UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the fiscal year ended:
or
For the transition period from ________ to ________
Commission
file number
(Exact Name of Registrant as Specified in Its Charter)
| (State
or Other Jurisdiction of Incorporation or Organization) |
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Employer Identification Number) |
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Securities registered under section 12(b) of the Exchange Act: None
Securities
registered under section 12(g) of the Exchange Act:
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
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by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate
by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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)
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
Reporting Company | |
| (Do not check if smaller reporting company) | Emerging
growth Company |
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with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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There
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As of April 15, 2024, shares of the registrant’s common stock were outstanding .
Documents
incorporated by reference:
TABLE OF CONTENTS
| 2 |
FORWARD-LOOKING INFORMATION
This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by using terminology including “anticipates,” “believes,” “expects,” “can,” “continue,” “could,” “estimates,” “intends,” “may,” “plans,” “potential,” “predict,” “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions; uncertainties and other factors may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Our expectations are as of the date this Annual Report is filed, and we do not intend to update any of the forward-looking statements after the date this Annual Report is filed to confirm these statements to actual results, unless required by law.
This Annual Report also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other industry data. This data involves several assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently verified the statistical and other industry data generated by independent parties and contained in this Annual Report and, accordingly, we cannot guarantee their accuracy or completeness, though we do generally believe the data to be reliable. In addition, projections, assumptions and estimates of our future performance and the future performance of the industries in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including, but not limited to, the possibility that we may fail to preserve our expertise in medical therapy and product research and development; that existing and potential partners may opt to work with, or favor the products of, competitors if our competitors offer more favorable products or pricing terms; that we may be unable to maintain or grow sources of revenue; that we may be unable to attain and maintain profitability; that we may be unable to attract and retain key personnel; that we may not be able to effectively manage, or to increase, our relationships with customers; that we may have unexpected increases in costs and expenses. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.
| 3 |
PART I
| ITEM 1. | BUSINESS |
Overview
Creations, Inc. was incorporated in May 2019. On July 1, 2019, Creations, Inc, acquired a 100% interest in Yetsira Holdings Ltd., though a share swap agreement. Yetsira Holdings is an Israeli Corporation incorporated on December 2017 which in turn owns 100% of Yetsira Investment House (“Yetsira”), our operating entity, incorporated in November 2016, and Ocean Partners Y.O.D.M Ltd. (“Ocean Partners” and “Ocean”).
Through our wholly owned subsidiaries, Yetsira Investment House and Ocean Partners, we operate as a portfolio manager, licensed by the Israel Securities Authority (“ISA”). We currently offer and manage ten mutual funds with approximately $283,000,000 in assets, currently under management (“AUM”). Our core-business is providing investment services for Israeli mutual funds.
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 of distribution commissions to banks, third-party platform user fees, salary commissions and expenses, and commissions to the ISA and the Israeli Stock Exchange. Following the acquisition of Ocean, all the investment management business of the group is managed through Ocean. We exercise effective control over the operations of Ocean 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, private portfolio and increasing 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 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.
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.
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 enlarge 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 experience that can be used to advance the Company forward.
| 4 |
On February 9, 2023, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) by and among Aharon Barkai & Co. Ltd. (the “Purchasers”) through its controllers Yaniv Aharon and Dan Barkai, and an agreement for the purchase of Shares and Capital Notes (the “Purchase Agreement”), whereby the Company sold all of the capital stock and capital notes of Ocean Yetsira Ltd. (“Ocean”) in exchange for the payment of an aggregate of ILS 2,061,930 (approximately $567,000) and the return of 1,254,498 shares of common stock of the Company and 1,254,498 warrants to purchase common stock owned by the Purchasers. The transactions contemplated in the Purchase Agreement and the Share Exchange Agreement are collectively referred to as the “Transaction”). Mr. Aharon is a director of the Company. The Capital Notes in the amount of ILS 2,165,800 (approximately $596,000) which are owed to the Company by Ocean will be repaid by the Purchasers at closing as well. The closing of the transaction was subject to the approval of the Court of Family Affairs to allow the Executor of the Estate of Guy Nissenson to sign upon behalf of the Estate and to approval of the Company’s stockholders. On March 20, 2023, such approval was obtained.
The transaction closing was on August 2, 2023. On August 14, 2023, the company received the cash consideration of the transaction amounted to $1,163,220.
The 1,254,498 shares described above were returned and canceled during November 2023.
According to agreements between the parties to the share exchange agreements, as of February 7, 2023, the Company does not have any financial or economic benefit with respect to the contentious operation of Ocean Yetsira and its subsidiaries.
Available Information
The Company’s website, www.creationsfin.com, provides access, without charge, to its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission (“SEC”). The information provided on the Company’s website is not part of this report and is therefore not incorporated by reference unless such information is otherwise specifically referenced elsewhere in this report.
Materials filed by the Company with the SEC may be read and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding our company that we file electronically with the SEC.
| 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 1B. | UNRESOLVED STAFF COMMENTS |
Not applicable to smaller reporting companies.
| ITEM 1C. | CYBERSECURITY |
Risk Management and Strategy
Management believes the Company has adequate processes and systems to maintain the confidentiality of its communications and records. However, given our current business plan and lack of significant operations and employees, management does not believe that cybersecurity threats constitute a material risk for the Company. The Company currently does not have formal processes for assessing, identifying and managing risks from cybersecurity threats to the Company directly or through third-party service providers. We do not engage assessors, consultants, auditors or other third parties in connection with cybersecurity.
The Company has not experienced any cybersecurity incidents to date.
Governance
The board of directors oversees risks from cybersecurity threats as part of its risk oversight function. However, there are no specific processes or committees by which the board of directors may be informed about such risks.
Management is responsible for assessing and managing the any material risks to the Company from cybersecurity threats. However, management has no specific expertise in such matters, and there are no specific processes by which management is informed about or monitors the prevention, detection, mitigation and remediation of cybersecurity incidents. If any such risks were identified, management would report such risks to the board of directors.
If and when the Company completes a merger or other acquisition, the board of directors and management will assess the risks of cybersecurity threats to its business adopt processes for assessing, identifying and managing risks from cybersecurity threats as warranted.
| ITEM 2. | PROPERTIES |
Not Applicable.
| ITEM 3. | 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 4. | MINE SAFETY DISCLOSURES |
Not Applicable.
| 5 |
PART II
| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY , RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Market Information
Our common stock is quoted on the OTC Pink maintained by the OTC Markets Group, Inc. under the ticker symbol “CEAI”. Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. There is no public trading market for our securities.
Holders
As of April 15, 2024, we have 2,289,744 shares of our common stock issued and outstanding held by 35 stockholders of record.
Dividends
The Company has not declared or paid any cash dividends on its common stock and presently intends on retaining future earnings, if any, to fund the development and growth of the business. Therefore, the Company does not anticipate paying any cash dividends in the foreseeable future.
Securities Authorized for Issuance under Equity Compensation Plans
The Company has not adopted an equity incentive plan.
Recent Sales of Unregistered Securities
The Company has not sold any shares of common stock or securities convertible into common stock during the last two years.
Purchases of Equity Securities by the Issuer and Affiliated Purchases
During each month within the fourth quarter of the fiscal year ended December 31, 2023, neither we nor any “affiliated purchaser”, as that term is defined in Rule 10b-18(a)(3) under the Exchange Act, repurchased any of our common stock or other securities.
| ITEM 6. | [RESERVED] |
| 6 |
| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
This Annual 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 (. 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 August 31, 2020, the Company’s registration statement on Form S-1 was declared effective by the U.S. Securities and Exchange Commission. As at the date of filing this report, the Company’s shares have not begun to be quoted on the OTCQB.
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.
On February 9, 2023, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) by and among Aharon Barkai & Co. Ltd. (the “Purchasers”) through its controllers Yaniv Aharon and Dan Barkai, and an agreement for the purchase of Shares and Capital Notes (the “Purchase Agreement”), whereby the Company sold all of the capital stock and capital notes of Ocean Yetsira Ltd. (“Ocean”) in exchange for the payment of an aggregate of ILS 2,061,930 (approximately $567,000) and the return of 1,254,498 shares of common stock of the Company and 1,254,498 warrants to purchase common stock owned by the Purchasers. The transactions contemplated in the Purchase Agreement and the Share Exchange Agreement are collectively referred to as the “Transaction”). Mr. Aharon is a director of the Company. The Capital Notes in the amount of ILS 2,165,800 (approximately $596,000) which are owed to the Company by Ocean will be repaid by the Purchasers at closing as well. The closing of the transaction was subject to the approval of the Court of Family Affairs to allow the Executor of the Estate of Guy Nissenson to sign upon behalf of the Estate and to approval of the Company’s stockholders. On March 20, 2023, such approval was obtained.
The transaction closing was on August 2, 2023. On August 14, 2023, the company received the cash consideration of the transaction amounted to $1,163,220. As of November 29, 2023, the transaction was finalized, and the 1,254,498 shares were returned and canceled.
According to agreements between the parties to the share exchange agreements, as of February 7, 2023, the Company shall not have any financial or economic benefit with respect to the contentious operation of Ocean Yetsira and its subsidiaries.
| 7 |
Recently Issued Accounting Pronouncements
Management reviewed currently issued pronouncements during the year ended December 31, 2023, 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 Year Ended December 31, 2023, compared to Year Ended December 31, 2022. (In Thousands)
Following the agreement described above, As of February 7, 2023, the Company does not have any financial or economic benefit with respect to the contentious operation of Ocean Yetsira and its subsidiaries. As a result, the company ceased the consolidation of the sold companies’ assets, liabilities, and results. For practical matters, the consolidation ceased as of January 1, 2023. The company received an amount of $1,163 and recognized a receivable treasury stock balance in the amount of $321 deducted from the shareholders’ equity.
General and Administrative Expenses
For the year ended December 31, 2023, our general and administrative expenses were $183 from continuing operations, compared to $159 for the year ended December 31, 2022, those increase in expenses attributed to dividing mutual expenses of the sold companies and the parent company, and increase in professional fees such as attorney and CPA to accomplish the sale of the companies.
Net Income, Loss
The Company realized a net loss of $76 for the year ended December 31, 2023, compared to a net loss of $146 for the year ended December 31, 2021, the income is attributed to $112 Capital gain from realization of subsidiary.
After taking into account foreign currency translation adjustments, which resulted in other comprehensive loss of $0 and of $179 for the year ended December 31, 2023, and 2022, respectively, the Company realized a net loss after other comprehensive expenses of $82 and $205 for the year ended December 31, 2023 and 2022, respectively.
Liquidity and capital resources
As of December 31, 2023, the Company had cash from continued operations in the amount of $1,083 compared to cash in the amount of $114 as of December 31, 2022.
Stockholders’ equity as of December 31, 2023 was $957, as compared to stockholders’ equity of $1,360 as of December 31, 2022.
The Company’s accumulated deficit was $1,860 and $1,778 on December 31, 2023, and December 31, 2022, respectively.
Off- Balance Sheet Arrangements
The Company currently does not have any off-balance sheet arrangements.
| ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Not Applicable.
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
| 8 |
CREATIONS INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2023 and 2022
| F-1 |
CREATIONS INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2023 and 2022
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| F-2 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Creations Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Creations Inc. and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related statements of operations and comprehensive loss, changes in stockholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the “Financial Statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 2019.
/s/ Barzily and Co. CPA’s
April 15, 2024
| F-3 |
CREATIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(U.S. dollars in thousands except share data)
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | ||||||||
| Capital note | ||||||||
| Assets held for sale | ||||||||
| Total current assets | ||||||||
| Non-current assets | ||||||||
| Loans granted to stockholders | ||||||||
| Total non-current asset | ||||||||
| Total assets | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | ||||||||
| Liabilities held for sale | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| COMMITMENT AND CONTINGENCIES | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Common Stock of $ par value - | ||||||||
| Authorized: shares at December 31, 2023 and 2022; Issued and outstanding: shares at December 31, 2023 and shares at December 31, 2022 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | ||||||||
The accompanying notes are an integral part of the financial statements
| F-4 |
CREATIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(U.S. dollars in thousands except share data)
| For the year ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| General
and administrative expenses (related parties of $ | ( | ) | ( | ) | ||||
| Operating loss | ( | ) | ( | ) | ||||
| Financial income | ||||||||
| Foreign exchange differences | ( | ) | ||||||
| Gain from disposal of subsidiary | ||||||||
| Net loss before tax from continuing operations | ( | ) | ( | ) | ||||
| Tax expenses | ( | ) | ( | ) | ||||
| Net loss for the year from continuing operations | ( | ) | ( | ) | ||||
| Net income from discontinued operations, net of tax | ||||||||
| Net loss for the year | ( | ) | ( | ) | ||||
| Other comprehensive expenses: | ||||||||
| Foreign currency translation adjustments from discontinued operation | ( | ) | ||||||
| Comprehensive loss | ( | ) | ( | ) | ||||
| Basic and diluted net loss per share | ) | ) | ||||||
| Weighted average number of Common Stock used in computing basic and diluted loss per share | ||||||||
The accompanying notes are an integral part of the financial statements
| F-5 |
CREATIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(U.S. dollars in thousands except share data)
Common Stock | Additional paid-in | Accumulated other comprehensive | Accumulated | Total stockholders’ equity | ||||||||||||||||||||
| Number | Amount | capital | income | Deficit | (deficit) | |||||||||||||||||||
| Balance as of January 1, 2022 | ( | ) | ||||||||||||||||||||||
| Foreign currency translation adjustments | - | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of December 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||
| Stocks cancelled during the year | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
The accompanying notes are an integral part of the financial statements
| F-6 |
CREATIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
| December 31 | December 31 | |||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Less net income from discontinues operations | ( | ) | ||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Foreign exchange differences | ||||||||
| Capital gain from realization of subsidiary (appendix A) | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Other current assets | ||||||||
| Accounts payable | ( | ) | ||||||
| Related parties | ( | ) | ||||||
| Operating cash flow from discontinued operations | ||||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
Cash flows from investing activities: | ||||||||
| Investing cash flow from discontinued operations | ( | ) | ||||||
| Realization of subsidiary (appendix A) | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Foreign currency translation adjustments on cash and cash equivalents from discontinues operations | ( | ) | ||||||
| Change in cash and cash equivalents | ( | ) | ||||||
| Cash of continuing operations at the beginning of the year | ||||||||
| Cash of discontinued operations at the beginning of the year | ||||||||
| Cash at the end of the year | ||||||||
| Less cash of discontinued operations at the end of the year | ( | ) | ||||||
| Cash and cash equivalents at end of year | ||||||||
Appendix A – Disposal of subsidiary
| Asset held for sale (excluding cash) | ( | ) | ||
| Capital note | ( | ) | ||
| Stocks receivables | ||||
| Gain from disposal of subsidiary | ( | ) | ||
| Foreign exchange differences from realization of subsidiary | ||||
| Cash inflow from disposal of subsidiary | ( | ) |
| F-7 |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE 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 was providing investment services for mutual funds and portfolio management services for individuals and institutions. It operated as a portfolio manager through its wholly owned subsidiaries. |
The Company had three wholly owned subsidiaries. Ocean Yetsira Ltd. (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.
| B. | On
February 9, 2023, the Company entered into a share exchange agreement (the “Share Exchange
Agreement”) by and among Aharon Barkai & Co. Ltd. (the “Purchasers”)
through its controllers Yaniv Aharon and Dan Barkai, and an agreement for the purchase of
Shares and Capital Notes (the “Purchase Agreement”), whereby the Company sold
all of the capital stock and capital notes of Ocean Yetsira Ltd. (“Ocean Yetsira”)
in exchange for the payment of an aggregate of ILS |
The
transaction closing was on August 2, 2023. On August 14, 2023, the company received the cash consideration of the transaction amounted
to $
The shares described above were returned and canceled during November 2023.
According to agreements between the parties to the share exchange agreements, as of February 7, 2023, the Company does not have any financial or economic benefit with respect to the contentious operation of Ocean Yetsira and its subsidiaries, and in accordance ceased the consolidation of its subsidiaries and ceased its operation (see also note 3).
| F-8 |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 1 - GENERAL (CONT.)
| C. | On August 31, 2020, the Company’s registration statement on Form S-1 was declared effective by the U.S. Securities and Exchange Commission. As at the date of filing this report, the Company’s shares have not begun to be quoted on the OTCQB. |
| D. | The figures in the financial statements are stated in U.S. Dollars in thousands unless otherwise mentioned. |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).
A. Use of Estimates in Preparation of Financial Statements
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
B. Principles of consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
C. Functional currency
The functional currency of the Company is the U.S. dollar, which is the currency of the primary economic environment in which it operates. In accordance with ASC 830, “Foreign Currency Matters” (ASC 830), monetary balances denominated in or linked to foreign currency are stated on the basis of the exchange rates prevailing at the applicable balance sheet date. For foreign currency transactions included in the statement of operations, the exchange rates applicable on the relevant transaction dates are used. Gains or losses arising from changes in the exchange rates used in the translation of such transactions and from the remeasurement of monetary balance sheet items are carried as financing income or expenses.
The functional currency of Ocean Yetsira, Yetsira and Ocean is the New Israeli Shekel (“NIS”) and their financial statements are included in the consolidation based on translation into US dollars. Accordingly, assets and liabilities were translated from NIS to US dollars using year-end exchange rates, and income and expense items were translated at average exchange rates during the year. Gains or losses resulting from translation adjustments are reflected in stockholders’ equity, under “Accumulated Other Comprehensive Income”.
| F-9 |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
| C. | (Continued) |
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Official exchange rate of NIS 1 to US dollar | ||||||||
D. Cash and cash equivalents
The Company considers all highly liquid investments, which include short-term bank deposits that are not restricted as to withdrawal or use, and short-term debentures, with original periods to maturity not exceeding three months, to be cash equivalents.
E. Accounts receivable
Accounts receivable are reported at their outstanding unpaid principal balances net of an allowance for uncollectible accounts. The Company provides for allowances for uncollectible receivables based on management’s estimate of uncollectible amounts considering age, collection history, and any other factors considered appropriate. The Company writes off accounts receivable against the allowance for doubtful accounts when a balance is determined to be uncollectible. At December 31, 2022, the Company determined that an allowance for doubtful accounts was not needed.
F. Property and equipment, net
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets at the following annual rates
| % | ||||
| Computers and equipment | ||||
| Vehicle | ||||
When an asset is retired or otherwise disposed of, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition is reflected in the statements of operations.
G. Impairment of long-lived assets
Property
and equipment subject to amortization are reviewed for impairment in accordance with ASC 360, “Accounting for the Impairment or
Disposal of Long-Lived Assets”, whenever events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future
undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized
is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. During the year ended December
31, 2023,
H. 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. |
| F-10 |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
| I. | (Continued) |
Asset Management and Investments Fees (Gross): The Company earned Asset management and investment fees from its contracts with its clients. These fees were 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 were based on a fixed fee schedule, were recognized when the services were rendered.
All of the Company’s revenues were from contracts with customers. Customers were invoiced at the end of the month.
See note 3.
Contract Assets and Liabilities
A contract asset is an entity’s right to payment for goods and services already transferred to a customer if that right to payment is conditional on something other than the passage of time. Generally, an entity will recognize a contract asset when it has fulfilled a contract obligation but must perform other obligations before being entitled to payment.
A contract liability is an entity’s obligation to transfer goods or services to a customer at the earlier of (1) when the customer prepays consideration or (2) the time that the customer’s consideration is due for goods and services the entity will yet provide. Generally, an entity will recognize a contract liability when it receives a prepayment.
At December 31, 2023, contract assets and liabilities were $
J. Fair value of financial instruments
The carrying amounts reported in the balance sheets for cash and cash equivalents, bank deposits, other current assets and accounts receivable and accounts payable approximate their fair market value based on the short-term maturity of these instruments. The Company did not have any non-financial assets or liabilities that are measured at fair value on a recurring basis as of December 31, 2023, and 2022.
K. Marketable securities
Marketable securities represent equity investments in common stocks mutual funds. Equity investments in unconsolidated entities, other than those accounted for using the equity of accounting, are generally measured at fair value. Realized and unrealized gains and losses are included in net income.
Fair Value Measurements
The Company values its investments under the provisions of FASB ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”), which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
See note 3.
L. Severance pay
The
groups liability for severance pay is calculated according to Section 14 of the Israeli Severance Compensation Act, 1963 (“Section
14”), pursuant to which Holdings’ severance pay liability to its employees is fully discharged by monthly deposits to pension
fund accounts in the employees’ names, at a rate of
| F-11 |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
M. Income taxes
The Company accounts for income taxes under ASC 740, “Income Taxes”. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.
The Company maintains a valuation allowance with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward period under the Federal tax laws. Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimate.
The Company accounts for uncertainties in income taxes under the provisions of ASC 740-10-05 which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and certain recognition thresholds must be met before a tax position is recognized. An entity may only recognize or continue to recognize tax positions that meet a “more likely-than-not” threshold. As of December 31, 2023 and 2022, the Company does not believe it has any uncertain tax positions that would require either recognition or disclosure in the accompanying financial statements. The Company recognizes interest and penalties related to uncertain income tax positions in other expense.
N. Concentrations of credit risks
Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents and restricted bank deposit. Cash and cash equivalents and the restricted bank deposit are invested mainly in USD and NIS in banks in Israel and the United States. Such funds in United States may be in excess of insured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investments are financially sound and, accordingly, minimal credit risk exists with respect to these investments.
The Company has no off-balance-sheet concentrations of credit risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements.
| F-12 |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
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.
P. Legal and other contingencies
The Company accounts for its contingent liabilities in accordance with ASC 450 “Contingencies” under which a provision is recorded when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. With respect to legal matters, provisions are reviewed and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. As of December 31, 2023 and 2022, the Company is not a party to any litigation that could have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.
Legal costs incurred in connection with loss contingencies are expensed as incurred.
Q. Warrants
Warrants that were granted by the Company to investors through private placement transactions and to the Holdings stockholders under the Holdings Exchange are classified as a component of permanent equity since they are freestanding financial instruments that are legally detachable and separately exercisable, contingently exercisable, do not embody an obligation for the Company to repurchase its own shares, and permit the holders to receive a fixed number of shares of
| F-13 |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
| Q. | (Continued) |
common stock upon exercise. In addition, the warrants must require physical settlement and may not provide any guarantee of value or return. Fully vested and non-forfeitable warrants that meet these criteria are initially recorded at their grant date fair value and are not subsequently re-measured.
R. Leases
The Company accounts for leases under the guidance of FASB Accounting Standards Codification, or ASC, Topic 842, Leases, or ASC 842, which requires the recognition of the right-of-use assets and related operating and finance lease liabilities on the balance sheet and the disclosure of key information about certain leasing arrangements.
Leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset or the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any one of these criteria. Substantially all the Company’s operating leases are comprised of office space leases and substantially all its finance leases are comprised of office furniture and technology equipment.
Lease payments included in the measurement of the lease liability comprise the following: the fixed non-cancellable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early.
Lease expense for operating leases consists of the lease payments, and is recognized on a straight-line basis over the lease term. Included in lease expense are any variable lease payments incurred in the period that were not included in the initial lease liability.
The Company recognized a lease liability in the amount of the present value of the lease payments, and concurrently recognized right of use assets in the same amount of the lease liability regarding a lease agreement classified as operating lease.
| F-14 |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
S. Goodwill
Goodwill
consists of the excess of cost over net assets acquired of Ocean. Goodwill is not amortized, but is tested at least annually for impairment,
or if circumstances change that will more likely than not reduce the fair value of the reporting unit below its carrying amount. The
Company performs annual impairment testing on a recurring basis in the last quarter of each year. Impairments, if any, are expensed in
the year incurred. The Company did
T. Recently adopted accounting pronouncements.
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes how entities will measure credit losses for financial assets and certain other instruments that are not measured at fair value through net income. The new expected credit loss impairment model requires immediate recognition of estimated credit losses expected to occur. Additional disclosures are required regarding assumptions, models, and methods for estimating the credit losses. ASU 2019-10, Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, deferred the effective date for non-public companies. The standard is effective for non-public companies for fiscal years beginning after December 15, 2022. We adopted these requirements as of January 1, 2023 with no material impact on our consolidated financial statements.
NOTE 3 - SALE OF SUBSIDIARY
Following
the closing of the transactions described in note 1.B. on March 20, 2023, the company disposed its investments in Ocean Yetsira, Yetsira
and Ocean (the sold companies). On August 14, 2023, the company received the cash consideration of the transaction amounted to $
As
of February 7, 2023, the Company does not have any financial or economic benefit with respect to the contentious operation of Ocean
Yetsira and its subsidiaries. As a result, the company ceased the consolidation of the sold companies’ assets, liabilities and
results.. The shares
described in note 1.B. were returned and canceled during November 2023. These shares were decreased from the additional
paid-in capital in the amount of $
Assets Held for Sale
In accordance with the provisions of ASC-205-20, presentation of Financial Statements, the company have separately reported the assets and liabilities of the discontinued operations in the consolidated statements of financial position as of December 31, 2022.
Following non-commital guidelines for future transactions regarding sale of main activity to related parties during 2022 and the agreement described in note 1.B., the company classified its investments in the sold companies as of December 31, 2022 as an asset held for sale. The balances of the sold companies were as follows.
| December 31, | ||||
| 2022 | ||||
| Cash and cash equivalents | ||||
| Marketable securities | ||||
| Bank deposit | ||||
| Accounts receivable | ||||
| Other current assets | ||||
| Property and equipment, net | ||||
| Intangible assets, net | ||||
| Goodwill | ||||
| Total assets | ||||
| Accounts payable | ||||
| Deferred taxes | ||||
| Capital note | ||||
| Total liabilities | ||||
| F-15 |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 4 - LOANS GRANTED TO STOCKHOLDERS
In
2019, the Company entered into loan agreements with three of its stockholders, who also serve as service providers to Yetsira and Ocean
(see also Note 11C), under which the Company issued each of the three a loan of NIS
During
2020, one of the stockholders service agreement was terminated and the loan amounted $
During
2021, one of the stockholders service agreement was terminated and the loan of amounted $
During
2023 the remaining loan amounted $
| F-16 |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 4 - LOANS GRANTED TO STOCKHOLDERS (CONT.)
Composition: |
Year ended December 31, | Year ended December 31, | |||||||
| 2023 | 2022 | |||||||
| Opening balance | $ | $ | ||||||
| Interest income and exchange differences | ( | ) | ||||||
| Repayment | ( | ) | ||||||
| Closing balance | $ | $ | ||||||
NOTE 5 - COMMITMENT AND CONTINGENCIES
| A. | Leases: |
On October 22, 2020, Ocean Yetsira entered into new Lease Agreement (the “New Lease Agreement”) with an unrelated third party, for leasing premises which including 196 square meters and 4 parking spaces. The lease is for a term commencing December 1, 2020 throughout November 30, 2022 (the “Leasing Period”), and Ocean Yetsira has the right to terminate the New Lease Agreement in an advance notice of 3 months following the lapse of first 9 months of Leasing Period. The monthly lease fee
| F-17 |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 5 - COMMITMENT AND CONTINGENCIES (CONT.)
| A. | (Continued) |
amounted
to NIS
In
addition, Ocean Yetsira has the right to extend the Leasing Period by additional
Ocean
Yetsira pledged an amount of NIS
The
lease was capitalized under ASC 842: minimum payment $
Total
lease expenses amounted to $
The agreement term was ended in November 2022.
| B. | Following the acquisition of Ocean, the mutual fund management activity of the group was managed through Ocean. |
On September 24, 2020, Ocean entered into a new hosting agreement (the “New Hosting Agreement”) with Sigma Mutual Funds Ltd. (“Sigma Mutual Funds”), an unrelated third party, under which Ocean receives hosting services from Sigma Mutual Funds and provides fund portfolio management services
| F-18 |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 5 - COMMITMENT AND CONTINGENCIES (CONT.)
| B. | (Continued) |
for funds under the management of Sigma Mutual Funds. The New Hosting Agreement replaced the Hosting Agreement signed with Mutual Funds Moduls.
The New Hosting Agreement term is for unlimited period commencing the date in which the Company’s funds are transferred from the former funds administrator and may be terminate upon occurrence of events as determined in the New Hosting Agreement. As of November 9, 2020, the Company’s funds were transferred from the former funds administrator and the New Hosting Agreement has entered into effect.
During
the year ended December 31, 2022, the Company incurred hosting services and fund portfolio management services expenses in total amount
of $
| C. | Yetsira and Ocean Yetsira entered into Administration Service Agreements (the “Agreements”) with certain of the Company stockholders (the “Service Providers”), under which the Service Providers will provide outsourced executive services over a period of 12 months commencing from the Effective Date. In consideration of their services, the Service Providers will be entitled to (1) monthly consideration which is subject to the volume of assets administered by Ocean Yetsira; (2) bonus awards as defined and under conditions specified in the Agreements and (3) reimbursement of reasonable expenses that were incurred to perform the services. Following the agreement described in Note 1.C., certain service providers operate through Creations. |
In
addition, the Service Providers are also committed to non-competition clauses over a period of twenty-four months commencing the Effective
Date (the “Non-Competition Period”). It was agreed that (1) upon termination of the Agreement by the Company, the Service
Providers will be entitled to their monthly based salary over the period commencing the termination period and through the Non-Competition
Period or (2) upon resignation of the Agreement by a Service Provider, the Service Provider will be entitled to
Following
the closing of the transactions described in note 1.B., the agreements described in the previous paragraphs were adopted by the
company in connection to the company’s CEO. in the amount of NIS
| F-19 |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 6 - STOCKHOLDERS’ EQUITY
| A. | Common Stock |
The holder of the shares of Common Stock are entitled to the following rights:
| 1. | Right to participate and vote in the Company’s general meetings, whether regular or extraordinary. Each share will entitle its holder, when attending and participating in the voting in person or via agent or letter, to one vote; |
| 2. | Right to share in distribution of dividends, whether in cash or in the form of bonus shares; the distribution of assets or any other distribution pro rata to the par value of the shares held by them; |
| 3. | Right to a share in the distribution of the Company’s excess assets upon liquidation on a pro rata basis to the par value of the shares held by them. |
| B. | Warrants (exercise price of $1.00 per share) |
| 2023 | 2022 | |||||||
| Outstanding as of January 1 | ||||||||
| Granted | ||||||||
| Expired | ( | ) | ||||||
| Outstanding as of December 31 | ||||||||
| F-20 |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 7 - EMPLOYEE BENEFITS
Refers to discontinued operations
The
Company’s liability for severance pay is calculated according to Section 14 of the Israeli Severance Compensation Act, 1963 (“Section
14”), pursuant to which Holdings’ severance pay liability to its employees is fully discharged by monthly deposits to pension
fund accounts in the employees’ names, at a rate of
Severance
pay deposit expenses under Section 14 for the years ended December 31, 2023 and 2022 amounted to $
NOTE 8 - TAXES ON INCOME
| A. | Taxation under Various Laws |
| 1. | Tax
rate applicable to Ocean Yetsira, Yetsira and Ocean is |
| 2. | Tax rates applicable to the Company: |
The
federal income tax rates is a
| F-21 |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 8 - TAXES ON INCOME (CONT.)
| B. | Net operating losses carryforward |
As
of December 31, 2023, the Company (excluding subsidiaries) has accumulated net operating loss carryforwards for U.S. federal income
tax purposes of approximately $
| C. | Income tax expenses |
Tax expenses for the years ended December 31, 2023 and 2022 are as follows:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Current tax | $ | $ | ||||||
| Prior periods tax | ||||||||
| $ | $ | |||||||
| F-22 |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 8 - TAXES ON INCOME (CONT.)
| D. | Deferred income taxes |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Deferred tax assets: | ||||||||
| Net operation loss carryforward | $ | $ | ||||||
| Net deferred tax asset before valuation allowance | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | $ | $ | ||||||
Refers to discontinued operations
Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Deferred tax liability: | ||||||||
| Customer relations intangible assets | $ | $ | ||||||
| Net deferred tax liability | $ | $ | ||||||
The Company has a valuation allowance against a majority of its net deferred tax assets due to the uncertainty of realization of the deferred tax assets due to the operating loss history of the Company. The Company currently provides a valuation allowance against deferred taxes when it is more likely than not that some portion, or all of its deferred tax assets will not be realized. The valuation allowance could be reduced or eliminated based on future earnings and future estimates of taxable income.
| E. | Reconciliation of Income Taxes |
The main reconciling item between the statutory tax rate of the Company and the effective tax rate is the recognition of valuation allowances in respect to deferred taxes relating to accumulated net operating losses carried forward and temporary differences due to the uncertainty of the realization of such deferred taxes.
| F-23 |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 8 - TAXES ON INCOME (CONT.)
| F. | The components of profit and loss before taxes on income are as follows: |
Year ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Foreign – discontinued operations | $ | $ | ||||||
| Domestic – continuing operations | ( | ) | ( | ) | ||||
| Income (loss) before taxes on income | $ | ( | ) | $ | ||||
| G. | Tax Assessments |
The Company has not received final tax assessments for income tax purposes since incorporation.
NOTE 9 - FINANCIAL INCOME, NET
Composition:
Year ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Bank commissions and others | $ | $ | ||||||
| Other | ||||||||
| Total financial income, net | $ | $ | ||||||
| F-24 |
CREATIONS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 10 - RELATED PARTIES BALANCES AND TRANSACTIONS
| A. | Balances with related parties |
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Assets: | ||||||||
| Loans granted to stockholders (Note 9) | $ | $ | ||||||
| Liabilities: | ||||||||
| Management fee payable to stockholders | $ | $ | ||||||
| B. | Transactions with related parties |
Year ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Income: | ||||||||
| Income (expenses) in respect to loans granted to stockholders | $ | ( | ) | $ | ||||
| Expenses: | ||||||||
| Management fee (including discontinued operation) | $ | $ | ||||||
| F-25 |
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None.
| ITEM 9A. | 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 December 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.
| ITEM 9B. | OTHER INFORMATION |
None.
| ITEM 9C. | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS |
Not applicable.
PART III
| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
Our board of directors consists of two (2) members: Shumel Yelshevich, and Ilan Arad Keshet.
Directors and Executive Officers
The following table provides information as of April 15, 2024 as to each person who is, as of the filing hereof, a director and/or executive officer of the Company:
| Name | Position(s) | Age | ||||
| Shmuel Yelshevich | Interim Chief Executive Officer, Chief Financial Officer, President, Treasurer, and Secretary | 36 | ||||
| Ilan Arad Keshet | Chairman of the Board | 45 |
(1) Chairman of audit committee and Chairman of compensation committee
No Family Relationships
There is no family relationship between any director and executive officer or among any directors or executive officers.
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Business Experience and Background of Directors and Executive Officers
BOARD OF DIRECTORS
Shmuel Yelshevish co-founded Yetsira and served as Chief Financial Officer, Vice President of Sales and Investment Manager at Yetsira since November 2016. From 2013 to 2016, Mr. Yelshevich served as a manager of marketing department, portfolio manager and analyst at Israeli portfolio management firm. Mr. Shmuel holds a B.A. in Finance and Financial Risk Management from The Interdisciplinary Center Herzliya. Mr.
Ilan Arad Keshet co-founded Yetsira and has served as Chief Executive Officer and Investment Manager of Yetsira since November 2016. From 2013 to 2015. Mr. Arad Keshet served as a private investment manager and counselor to a wealth family, specializing in complex options strategies. From 2010 to 2013, Mr. Arad Keshet served at dash- Securities, a large brokerage firm in Israel, as a trading floor manager and portfolio manager of institutional funds. Mr. Arad Keshet holds a BA in Finance from Max Stern Yezreel Valley College.
Board Leadership Structure and Role in Risk Oversight
Our Board of Directors is primarily responsible for overseeing our risk management processes on behalf of our company. The Board of Directors receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment of risks. The Board of Directors focuses on the most significant risks facing our company and our company’s general risk management strategy, and also ensures that risks undertaken by our Company are consistent with the board’s appetite for risk. While the board oversees our company’s risk management, management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our company and that our board leadership structure supports this approach.
Committees of the Board
We currently do not maintain any committees of the Board of Directors. Given our size and the development of our business to date, we believe that our directors can perform all of the duties and responsibilities which might be performed by a committee. We do not currently have an audit committee financial expert.
Corporate Governance Guidelines
The Board of Directors will adopt corporate governance guidelines that serve as a flexible framework within which our Board of Directors and its committees operate. These guidelines will cover a number of areas including the size and composition of the board, board membership criteria and director qualifications, director responsibilities, board agenda, roles of the chairman of the board and Chief Executive Officer and Chief Financial Officer, meetings of independent directors, committee responsibilities and assignments, board member access to management and independent advisors, director communications with third parties, director compensation, director orientation and continuing education, evaluation of senior management and management succession planning. A copy of our corporate governance guidelines will be available on our website at www.Creationsfin.com
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Involvement in Certain Legal Proceedings
To our knowledge, our directors and executive officers have not been involved in any of the following events during the past ten years:
| 1. | any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; | |
| 2. | any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); | |
| 3. | being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities; | |
| 4. | being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; | |
| 5. | being subject of, or a party to, any Federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any Federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or | |
| 6. | being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Board of Directors Meetings and Attendance
We have no formal policy regarding director attendance at the annual meeting of stockholders. The Board of Directors held 1 meeting in 2023. All Board members were present at all of the meetings.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who own more than 10% of the Company’s stock (collectively, “Reporting Persons”) to file with the SEC initial reports of ownership and changes in ownership of the Company’s common stock. Reporting Persons are required by SEC regulations to furnish the Company with copies of all Section 16(a) reports they file. To the Company’s knowledge, based solely on its review of the copies of such reports received or written representations from certain Reporting Persons that no other reports were required, the Company believes that during its fiscal year ended December 31, 2023 all Reporting Persons timely complied with all applicable filing requirements, if applicable.
| ITEM 11. | EXCUTIVE COMPENSATION |
The following table sets forth all compensation recorded by us in each of the last two completed fiscal years for the named executive officers.
| Name and Principal Position | Year |
Salary ($) | Bonus ($) | Stock Awards |
Option Awards | Non-Equity Incentive Plan Compensation | Non-Qualified Deferred Compensation | All Other Compensation | Total Compensation ($) | |||||||||||||||||||||||||||
| Shmuel Yelshevich | 2023 | 93 | 93 | |||||||||||||||||||||||||||||||||
| Interim Chief Executive Officer | 2022 | 52 | 52 | |||||||||||||||||||||||||||||||||
| Ilan Arad Keshet | 2023 | 0 | 0 | |||||||||||||||||||||||||||||||||
| Chairman of the Board | 2022 | 0 | 0 | |||||||||||||||||||||||||||||||||
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Employment Agreements with Named Officers
| Gradation of the volume of managed assets (in NIS million) | The monthly Consideration (in NIS, before VAT) | |
| 0-1,000 | 20,000 | |
| 1,001-2,000 | 30,000 | |
| 2,001-3,000 | 45,000 | |
| 3,001-4,000 | 65,000 | |
| 4,001+ | 85,000 |
Outstanding Equity Awards at Fiscal Year-End
There were no outstanding equity awards at the end of December 31, 2023 .
Director Compensation
To date, we have not paid any compensation to our directors.
| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
The following table sets forth information with respect to the beneficial ownership of our common stock as of April 15, 2024 for:
| ● | each beneficial owner of more than 5% of our outstanding common stock; | |
| ● | each of our director and named executive officers; and | |
| ● | all of our directors and executive officers as a group. |
Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities and include common stock that can be acquired within 60 days of April 15, 2024. The percentage ownership information shown in the table is based upon 2,289,744 shares of common stock outstanding as of April 15, 2024.
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In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed outstanding shares of common stock subject to options and warrants held by that person that are immediately exercisable or exercisable within 60 days of April 15, 2024. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Beneficial ownership representing less than 1% is denoted with an asterisk (*). The information in the table below is based on information known to us or ascertained by us from public filings made by the stockholders. Except as otherwise indicated in the table below, addresses of the directors, executive officers and named beneficial owners are in care of the Company.
Name and Address of Beneficial Owner | Title of Class | Number of shares of Common stock Beneficially Owned | Percentage of Common stock Beneficially Owned (1) | |||||||
| Estate of Guy Nissenson | Common Stock | 1,044,435 | 45.61 | % | ||||||
| Shmuel Yelshevich | Common Stock | 80,903 | 3.53 | % | ||||||
| Ilan Arad | Common Stock | 80,903 | 3.53 | % | ||||||
| All Executive Officers and Directors as a group (2 individuals) | 161,806 | 7.07 | % | |||||||
| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
Related Party Transactions
We describe below all transactions and series of similar transactions, other than compensation arrangements, in the last two fiscal years, to which we were a party or will be a party, in which:
| ● | the amounts involved exceeded the lesser of $120,000 or one percent of the average of the Company’s total assets at year-end for the last two completed fiscal years; and | |
| ● | any of our directors, executive officers or holders of more than 5% of our capital stock, or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest. |
The Company will only enter into related party transactions if the terms are at least as favorable to them as could be obtained from a third party.
Director Independence
We currently do not have any directors who are independent.
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| ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
The following is a summary of the fees billed to the Company by Barzily and other tax professionals for professional accounting services rendered for the year ended December 31, 2023 and 2022.
| Fiscal Year 2023 | Fiscal Year 2022 | |||||||
| Audit fees | $ | 30 | $ | 34 | ||||
| Audit related fee | - | - | ||||||
| Tax fees | 3.6 | 3.6 | ||||||
| Other fees | - | - | ||||||
| Total | $ | 33.6 | $ | 37.6 | ||||
Audit fees consist of fees billed for services rendered for the audit of our financial statements and review of our financial statements included in our quarterly reports on Form 10–Q. Other fees consist of comfort letter service fees.
Tax fees consist of fees billed for professional services related to the preparation of our U.S. federal and state income tax returns.
We did not incur assurance and audit-related fees during 2023 and 2022, to Barzily as applicable, nor in connection with the audit of our financial statements for the reviews of registration statements and issuance of related consents and assistance with SEC comment letters.
There were no other fees billed to us by Barzily as applicable, for services rendered to us during the years ended December 31, 2023 and 2022, respectively, other than the services described above under “Audit Fees” and “Audit-Related Fees.”
Policy on Pre-Approval by Audit Committee of Services Performed by Independent Registered Public Accounting Firms
The policy of the audit committee is to pre-approve all audit and permissible non-audit services to be performed by the independent public accounting firm during the fiscal year. The audit committee pre-approves services by authorizing specific projects within the categories outlined above. The audit committee’s charter delegates to its Chair the authority to address any requests for pre-approval of services between audit committee meetings, and the Chair must report any pre-approval decisions to the audit committee at its next scheduled meeting. All services related to the fees described above were approved by the audit committee pursuant to the pre-approval provisions set forth in the applicable SEC rules and the audit committee’s charter.
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| ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. |
| ITEM 16. | FORM 10-K SUMMARY |
Not applicable.
| 15 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
| Creations, Inc. | ||
| Date: April 15, 2024 | By: | /s/ Shmuel Yelshevich |
| Name: | Shmuel Yelshevich | |
| Title: | Interim Chief Executive Officer | |
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