and 2021, cost of revenues was $964 and $849, respectively. The increase in these expenses was mainly attributable to an increase in the AUM.

 

Marketing Expenses

 

For the nine months ended September 30, 2022, our marketing expenses were $173 compared to $159 for the prior-year period.

 

General and Administrative Expenses

 

For the nine months ended September 30, 2022, our general and administrative expenses were $533, compared to $611 for the period ended September 30, 2021, an approximate 12.76% decrease. These expenses are mainly attributed to service and professional fees, payments to the management and employees as shown in the table below.

 

The following table provides a year-over-year breakout of the material components of our general and administrative expenses:

 

  

Nine Months Ended
September 30, 2022

(in thousands)

  

Nine Months Ended
September 30, 2021

(in thousands)

 
Components of G&A Expenses:  $   $ 
Wages   20    51 
Travel and vehicle expenses   13    11 
Communication and office expenses   46    62 
Services and professional fees   363    365 
One off expense   20    29 
Office rent   43    44 
Other expenses   28    49 
Total G&A expenses  $533   $611 

 

The changes in General and Administrative Expenses are primarily due to the following event:

 

●Nine months ended September 30, 2021, include one-off expenses of $29 due to a VAT assessment.
●Nine months ended September 30, 2022, includes one-off expenses of $20 due to additional attorney fees regarding future transactions sale of main activity to related parties as mentioned above.
●Expenses that emerged from the merger in 2020 between Ocean and Yetsira was reduced, and a moderate increase in expanses is attributed to a gradual increase in the company growing operations and increased AUM.

 

Net Loss

 

The Company realized a net Income of $60 for the nine months ended September 30, 2022, compared to a net loss of $149 for the nine months ended September 30, 2021. This attributed to increased revenue following the growth of our AUM.

 

4

 

 

After taking into account foreign currency translation adjustments, which resulted in other comprehensive expense of $183 and expense of $4 for the nine months ended September 30, 2022, and 2021, respectively, the Company realized a net loss after other comprehensive expenses of $123 and $153 for the nine months ended September 30, 2022 and 2021, respectively.

 

Liquidity and capital resources

 

As of September 30, 2022, the Company had cash in the amount of $487 compared to cash in the amount of $503 as of December 31, 2021.

 

Stockholders’ equity as of September 30, 2022 was $1,442 as compared to stockholders’ equity of $1,565 as of December 31, 2021.

 

The Company’s accumulated deficit was $1,692 and $1,752 at September 30, 2022 and December 31, 2020, respectively.

 

Liquidity and capital resources

 

The Company’s operating activities resulted in net cash provided of $85 for the nine months ended September 30, 2022, compared to net cash used of $72 for the nine months ended September 30, 2021. The decrease in net cash used was mainly attributable to an increase of revenue, due to increase in AUM.

 

The Company’s investing activities net cash used of $46 for the nine months ended September 30, 2022, compared to $101 investing activities used for the nine months ended September 30, 2021.

 

Off- Balance Sheet Arrangements

 

The Company currently does not have any off-balance sheet arrangements. 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and (ii) accumulated and communicated to our management, including our chief executive officer and chief financial officer, or person performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

5

 

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15f of the Exchange Act) that occurred during the quarter ended September 30, 2022 that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Limitations on Internal Controls

 

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

There are no legal proceedings to which we are presently a party, and we are not aware of any legal proceedings threatened or contemplated against us.

 

Item 1A. Risk Factors.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

During the quarter ended September 30, 2022, the Company did not issue any unregistered securities.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information.

 

Not applicable.

 

Item 6. Exhibits.

 

Exhibit
Number		   Description of Exhibit
 
31   Certification by Chief Executive Officer and Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.*
32   Certification pursuant to 18 U.S.C. §1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101.INS   Inline XBRL Instance Document.*
101.SCH   Inline XBRL Taxonomy Extension Schema.*
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase.*
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase.*
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase.*
101.PRE   Inline XBRL Extension Presentation Linkbase.*
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

* Filed herewith.

 

** Furnished herewith.

 

6

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

November 21, 2022 CREATIONS, INC.
   
  /s/ Shmuel Yelsevich
  Shmuel Yelshevich
 

Interim Chief Executive Officer, Chief Financial Officer, President, Treasurer, and Secretary

(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

 

7

 

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