| SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Presentation 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.)
A. Basis of Presentation (Continued). 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
June 2016, the FASB issued ASU No. 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 will evaluate the impact of ASU 2016-13 on
the Company’s consolidated financial statements in a future period closer to the date of adoption. 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. CREATIONS
INC. AND SUBSIDIARIES NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (U.S.
dollars in thousands) NOTE
2 SIGNIFICANT ACCOUNTING POLICIES (CONT.)
A. Basis of Presentation (Continued). 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.
B. Use
of Estimates in Preparation of Financial Statements 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.
C. 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.
D. 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. CREATIONS
INC. AND SUBSIDIARIES NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (U.S.
dollars in thousands) NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (CONT.)
D. Functional
currency (Continued). 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 period.
Gains or losses resulting from translation adjustments are reflected in stockholders’ equity, under “Accumulated Other
Comprehensive Income”. SCHEDULE
OF TRANSLATION ADJUSTMENTS
September 30, September 30,
2021 2020
Official exchange rate of NIS 1 to US dollar 0.310 0.291
Exchange rate change in the period ( 6 )% ( 1 )%
E. Revenue
recognition The
Company accounts for revenue under ASC 606, Revenue from Contracts with Customers (“ASC 606”). Under the guidance, the Company
determines revenue recognition through the following five steps:
● Identification
of the contract, or contracts, with a customer;
Identification
of the performance obligations in the contract;
Determination
of the transaction price;
Allocation
of the transaction price to the performance obligations in the contract; and
● Recognition
of revenue when, or as, the Company satisfies a performance obligation. Asset
Management and Investments Fees (Gross) 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 2 SIGNIFICANT ACCOUNTING POLICIES (CONT.)
F. Income
taxes The
Company recorded no income tax expense for the nine months ended September 30, 2021 and 2020 because the estimated annual effective tax
rate was zero. As of September 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 $ 13 13
G. Basic
and diluted net loss per share 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 3,544,242 2,317,315 3,544,242 2,298,934
H. 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 5.25 17 52 no CREATIONS
INC. AND SUBSIDIARIES NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (U.S.
dollars in thousands) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
I. 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 $ 625 627 Goodwill
is not amortized, but is tested at least annually for impairment, or if circumstances occur that more likely than not reduce the fair
value of the reporting unit below its carrying amount. The
Company has determined that there has been no |
