UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X]☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SeptemberJune 30, 20202021
[ ]☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 333-240161.333-240161.
CREATIONS, INC.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, 37th Floor
New York, NY10036
(Address of principal executive offices, Zip Code)
212-930-9700212-930-9700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Ticker | Name of | ||
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 [X] ☒ 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 [X] ☒ 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 [X] ☒
As of November 10, 2020May 12, 2021, there were shares of common stock, par value $0.0001 per share, issued and outstanding.
TABLE OF CONTENTS
i |
CREATIONS INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBERJUNE 30, 20202021
CREATIONS INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBERJune 30, 20202021
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- 2 - |
PART I -1 – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTSFinancial StateMENTS
CREATIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands except share data)
September 30, | December 31, | June 30, | December 31, | |||||||||||||
2020 | 2019 | 2021 | 2020 | |||||||||||||
Unaudited | Unaudited | |||||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | 826 | 1,366 | 418 | 625 | ||||||||||||
Marketable securities | 45 | - | 86 | - | ||||||||||||
Bank deposit | 12 | - | 45 | 33 | ||||||||||||
Accounts receivable | 102 | 51 | ||||||||||||||
Other current assets | 113 | 21 | 56 | 68 | ||||||||||||
Total current assets | 996 | 1,387 | 707 | 777 | ||||||||||||
Non-current assets | ||||||||||||||||
Property and equipment, net | 36 | 4 | 43 | 45 | ||||||||||||
Intangible asset | 363 | - | ||||||||||||||
Intangible assets | 332 | 371 | ||||||||||||||
Goodwill | 583 | - | 619 | 627 | ||||||||||||
Loans granted to stockholders | 37 | 36 | 26 | 26 | ||||||||||||
Total non-current assets | 1,019 | 40 | ||||||||||||||
Operating right of use assets | 80 | 109 | ||||||||||||||
Total non-current asset | 1,100 | 1,178 | ||||||||||||||
Total assets | 2,015 | 1,427 | 1,807 | 1,955 | ||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
Current liabilities | ||||||||||||||||
Accounts payable | 172 | 92 | ||||||||||||||
Related parties | 1 | 1 | ||||||||||||||
Accounts payable (related parties of $98 and $26) | 260 | 141 | ||||||||||||||
Operating lease liability – current portion | 57 | 58 | ||||||||||||||
Total current liabilities | 173 | 93 | 317 | 199 | ||||||||||||
DEFERRED INCOME TAXES | 84 | - | ||||||||||||||
Non-current liabilities | ||||||||||||||||
Operating lease liability – net of current portion | 23 | 51 | ||||||||||||||
Deferred taxes | 76 | 86 | ||||||||||||||
Total non-current liabilities | 99 | 137 | ||||||||||||||
Total liabilities | 416 | 336 | ||||||||||||||
COMMITMENT AND CONTINGENCIES | - | - | ||||||||||||||
STOCKHOLDERS’ EQUITY | ||||||||||||||||
Common Stock of $0.0001 par value - | ||||||||||||||||
Authorized: 100,000,000 at September 30, 2020 and December 31, 2019; Issued and outstanding: 3,544,242 and 2,289,744 shares at September 30, 2020 and December 31, 2019, respectively | - | - | ||||||||||||||
Common Stock of $ par value - Authorized: at June 30, 2021 and December 31, 2020; Issued and outstanding: shares at June 30, 2021 and December 31, 2020 | - | - | ||||||||||||||
Additional paid-in capital | 3,162 | 2,205 | 3,162 | 3,162 | ||||||||||||
Accumulated other comprehensive income | 19 | 6 | 91 | 106 | ||||||||||||
Accumulated deficit | (1,423 | ) | (877 | ) | (1,862 | ) | (1,649 | ) | ||||||||
Total stockholders’ equity | 1,758 | 1,334 | 1,391 | 1,619 | ||||||||||||
Total liabilities and stockholders’ equity | 2,018 | 1,427 | 1,807 | 1,955 |
The accompanying notes are an integral part of the condensed consolidated financial statements
- 3 - |
CREATIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(U.S. dollars in thousands except share data)
2021 | 2020 | 2021 | 2020 | |||||||||||||
For the period of three months ended June 30, | For the period of six months ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Unaudited | Unaudited | |||||||||||||||
Revenues | 515 | 67 | 891 | 157 | ||||||||||||
Cost of revenues | (287 | ) | (78 | ) | (544 | ) | (168 | ) | ||||||||
Gross profit (loss) | 228 | (11 | ) | 347 | (11 | ) | ||||||||||
Operating expenses: | ||||||||||||||||
Marketing expenses | (84 | ) | 1 | (121 | ) | (1 | ) | |||||||||
General and administrative expenses (related parties $153, $86, $226 and $111) | (221 | ) | (156 | ) | (450 | ) | (352 | ) | ||||||||
Operating loss | (77 | ) | (166 | ) | (224 | ) | (364 | ) | ||||||||
Financial income, net | 3 | 24 | 3 | 36 | ||||||||||||
Loss before taxes on income | (74 | ) | (142 | ) | (221 | ) | (328 | ) | ||||||||
Income tax benefit | 4 | - | 8 | - | ||||||||||||
Net loss for the period | (70 | ) | (142 | ) | (213 | ) | (328 | ) | ||||||||
Other comprehensive loss: | ||||||||||||||||
Foreign currency translation adjustments | 31 | 19 | (15 | ) | 7 | |||||||||||
Comprehensive loss | (39 | ) | (123 | ) | (228 | ) | (321 | ) | ||||||||
Basic and diluted net loss per share | (0.02 | ) | (0.06 | ) | (0.06 | ) | (0.14 | ) | ||||||||
Weighted average number of Common Stock used in computing basic and diluted loss per share | 3,544,242 | 2,289,744 | 3,544,242 | 2,289,744 |
For the period of three months ended September 30, | For the period of nine months ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Unaudited | Unaudited | |||||||||||||||
Revenues | 95 | 117 | 252 | 272 | ||||||||||||
Cost of revenues | (114 | ) | (143 | ) | (282 | ) | (292 | ) | ||||||||
Gross loss | (19 | ) | (26 | ) | (30 | ) | (20 | ) | ||||||||
Operating expenses: | ||||||||||||||||
Marketing expenses | (6 | ) | (2 | ) | (7 | ) | (7 | ) | ||||||||
General and administrative expenses | (223 | ) | (216 | ) | (572 | ) | (268 | ) | ||||||||
Other expenses | (6 | ) | - | (9 | ) | - | ||||||||||
Operating loss | (254 | ) | (244 | ) | (618 | ) | (295 | ) | ||||||||
Financial (expenses) income, net | 36 | (4 | ) | 72 | (11 | ) | ||||||||||
Net loss for the period | (218 | ) | (248 | ) | (546 | ) | (306 | ) | ||||||||
Other comprehensive income (expenses): Foreign currency translation adjustments | ||||||||||||||||
Comprehensive loss | 6 | 3 | 13 | (4 | ) | |||||||||||
Net comprehensive loss for the period | (212 | ) | (245 | ) | (533 | ) | (310 | ) | ||||||||
Basic and diluted net loss per share | (0.09 | ) | (0.44 | ) | (0.24 | ) | (0.66 | ) | ||||||||
Weighted average number of Common Stock used in computing basic and diluted loss per share | 2,317,315 | 554,666 | 2,298,934 | 463,363 |
The accompanying notes are an integral part of the condensed consolidated financial statements
- 4 - |
CREATIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(U.S. dollars in thousands except share data)
Common Stock |
Additional paid-in |
Receivable on account | Accumulated other comprehensive |
Accumulated | Total stockholders’ equity | |||||||||||||||||||||||
Number | Amount | capital | of shares | income | deficit | (deficit) | ||||||||||||||||||||||
Unaudited | ||||||||||||||||||||||||||||
Balance as of January 1, 2019 | 417,459 | $ | - | $ | 333 | $ | - | $ | 13 | $ | (401 | ) | $ | (55 | ) | |||||||||||||
Receivable on account of shares | - | - | - | 1,640 | - | - | 1,640 | |||||||||||||||||||||
Conversion of loans from related company into shares of Common Stock | 204,685 | - | 205 | - | - | - | 205 | |||||||||||||||||||||
Other comprehensive loss | - | - | - | - | (4 | ) | - | (4 | ) | |||||||||||||||||||
Net loss | - | - | - | - | - | (306 | ) | (306 | ) | |||||||||||||||||||
Balance as of September 30, 2019 | 622,144 | $ | - | $ | 538 | $ | 1,640 | $ | 9 | $ | (707 | ) | $ | 1,480 |
Common Stock |
Additional paid-in |
Receivable on account | Accumulated other comprehensive |
Accumulated | Total stockholders’ equity | |||||||||||||||||||||||
Number | Amount | capital | of shares | income | deficit | (deficit) | ||||||||||||||||||||||
Unaudited | ||||||||||||||||||||||||||||
Balance as of July 1, 2019 | 417,459 | $ | - | $ | 333 | $ | - | $ | 6 | $ | (460 | ) | $ | (121 | ) | |||||||||||||
Receivable on account of shares | - | - | - | 1,640 | - | - | 1,640 | |||||||||||||||||||||
Conversion of loans from related company into shares of Common Stock | 204,685 | - | 205 | - | - | - | 205 | |||||||||||||||||||||
Other comprehensive income | - | - | - | - | 3 | - | 3 | |||||||||||||||||||||
Net loss | - | - | - | - | - | (247 | ) | (247 | ) | |||||||||||||||||||
Balance as of September 30, 2019 | 622,144 | $ | - | $ | 538 | $ | 1,640 | $ | 9 | $ | (707 | ) | $ | 1,480 |
(Unaudited)
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 January 1, 2020 | 2,289,744 | - | 2,205 | 6 | (877 | ) | 1,334 | |||||||||||||||||
Other comprehensive loss | - | - | - | 7 | - | 7 | ||||||||||||||||||
Net loss | - | - | - | - | (328 | ) | (328 | ) | ||||||||||||||||
Balance as of June 30, 2020 | 2,289,744 | - | 2,205 | 13 | (1,205 | ) | 1,013 |
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 | |||||||||||||||||
Other comprehensive loss | - | - | - | (15 | ) | - | (15 | ) | ||||||||||||||||
Net loss | - | - | - | - | (213 | ) | (213 | ). | ||||||||||||||||
Balance as of June 30, 2021 | 3,544,242 | - | 3,162 | 91 | (1,862 | ) | 1,391 |
The accompanying notes are an integral part of the condensed consolidated financial statements
- 5 - |
CREATIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(U.S. dollars in thousands except share data)
Common Stock |
Additional paid-in | Accumulated other comprehensive |
Accumulated |
Total stockholders’ | ||||||||||||||||||||
Number | Amount | capital | income | deficit | equity | |||||||||||||||||||
Unaudited | ||||||||||||||||||||||||
Balance as of January 1, 2020 | 2,289,744 | $ | - | $ | 2,205 | $ | 6 | $ | (877 | ) | $ | 1,334 | ||||||||||||
Issuance of units consisting of shares of Common Stock and warrants upon acquisition of subsidiary | 1,254,498 | - | 957 | - | - | 957 | ||||||||||||||||||
Other comprehensive income | - | - | - | 13 | - | 13 | ||||||||||||||||||
Net loss | - | - | - | - | (546 | ) | (546 | ) | ||||||||||||||||
Balance as of September 30, 2020 | 3,544,242 | $ | - | $ | 3,162 | $ | 19 | $ | (1,423 | ) | $ | 1,758 |
Common Stock |
Additional paid-in | Accumulated other comprehensive |
Accumulated |
Total stockholders’ | ||||||||||||||||||||
Number | Amount | capital | income | deficit | equity | |||||||||||||||||||
Unaudited | ||||||||||||||||||||||||
Balance as of July 1, 2020 | 2,289,744 | $ | - | $ | 2,205 | $ | 12 | $ | (1,204 | ) | $ | 1,013 | ||||||||||||
Issuance of units consisting of shares of Common Stock and warrants upon acquisition of subsidiary | 1,254,498 | - | 957 | - | - | 957 | ||||||||||||||||||
Other comprehensive income | - | - | - | 7 | - | 7 | ||||||||||||||||||
Net loss | - | - | - | - | (219 | ) | (219 | ) | ||||||||||||||||
Balance as of September 30, 2020 | 3,544,242 | $ | - | $ | 3,162 | $ | 19 | $ | (1,423 | ) | $ | 1,758 |
The accompanying notes are an integral part of the condensed consolidated financial statements
CREATIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
For the period of nine months ended September 30, | ||||||||
2020 | 2019 | |||||||
Unaudited | ||||||||
Cash flows from operating activities: | ||||||||
Net loss | (546 | ) | (306 | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 2 | 1 | ||||||
Financial expenses related to loans from related company | - | 10 | ||||||
Financial income related to loans to shareholders | (1 | ) | - | |||||
Unrealized gain on marketable securities | (21 | ) | ||||||
Changes in operating assets and liabilities: | ||||||||
Other current assets | (39 | ) | 3 | |||||
Accounts payable | 66 | 77 | ||||||
Related parties | - | (2 | ) | |||||
Net cash used in operating activities | (539 | ) | (217 | ) | ||||
Cash flows from financing activities: | ||||||||
Loans received from related company | - | 23 | ||||||
Receivable on account of shares | - | 1,640 | ||||||
Net cash provided by financing activities | - | 1,663 | ||||||
Cash flows from investing activities: | ||||||||
Investment in fixed assets | (1 | ) | - | |||||
Acquisition of subsidiary (Appendix A) | (87 | ) | - | |||||
Cash acquired from acquisition of subsidiary (Appendix A) | 100 | - | ||||||
Investment in marketable securities | (24 | ) | - | |||||
Net cash (used in) provided by investing activities | (12 | ) | - | |||||
Foreign currency translation adjustments on cash and cash equivalents | 11 | 4 | ||||||
Change in cash and cash equivalents | (540 | ) | 1,450 | |||||
Cash and cash equivalents at beginning of period | 1,366 | 86 | ||||||
Cash and cash equivalents at end of period | 826 | 1,536 | ||||||
Supplementary information on financing activities not involving cash flows: | ||||||||
Conversion of loans from related company into shares of Common Stock | - | 205 |
2021 | 2020 | |||||||
For the Period of Six Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
Unaudited | ||||||||
Cash flows from operating activities: | ||||||||
Net loss | (213 | ) | (328 | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 37 | 1 | ||||||
Amortization of operating right of use asset | 29 | |||||||
Other income – capital gain from marketable securities | - | (86 | ) | |||||
Deferred tax benefit | (8 | ) | - | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (52 | ) | - | |||||
Other current assets | 10 | (7 | ) | |||||
Accounts payable | 121 | 7 | ||||||
Operating right of use liability | (29 | ) | - | |||||
Net cash used in operating activities | (105 | ) | (413 | ) | ||||
Cash flows from investing activities: | ||||||||
Maturity of (investment in) bank deposit | (12 | ) | - | |||||
Investment in marketable securities | (85 | ) | (24 | ) | ||||
Purchase of property and equipment | (3 | ) | - | |||||
Net cash used in investing activities | (100 | ) | (24 | ) | ||||
Foreign currency translation adjustments on cash and cash equivalents | (2 | ) | 5 | |||||
Change in cash and cash equivalents | (207 | ) | (432 | ) | ||||
Cash and cash equivalents at beginning of the period | 625 | 1,366 | ||||||
Cash and cash equivalents at end of the period | 418 | 934 |
The accompanying notes are an integral part of the condensed consolidated financial statements
- |
CREATIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
Appendix A - Acquisition of subsidiary
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 | |
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. which was established as a private Israeli corporation in November 2016. and Ocean Partners Y.O.D.M following its acquisition (See note 1B).
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, the Company entered into |
On September 7, 2020, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) by and among Yetsira, Ocean , and certain shareholders of Ocean (“Ocean Shareholders”), under which upon consummation of certain conditions the Company will purchase the remaining % of the shares of Ocean for a total equity consideration which represents % 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. | shares of common stock of the Company. |
2. | ||
- 7 - |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 1 - GENERAL (CONT.)
B. | (Continued) |
The Company consummated the aforesaid acquisition at 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 result of operation of Ocean.
C. | ||
Beginning in early 2020, there has been an outbreak of coronavirus (COVID-19), initially in China and which has spread to other jurisdictions, including locations As a result, similarly to |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 1 - GENERAL
On August 31, 2020, the Company’s registration statement on Form S-1 was declared effective by the U.S. Securities and Exchange Commission |
E. | The figures in the financial statements are stated in U.S. Dollars in thousands unless otherwise mentioned. |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements have been prepared from the books and records of the Company and include all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and Rule 8-03 of Regulation S-X promulgated by the “SEC”. Interim results are not necessarily indicative of the results that may be expected for the full year. The interim condensed consolidated 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, 2020 from which the accompanying condensed consolidated balance sheet was derived. 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, 2020, except of the following accounting pronouncement adopted by the Company.
- |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Recently Issued Accounting Pronouncements, Adopted
On January 1, 2021, the Company adopted ASU 2019-12, “Simplifying the Accounting for Income Taxes” (“ASU 2019-12”) which reduces the cost and complexity in accounting for income taxes. ASU 2019-12 removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of U.S. GAAP. Most amendments within ASU 2019-12 are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
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).” This guidance simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The amendments to this guidance are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.
The Company does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed consolidated financial statements.
Use of | ||
The preparation of consolidated financial statements in conformity with U.S. GAAP accounting principles 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
- |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
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 Yetsira, Ocean 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”.
SCHEDULE OF TRANSLATION ADJUSTMENTS
June 30, | June 30, | |||||||
2021 | 2020 | |||||||
Official exchange rate of NIS 1 to US dollar | 0.307 | 0.289 | ||||||
Exchange rate change in the period | (1.4 | %) | (0.3 | %) |
D. |
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 | |||
● | Identification of the performance obligations in the contract; | ||
● | Determination of the transaction price; | ||
● | Allocation of the transaction price to the | ||
● | |||
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.
- |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 32 - ACQUISITIONSSIGNIFICANT ACCOUNTING POLICIES (CONT.)
The Company recorded no income tax expense for the six months ended June 30, 2021 and 2020 because the estimated annual effective tax rate was zero. As of June 30, 2021, the Company continues to provide a valuation allowance against its net deferred tax assets since the Company believes it is more likely than not that its deferred tax assets will not be realized. The $8 thousands income tax benefit recorded in the Condensed consolidated statements of operations and comprehensive loss is related to amortization of intangible assets allocated to the acquisition of Ocean during 2020, (decrease of the $8 thousands in the deferred tax liability related to customer relationship).
F. | |||
The Company computes net loss per share in accordance with ASC 260, “Earnings per share.” Basic loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, net of the weighted average number of treasury shares (if any).
Diluted loss per common share is computed similarly to basic loss per share, except that the denominator is increased to include the number of additional potential common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Potential common shares are excluded from the computation for a period in which a net loss is reported or if their effect is anti-dilutive. The Company’s potential common shares consist of stock warrants issued to certain investors and their potential dilutive effect is considered using the treasury method.
The total numbers of shares related to outstanding stock warrants that have been excluded from the calculation of the diluted net loss per share due to their anti-dilutive effect was and for the three and six months ended June 30, 2021 and 2020 respectively.
G. | ||
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 expense in the three and six months ended June 30, 2021 amounted to $18 thousand and $35 thousand, respectively. Impairments, if any, are based on excess of the carrying amount over the fair value of the asset. There wes 0 impairment charge for the six months ended June 30, 2021.
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CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 3: ACQUISITIONS2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
The allocationGoodwill represents the excess of the purchase price toacquisition cost of businesses over the fair value of the identifiable net assets acquiredacquired. The goodwill amount of $619 on June 30, 2021 and liabilities assumed is as follows:
Cash | $ | 100 | ||
Bank deposit | 12 | |||
Prepaid expenses and other current assets | 50 | |||
Property and equipment | 33 | |||
Accrued expenses and other current liabilities | (13 | ) | ||
Deferred income taxes | (84 | ) | ||
Intangible asset - Customer relationships (*) | 363 | |||
Goodwill | 583 | |||
Total purchase price (**) | $ | 1,044 |
The consolidated results of operations do not include any revenues or expenses related to Ocean business on or prior to the Closing Date.
The following unaudited condensed combined pro forma information for nine months period ended September 30, 2020 and for the year ended$627 December 31, 2019, gives effect2020 relates to the acquisition of Ocean as if it had occurred on January 1, 2019. The pro forma informationOcean. This difference of the amounts for this dates is from foreign currency adjustments only.
Goodwill is not necessarily indicativeamortized, but is tested at least annually for impairment, or if circumstances occur that more likely than not reduce the fair value of the resultsreporting unit below its carrying amount.
The Company has determined that there has been no impairment of operations, which actually would have occurred had the acquisition been consummated on that date, nor does it purport to represent the resultsgoodwill as of operations for future periods.June 30, 2021.
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 3: ACQUISITIONS
September 30 | December 31, | |||||||
2020 | 2019 | |||||||
Unaudited | ||||||||
Revenues | $ | 856 | $ | 1,511 | ||||
Net loss | (593 | ) | (576 | ) | ||||
Net loss per ordinary share: | ||||||||
Basic | (0.17 | ) | (0.30 | ) | ||||
Diluted | $ | (0.17 | ) | $ | (0.30 | ) |
NOTE 4 - COMMITMENT AND CONTINGENCIES
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 4 - COMMITMENT AND CONTINGENCIES (CONT.)
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 53 - RELATED PARTIES BALANCES AND TRANSACTIONS
A. | ||
SUMMARY OF BALANCES WITH RELATED PARTIES
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
Assets: | ||||||||
Loans granted to stockholders | $ | 26 | $ | 26 | ||||
Liabilities: | ||||||||
Management fee payable to related parties | $ | 98 | $ | 26 |
B. | Transactions with related parties |
SUMMARY OF TRANSACTIONS WITH RELATED PARTIES
Three months ended June 30, | ||||||||
2021 | 2020 | |||||||
Income: | ||||||||
Interest income in respect to loans granted to stockholders | $ | - | * | $ | - | * | ||
Expenses: | ||||||||
Management fee | $ | 153 | $ | 86 |
* | Less than $1 thousand. |
Six months ended June 30, | ||||||||
2021 | 2020 | |||||||
Income: | ||||||||
Interest income in respect to loans granted to stockholders | $ | - | * | $ | - | * | ||
Expenses: | ||||||||
Management fee | $ | 226 | ** | $ | 111 |
* | Less than $1 thousand. |
** | Includes $43 thousand related to 2020. |
- |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 54 - RELATED PARTIES BALANCESMATERIAL EVENTS DURING THE PERIOD AND TRANSACTIONS (CONT.)ADDITIONAL MATTERS
September 30, | December 31, | |||||||
2020 | 2019 | |||||||
Unaudited | ||||||||
Assets: | ||||||||
Loans granted to stockholders | $ | 37 | $ | 36 | ||||
Liabilities: | ||||||||
Related parties | $ | 1 | $ | 1 |
SCHEDULE OF GRADATION OF VOLUME MANAGED ASSETS
For the period of three months ended September 30, | For the period of nine months ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Unaudited | Unaudited | |||||||||||||||
Income: | ||||||||||||||||
Interest income in respect to loans granted to stockholders | $ | (1 | ) | $ | - | $ | (1 | ) | $ | - | ||||||
Expenses: | ||||||||||||||||
Management fee | $ | 56 | $ | 7 | $ | 165 | $ | 7 | ||||||||
Interest expenses in respect to loans from related company | $ | - | $ | - | $ | - | $ | 10 |
Gradation of the volume of managed assets in NIS millions* | Monthly salary (NIS)* | |
Up to NIS1,000M (up to $297M) | NIS20,000 ($5,938) | |
NIS1,001M to NIS2,000M ($297M to $594M) | NIS30,000 ($8,907) | |
NIS2,001M to NIS3,000M ($594M to $891M) | NIS45,000 ($13,361) | |
NIS3,001M to NIS4,000M ($891M to $1,188M) | NIS65,000 ($19,299) | |
NIS4,001M and above ($1,188 and above) | NIS85,000 ($25,237) |
* | The amounts in dollars are translated from NIS and subject to changes in the exchange rates. |
In addition, the service provider will be entitled to an annual compensation, starting in 2022, for the year 2021 onwards, calculated as follows:
2.5% of the EBITDA between NIS2M to NIS6M (between $0.6M to $1.78M)
2% of the EBITDA above NIS6M (above $1.78M)
1% of the EBITDA above NIS10M (above $2.97M)
The bonus is limited to NIS500 thousand a year ($148 thousand)
In the three and six months ended June 30, 2021, the Company recognized an additional management fee expense to the service provider in the amount $0 and $18 thousand related to 2020.
C. | As of June 30, 2021, a bank guarantee in the amount of $17 is issued regarding the Company’s office lease. |
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CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 6 - SUBSEQUENT EVENT
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSOPERATIONS.
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. (previously called Yetsira Holdings Ltd. (until April 28, 2021)) (hereinafter: “Ocean Yetsira”), thoughthrough a share swap agreement. Ocean Yetsira Holdings is an Israeli Corporation incorporated in December 2017 which in turn owns 100% of Yetsira Investment House (“Yetsira”), our operating entity, which was incorporated in November 2016.
Through our wholly owned subsidiary, Yetsira Investment House, we operate as a portfolio manager, licensed by the Israel Securities Authority (“ISA”). Yetsira currently offers and manages six mutual funds with approximately $54,639,522 in assets, currently under management (“AUM”). While Yetsira’s core-business is the external investment management of Israeli mutual funds, the ISA license allows Yetsira to manage traditional private investment portfolios and IRA accounts.
We generate revenue primarily from management fees paid by our unitholders, 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 Yetsira and exercise effective control over the operations of Yetsira pursuant to a series of contractual arrangements, under which we are entitled to receive substantially all of its economic benefits.
Our continued focus is on our core business of mutual fund management, while increasing our number of managed funds. 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 to the investment advisors in the banks, which constitute the main channel for funds distribution in Israel. We also plan to increase public relations activities and advertising. Furthermore, in 2020, we expect to examine possibilities for integrating technological means in our services, mainly in our private portfolio management service. 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; particularly, where we believe that they can grow their business by expanding and upgrading their use of technology.
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”) that acts as external mutual funds investment management services for 6 mutual funds and several private clients, 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.
The acquisition implements the Company’s vision of becoming a leading investment company in Israel and delivering high quality asset management and value to its clients and shareholders. By combining the two businesses, Yetsira and Ocean, the Company will be able to expand its variety of mutual funds and more than double its AUM. Moreover, Ocean has a large base of private clients with a high degree of customer loyalty which can be used as a platform to enlargegrow the Company’s privet client’s portfolio management business. Furthermore, the acquisition is intended to diversify the experience, skills, and abilities of the Company’s investment managers team, including marketing experienceexpertise that can be used to advance the Company forward.
The company continue to focus on its mutual fund management business, while increasing our number of managed funds and private portfolio which resulted in accelerated growth of our AUM. Part of our growth depends on the strength of our brand, which the Company intends to continue to strengthen by increasing our exposure to the general public, especially through investment advisors in the commercial banks, and by other public relations activities and advertising.
The board of directors examines from time to time expanding the companies areas of activities by 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.
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Through our wholly owned subsidiary, Ocean, we operate as a portfolio manager. Ocean is an external investment managerlicensed by the Israel Securities Authority (“ISA”). Ocean currently offers and manages ten mutual funds branded as Ocean-Yetsira funds, and 90 private clients’ portfolios with approximately $273M 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 6 mutual fundtheir assets under management. Our expenses are mainly comprised of payments for distribution commissions to banks, third-party platform user fees, salaries, employees and third parties commissions and expenses, and ISA and the Israeli Stock Exchange fees. We conduct our business exclusively through Ocean Yetsira and exercise effective control over the operations of Ocean and Yetsira pursuant to a portfolio managerseries of 73 private clients,contractual arrangements, under which we are entitled to receive substantially all of its economic benefits.
On May 2021 the name of Yetsira Holding ltd. was changed to Ocean Yetsira Ltd in accordance with a total AUM of $95,295,548 with implied additional yearly expected revenue of $797,169our brand name.
Recently Issued Accounting Pronouncements
Management reviewed currently issued pronouncements during the three months ended SeptemberJune 30, 2020,2021, 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 ThreeSix Months Ended SeptemberJune 2021 compared to Six month Ended June 30, 2020 compared to Three Months Ended September 30, 2019.(In Thousands)
Revenue
For the threeSix months ended SeptemberJune 30, 20202021, and 2019,2020, the Company generated revenues in the amount of $95,000$891 and $117,000$157 respectively. The decrease was primarilyrevenue growth attributable to an decreaseAUM growth due to organic growth and Ocean acquisition in our averagethe last quarter of 2020 that added $95.3M to the company AUM, for the period, which led to an decreaseincrease in investment management fees.
Assets Under Management and Investment Performance
The following table reflects the changes in our AUM for the three monthsSix Months ended SeptemberJune 30, 20202021, and 2019.2020.
(In millions)
For the three month ended September 30, 2020 | For the three months ended September 30, 2019 | For the six months ended June 30, 2021 | For the six months ended June 30, 2020 | |||||||||||||
Beginning Balance | $ | 48.02 | $ | 53.55 | $ | 174.49 | $ | 60.60 | ||||||||
Gross inflows | 5.70 | 2.62 | 112.86 | 14.99 | ||||||||||||
Gross outflows | (5.12 | ) | (3.95 | ) | (41.90 | ) | (26.98 | ) | ||||||||
Market appreciation (depreciation)(1) | 6.04 | 5.90 | 27.65 | (1.38 | ) | |||||||||||
End Balance | $ | 54.64 | $ | 58.12 | $ | 273.12 | $ | 47.23 | ||||||||
Average AUM for the Period | $ | 51.87 | $ | 55.68 |
(1) | Market appreciation (depreciation) includes investment gains (losses) on assets under management, the impact of foreign exchange rates and net reinvested dividends. |
Our total AUM increased by $6.62$98.63 million during the threesix months ended SeptemberJune 30, 2020,2021, from $48.02$174.49 million as of January 1, 2021, to $273.12 million as of June 30, 2020 to $54.64 million as of September 30, 2020,2021, or a 13.78%56.52% increase on our total AUM. The increase was a result of net AUM inflows of $0.58$70.96 million and market appreciation of $6.04$27.65 million.
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Cost of Revenues
For the threesix months ended SeptemberJune 30, 20202021, and 2019,2020, cost of revenues was $114,000$544 and $143,000,$168, respectively. The decrease in these expenses was mainly attributable to a new hosting agreement with a fund manager that substantially reduced the payment for each fund.
Marketing Expenses
For the three months ended September 30, 2020, our marketing expenses were $6,000, compared to $2,000 for the prior-year period. The increase in these expenses was mainly attributable to a management decision to expandan increase in the number of managed funds and increase in the AUM.
Marketing Expenses
For the six months ended June 30, 2021, our marketing expenses duewere $121, compared to improved performance$1, respectively. The Increase in several of our funds.these expenses was mainly attributable to increase in sales employees and marketing activities.
General and Administrative Expenses
For the threesix months ended SeptemberJune 30, 2020,2021, our general and administrative expenses were $223,000 ,$450, compared to $216,000$352 for the period ended SeptemberJune 30, 2019,2020, an approximate 4%27.84% increase. The increase in these expenses was mainly attributed to service and professional fees, payments to the foundersmanagement and an employee,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:
For the three months ended (in thousands) | For the three months ended (in thousands) | For six months ended June 30, 2021 (in thousands) | For six months ended June 30, 2020 (in thousands) | |||||||||||||
Components of G&A Expenses: | $ | $ | $ | $ | ||||||||||||
Wages | 41 | 16 | 38 | 21 | ||||||||||||
Travel and vehicle expenses | 7 | 4 | 7 | 11 | ||||||||||||
Communication and office expenses | 3 | 3 | 47 | 17 | ||||||||||||
Services and professional fees | 146 | 189 | 270 | 206 | ||||||||||||
One off expense (2) | 29 | 65 | ||||||||||||||
Office rent | 17 | 5 | 29 | 19 | ||||||||||||
Insurance Fees and fines | 8 | -3 | ||||||||||||||
Depreciation | 0 | 1 | ||||||||||||||
Other expenses | 0 | 1 | 30 | 13 | ||||||||||||
Total G&A expenses | $ | 223 | $ | 216 | $ | 450 | $ | 352 |
(1) The increase in services and professional fees is primarily due to the following event:
On September 28, 2020, the share swap agreement between Ocean and Creations was consummated and contributed to an increase in professional services, management fees, wages, and other expenses.
(2) Six months ended June 30, 2020, include one-off expenses of $29 due to a VAT assessment. Six months ended June 30, 2020, include one-off expenses of $65 thousand for services fee for the S1 process.
Net Loss
The Company realized a net loss of $218,00$213 for the threesix months ended SeptemberJune 30, 2020,2021, compared to a net loss of $248,000$328 for the periodsix months ended SeptemberJune 30, 20192020. The decrease in net loss, attributed to the increase in revenue.
After taking into account foreign currency translation adjustments, which resulted in other comprehensive expense of $30,000, despite$15 and income of $7 for the six months ended June 30, 2021, and 2020, respectively, the Company realized a net loss after other comprehensive expenses of $228 and $321 for the six months ended June 31, 2021, and 2020, respectively.
- 16 - |
The Company realized a net loss of $70 for the three months ended June 30, 2021, compared to a net loss of $142 for the three months ended June 30, 2020. The decrease in revenue, was relatednet loss, attributed to anthe increase in financial income and a decrease in cost of revenue.
After taking into account foreign currency translation adjustments, which resulted in other comprehensive income of $6,000$31 and $3,000income of $19 for the three months ended SeptemberJune 30, 20202021, and 2019,2020, respectively, the Company realized a net loss after other comprehensive expenses of $212,000$39 and $245,000$123 for the three months ended September 30,June 31, 2021, and 2020, and 2019, respectively.
Liquidity and capital resources
As of SeptemberJune 30, 2020,2021, the Company had cash in the amount of $826,000,$418 compared to cash in the amount of $1,366,000$625 as of December 31, 2019.2020.
Stockholders’ equity as of SeptemberJune 30, 20202021, was $1,758,000,$1,391, as compared to a stockholders’ equity of $1,480,000$1,619 as of September 30, 2019.December 31, 2020.
The Company’s accumulated deficit was $1,423,000$1,862 and $707,000 at September$1,649 on June 30, 20202021, and September 30, 2019, respectively.
Results of Operations for the Nine Months Ended September 30, 2020 compared to the Nine Months Ended September 30, 2019.
Revenue
For the nine months ended September 30, 2020 and 2019, the Company generated revenues in the amount of $252,000 and $272,000 respectively. The decrease was primarily attributable to a change in client asset allocation to less volatile funds (bond fund) that often have lower costs. This allocation caused our zero fee special fund attract more assets and the fee for that fund will be updated beginning in January 2021.
Assets Under Management and Investment Performance
The following table reflects the changes in our AUM for the nine months ended September 30, 2020 and 2019.
(In millions)
For the nine month ended | For the nine months ended | |||||||
Beginning Balance | $ | 63.20 | $ | 49.51 | ||||
Gross inflows | 25.93 | 16.76 | ||||||
Gross outflows | (32.30 | ) | (15.98 | ) | ||||
Market appreciation (depreciation)(1) | 2.19 | 7.83 | ||||||
End Balance | $ | 54.64 | $ | 58.12 | ||||
Average AUM for the Period | $ | 53.52 | $ | 51.90 |
Our total AUM decreased by $8.56 million during the nine months ended September 30, 2020, from 63.2 million as of December 31, 2019 to $54.64 million as of September 30, 2020, or a 13.54% decrease on our total AUM. The decrease was a result of net AUM outflows of $6.37 million and market depreciation of $2.19 million.respectively.
Cost of Revenues
For the nine months ended September 30, 2020 and 2019, cost of revenues was $282,000 and $292,000, respectively. The decrease in these expenses was mainly attributable to a new hosting agreement with a fund manager that substantially reduced the payment for each fund.
Marketing Expenses
For the nine months ended September 30, 2020, our marketing expenses were $7,000, the same amount as the prior-year period.
General and Administrative Expenses
For the nine months ended September 30, 2020 our general and administrative expenses were $572,000, compared to $268,000 for the period ended September 30, 2019, an approximate 113% increase. The increase in these expenses was mainly attributed to service and professional fees, payments to the founders and an employee, 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:
For the nine months ended (in thousands) | For the nine months ended (in thousands) | |||||||
Components of G&A Expenses: | $ | $ | ||||||
Wages | 62 | 16 | ||||||
Travel and vehicle expenses | 18 | 16 | ||||||
Communication and office expenses | 21 | 8 | ||||||
Services and professional fees | 413 | 195 | ||||||
Office rent | 35 | 13 | ||||||
Insurance Fees and fines | 21 | 17 | ||||||
Depreciation | 1 | 2 | ||||||
Other expenses | 0 | 1 | ||||||
Total G&A expenses | $ | 572 | $ | 268 |
Net Loss
The Company realized a net loss of $546,000 for the nine months ended September 30, 2020, compared to a net loss of $306,00 for the period ended September 30, 2019 The increase in net loss of $240,000 was related primarily to an increase in general and administrative expenses (see components above).
After taking into account foreign currency translation adjustments, which resulted in other comprehensive income of $13,000 and ($4,000) for the nine months ended September 30, 2020 and 2019, respectively, the Company realized a net loss after other comprehensive expenses of $533,000 and $310,000 for the nine months ended September 30, 2020 and 2019, respectively.
Liquidity and capital resources
The Company’s operating activities resulted in net cash used of $539,000$105 for the ninesix months ended September 30, 2020,June 31, 2021, compared to net cash used of $217,000$413 for the ninesix months ended SeptemberJune 30, 2019.2020. The increasedecrease in net cash used was mainly attributable to an increase of expenses, including an increase in management payments to the foundersour AUM and hiring an additional employee, costs arising from moving to new offices and additional service fees which includes lawyer fees, auditor fees and accountant fees.revenue.
The Company’s investing activities resulted inused net cash used of $12,000$100 for the ninesix months ended SeptemberJune 30, 2020. Investing2021, compared to $24 investing activities resulted in no net cash provided or used for the threesix months ended SeptemberJune 30, 2019.2020.
The Company’s financing activities did not provide cash during the nine months ended September 30, 2020, compared to net cash provided of $1,663 during the nine months ended September 30, 2019. No loans were received or provided during the period ending September 30, 2020.
Off- Balance Sheet Arrangements
The Company currently does not have any off-balance sheet arrangementsarrangements.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to impairment of property, plant and equipment, intangible assets, deferred tax assets and fair value computation using the Binomial lattice valuation pricing model. We base our estimates on historical experience and on various other assumptions, such as the trading value of our common stock and estimated future undiscounted cash flows, that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions; however, we believe that our estimates, including those for the above-described items, are reasonable.
Use of Estimates
In accordance with accounting principles generally accepted in the United States, management utilizes estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These estimates and assumptions relate to recording, useful lives and impairment of tangible and intangible assets, derivatives, accruals, income taxes, stock-based compensation expense, binomial model inputs and other factors. Management believes it has exercised reasonable judgment in deriving these estimates. Consequently, a change in conditions could affect these estimates.
Fair Value of Financial Instruments
Fair value of financial instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of September 30, 2020, the amounts reported for cash, accrued interest and other expenses, notes payables, and derivative liability approximate the fair value because of their short maturities.
Recently Issued Accounting Pronouncements
Management reviewed currently issued pronouncements during the three months ended September 30, 2020, 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. Pronouncements disclosed in notes to the financials.
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.
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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 fiscal quarter ended SeptemberJune 30, 20202021 that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.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.
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.
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.
On September 28, 2020,During the quarter ended June 30, 2021, the Company issued 1,254,498 shares of common stock of the Company and 1,254,498 warrants to purchase the same number of shares of common stock of the Company (the “Warrants”) pursuant to the Share Exchange Agreement. 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.did not issue any unregistered securities..
Item 3. Defaults Upon Senior Securities.
None
Item 4. Mine Safety Disclosures
Not applicable.
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Not applicable.
Exhibit Number | Description of Exhibit | |
31 | Certification by Chief Executive | |
32 | Certification pursuant to 18 U.S.C. | |
101.INS | XBRL Instance Document.* | |
101.SCH | XBRL Taxonomy Extension Schema.* | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase.* | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase.* | |
101.LAB | XBRL Taxonomy Extension Label Linkbase.* | |
101.PRE | XBRL Extension Presentation Linkbase.* |
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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. [August 13, 2021]
CREATIONS, INC. | |
/s/ | |
Interim Chief Executive Officer | |
(Principal Executive Officer) |
CREATIONS, INC. | |
/s/ Shmuel Yelshevich | |
Shmuel Yelshevich | |
Interim Chief Financial Officer | |
(Principal Accounting and Financial Officer) |
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