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: March 31,June 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)

c/o Sichenzia Ross Ference LLP

1185 Avenue of the Americas, 3731^thst 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:

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.

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 MayAugust 12, 2022, there were 3,544,242shares of common stock, par value $0.0001 per share, issued and outstanding.

TABLE OF CONTENTS

CREATIONS INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31,June 30, 2022

CREATIONS INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31,June 30, 2022

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CREATIONS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

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

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

CREATIONS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

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

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

CREATIONS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

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)

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

CREATIONS INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in thousands)

NOTE 1-GENERAL

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.

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:

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 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 results of operations of Ocean.

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 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. OperationOperating results for the six and three months ended March 31,June 30, 2022 are not necessarynecessarily 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.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.

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

CREATIONS INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in thousands)

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”.

SCHEDULE OF TRANSLATION ADJUSTMENTS 

D.Revenue recognition

CREATIONS INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in thousands)

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:

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 expense inexpenses for both of the three months ended March 31,June 30, 2022 and 2021 amounted to $17 18 thousand. Amortization expense for both of the six months ended June 30, 2022 and June 30, 2021 amounted to $35thousand. Impairments, if any, are based on excess of the carrying amount over the fair value of the asset. There was 0impairment charge for the three months ended March 31,June 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 $636577 on March 31,June 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 0impairment of goodwill as of both March 31,June 30, 2022 and December 31, 2021.

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.

CREATIONS INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in thousands)

NOTE 3- RELATED PARTIES BALANCES AND TRANSACTIONS

SUMMARY OF BALANCES WITH RELATED PARTIES 

SUMMARY OF TRANSACTIONS WITH RELATED PARTIES 

NOTE 4-MATERIAL EVENTS AFTERDURING THE BALANCE SHEET DATEREPORTED PERIOD

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-commital 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.

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:

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 (.former-(former- 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.

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 99103 private portfolios with approximately $297M$304M 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.

On May 2021, the name of Yetsira Holdings Ltd was changed to Ocean Yetsira Ltd.

Recently Issued Accounting Pronouncements

Management reviewed currently issued pronouncements during the threeSix month ended March 31,June 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 ThreeSix Month Ended March 31,June 30, 2022, compared to ThreeSix Month Ended March 31,June 30, 2021. (In Thousands)

Revenue

For the threeSix month ended March 31,June 30, 2022, and 2021, the Company generated revenues in the amount of $538$1,123 and $376$891 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 threeSix month ended March 31,June 30, 2022, and 2021.

(In millions)

Our total AUM increased by $13.94$21.7 million during the threeSix month ended March 31,June 30, 2022, from $282.72$282.7 million as of December 31, 2021, to $296.66$304.4 million as of March 31,June 30, 2022, or a 4.93%7.67% increase on our total AUM. The increase was a result of net AUM inflows of $16.01$66.7 million, market depreciation of $2.07$45 million.

Cost of Revenues

For the threeSix month ended March 31,June 30, 2022, and 2021, cost of revenues was $304$613 and $257,$544, respectively. The increase in these expenses was mainly attributable to an increase in the AUM.

Marketing Expenses

For the threeSix month ended march 31,June 30, 2022, our marketing expenses were $58$126 compared to $37$121 for the prior-year period. The increase in these expenses was mainly attributable to a management decision to accelerate marketing efforts.

General and Administrative Expenses

For the threeSix month ended March 31,June 30, 2022, our general and administrative expenses were $211,$385, compared to $229$450 for the period ended march 31,June 30, 2021, an approximate 7.86%14.44% 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:

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

Net Loss

The Company realized a net loss of $16$1 for the threeSix month ended March 31,June 30, 2022, compared to a net loss of $143$213 for the threeSix month ended 31,June 30, 2021. The decrease in net loss attributed to increased revenue following the grows of our AUM.

After taking into account foreign currency translation adjustments, which resulted in other comprehensive expense of $30$164 and expense of $46$15 for the threeSix month ended march 31,June 30, 2022, and 2021, respectively, the Company realized a net loss after other comprehensive expenses of $46$165 and $189$228 for the threesix month ended March 31,June 30, 2022 and 2021, respectively.

Liquidity and capital resources

As of March 31,June 30, 2022, the Company had cash in the amount of $541compared$404 compared to cash in the amount of $503 as of December 31, 2021.

Stockholders’ equity as of March 31, 2021June 30, 2022, was $1,519,$1,400, as compared to stockholders’ equity of $1,565 as of December 31, 2021.

The Company’s accumulated deficit was $1,768$1,753 and $1,752 at March 31,on June 30, 2022, and December 31, 2020, respectively.

The Company’s operating activities resulted in net cash provided of $18$9 for the threeSix month ended march 31,June 30, 2022, compared to net cash used of $93$105 for the threeSix month ended march 31,June 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 providedused of $26$64 for the threeSix month ended March 31,June 30, 2022, compared to $5$100 investing activities usedprovided for the year threeSix month ended march 31,June 30, 2021.

The Company’s financing activities did not provide cash during the three month ended March 31, 2022, and the three month ended march 2021. No loans were received or provided during the three month ending March 31, 2022.

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.

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 March 31, 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 March 31,June 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.

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.