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EX-32.1 - Pinpoint Advance CORPv222845_ex32-1.htm
EX-31.1 - Pinpoint Advance CORPv222845_ex31-1.htm
EX-31.2 - Pinpoint Advance CORPv222845_ex31-2.htm
EX-32.2 - Pinpoint Advance CORPv222845_ex32-2.htm
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
(Mark One)
x
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011

¨
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 
For the transition period from _____________ to _____________

Commission File Number 000-52562

Pinpoint Advance Corp.
(Exact name of small business issuer as specified in its charter)
 
Delaware
 
20-1144642
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)

4 Maskit Street, Herzeliya, Israel 46700
(Address of principal executive offices)
 
972 9-9500245
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes ¨ No  ¨

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 ¨
Non-accelerated filer ¨
 
Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). x Yes ¨ No

As of May 13, 2011 there were 359,402 shares of common stock, par value $.0001 per share, issued and outstanding and 3,125,000 shares of Class A Common Stock, par value $.0001 per share issued and outstanding.

 
 

 

ITEM 1: FINANCIAL STATEMENTS.
 
PINPOINT ADVANCE CORP.
(a development stage corporation)
 
FINANCIAL STATEMENTS
as of March 31, 2011
 
In U.S. Dollars
 
INDEX
 
   
Page
     
Balance Sheets
 
F-2
     
Statements of Operations
 
F-3
     
Statements of Stockholders’ Equity
 
F-4
     
Statements of Cash Flows
 
F-6
     
Notes to Financial Statements
 
F-7

 
F-1

 
 
PINPOINT ADVANCE CORP.
(A development stage corporation)
BALANCE SHEETS

   
March 31,
2011
   
March 31,
2010
   
December 31,
2010
 
                   
ASSETS
                 
                   
Current assets
                 
Cash
  $ 3,930     $ 2,123     $ 15,636  
Deposit
    317       317       317  
Cash held in trust (Note 1)
    -       -       -  
Prepaid expense and other accounts receivable
    1,583       71,925       3,958  
Total Assets
  $ 5,830     $ 74,365     $ 19,911  
                         
LIABILITIES AND STOCKHOLDERS’ EQUITY
                       
Current Liabilities
                       
Accrued expenses and other accounts payable
  $ 39,373     $ 25,104 *     19,980  
Related party
    137,521       133,508       136,436  
Total current liabilities
    176,894       158,162       156,416  
                         
Commitments and Contingencies (Note 4)
                       
 
                       
Stockholders’ Deficiency (Note 5)
                       
Preferred stock – $.0001 par value; 1,000,000 authorized; none issued or outstanding
                       
Common stock $.0001 par value; 15,000,000
                       
Authorized, 359,402 issued and outstanding;
    37       37       37  
Common stock, Class A, $0.0001 par value,  5,000,000 Authorized, 3,125,000 issued and outstanding; and 0 shares issued and outstanding
    313       313       313  
Deficit accumulated during the development stage
    ( 171,414 )     ( 84,147 )     ( 136,855 )
Total stockholders’ deficit
    ( 171,064 )     ( 83,797 )     ( 136,505 )
Total liabilities and stockholders' deficiency
  $ 5,830     $ 74,365     $ 19,911  
                         
* Reclassification
                       
 
The accompanying notes should be read in conjunction with the financial statements

 
F-2

 

PINPOINT ADVANCE CORP.
(A development stage corporation)
STATEMENTS OF OPERATIONS

   
Period
ended
March 31, 2011
   
Period
 Ended
 March 31, 2010
   
For the period
from September
6, 2006
(inception) to
March 31, 2011
 
                   
State franchise tax
  $ 92     $ 36     $ 110,325  
Formation and operating costs
    -       -       1,000  
Other general and administrative expenses
    33,376       18,491       1,385,779  
Bank charges and interest expense
    1,091       1,089       8,658  
Loss from operation
    34,559       19,616       1,505,762  
Interest income
    -       -       1,359,678  
Loss  before provision for  income tax
    34,559       19,616       146,084  
Provision for income tax "(tax benefit)"
    -       -       4,444  
Net Loss for the period
  $ 34,559     $ 19,616     $ 150,528  
                         
Accretion of trust fund relating to common stock subject to possible redemption
    -       -       3,042  
Net Loss attributable to other common stockholders
  $ 34,559     $ 19,616     $ 153,570  
                         
Net loss  per share -
                       
Basic and diluted
  $ (0.01 )   $ (0.01 )        
Weighted average shares outstanding
                       
Basic and  diluted
    3,484,402       3,484,402          
                         
Net loss per class A share
                       
Basic and diluted
  $ (0.01 )   $ (0.01 )        
                         
Weighted average class A shares outstanding
    3,125,000       3,125,000          
 
The accompanying notes should be read in conjunction with the financial statements

 
F-3

 

PINPOINT ADVANCE CORP.
(A development stage corporation)
STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY
For the period from September 6, 2006 (inception) to March 31, 2010

    
Common stock
   
Common stock, Class A
   
Additional Paid-in
   
Deficit
accumulated
during the
   
Total
Stockholders’
   
Shares
   
Amount
   
Shares
   
Amount
   
capital
   
development stage
   
equity
Balance September 6, 2006 (inception)
        $                 $     $     $  
Common stock issued September 6, 2006 at $.0001 per share
    828,125       83                   24,917               25,000  
Net loss for the period
                                            (8,140 )     (8,140 )
Balances at December 31, 2006
    828,125       83                   24,917       (8,140 )     16,860  
Shares decreased as a result of a reverse split
    (203,125 )     (20 )                 20              
Proceeds from sale of underwriter’s purchase option
                            100             100  
Proceeds from issuance of warrants
                            1,500,000             1,500,000  
Sale of 2,875,000 units through public offering net of underwriter’s discount and offering expenses and net of $8,506,963 of proceeds allocable to 862,212 shares of common stock subject to possible conversion
    2,012,788       201                   17,475,949             17,476,150  
Net income for the period (audited)
                                  397,249       397,249  
Accretion of trust fund relating to common stock subject to possible conversion
                                  (118,777 )     (118,777 )
Balances at December 31, 2007
    2,637,788       264                   19,000,986       270,332       19,271,582  
Net loss for the period (audited)
                                  (387,073 )     (387,073 )
Accretion of trust fund relating to common stock subject to possible conversion
                                  115,735       115,735  
Reclassification of underwriting and legal fees to additional paid-in capital
                            962,500             962,500  
Reclassification of common stock value subject to redemption to current liability
                            (19,963,486 )     (17,758 )     (19,981,244 )
Balances at December 31, 2008
    2,637,788       264                         (18,764 )     (18,500 )
Reclassification of redeemable shares
    862,212       86                         (86 )      

 
F-4

 

PINPOINT ADVANCE CORP.
(A development stage corporation)
STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY
For the period from September 6, 2006 (inception) to March 31, 2010

    
Common stock
   
Common stock, Class A
   
Additional Paid-in
   
Deficit
accumulated
during the
   
Total
Stockholders’
 
   
Shares
   
Amount
   
Shares
   
Amount
   
capital
   
development stage
   
equity
 
Shares decrease as a result of reverse split
    (2,515,598 )     (251 )                 251              
Return and cancellation of initial stockholders common stock
    (625,000 )     (62 )                 62              
Issuance of common stock to initial stockholders
                3,125,000       313       (313 )            
Net loss for the period (audited)
                                  (45,682 )     (45,682 )
Balances at December 31, 2009
    359,402     $ 37       3,125,000       313           $ (64,532 )   $ (64,182 )
Net Loss for the period (audited)
                                            (72,323 )     (72,323 )
Balances at December 31,2010
    359,402     $ 37       3,125,000       313           $ (136,855 )     (136,505 )
Net Los for the period (unaudited)
    -       -       -       -       -       (34,559 )     (34,559 )
Balances at March 31, 2011
    359,402       37       3,125,000       313       -       (171,414 )     (171,064 )

 
F-5

 

PINPOINT ADVANCE CORP.
(A development stage corporation)
STATEMENTS OF CASH FLOWS

   
Period
ended
March 31, 2011
   
Period
 Ended
 March 31, 2010
   
For the period from
September 6, 2006
(inception) to March 31,
2011
 
OPERATING ACTIVITIES
                 
Net (loss)  income for the period
  $ (34,559 )   $ (19,616 )   $ (150,528 )
Increase (Decrease)  in accrued expenses and other accounts payable
    20,478       9,168       387,055  
(Increase) Decrease in prepaid expenses and other accounts receivable
    2,375       4,500       (1,582 )
                         
Net cash provided (used) in operating activities
    (11,706 )     (5,948 )     234,945  
                         
FINANCING ACTIVITIES
                       
Proceeds from issuance of common stock to initial stockholders
    -       -       25,000  
Proceeds from loans from related party
    -       -       151,210  
Payment of loans from related party
    -       -       (151,210 )
Deposit
    -       -       (317 )
Payment of Deferred offering cost
    -       -       (210,161 )
Proceeds from issuance of insider warrants
                    1,500,000  
Proceeds from purchase of underwriter’s purchase option
                    100  
Redemption of  common stock
                    (28,491,250 )
Portion of net proceeds from sale of units through public offering allocable to shares of common stock subject to possible conversion
    -       -       8,506,963  
Net proceeds from sale of units through public offering allocable to:
                       
Stockholders’ equity
    -       -       18,438,650  
Net cash provided by financing activities
  $ -       -     $ (231,015 )
                         
Net (Decrease)  increase  in cash
  $ (11,706 )     (5,948 )   $ 3,930  
Beginning of period
    15,636       8,071       -  
End of period
  $ 3,930       2,123     $ 3,930  
                         
Supplemental disclosure of non-cash activity:
                       
                         
Fair value of underwriter’s purchase option included in offering costs
    -       -       738,750  
Deferred legal fees against additional paid-in capital
                    100,000  
Deferred underwriting fees against additional paid-in capital
    -       -       862,500  
Supplemental disclosure of cash flow information:
                       
Cash paid during the period for income taxes
    -       5,918       25,205  
Cash paid during the period for interest
    -       -       5,953  
 
The accompanying notes should be read in conjunction with the financial statements

 
F-6

 

PINPOINT ADVANCE CORP.
(A development stage corporation)
 
NOTES TO FINANCIAL STATEMENTS
 
NOTE 1-DISCUSSION OF THE COMPANY’S ACTIVITIES
 
Organization and activities: Pinpoint Advance Corp. (the “Company”) was incorporated in Delaware on September 6, 2006, as a blank check company that was formed for the purpose of acquiring, merging with, engaging in a capital stock exchange with, purchasing all or substantially all of the assets of, or engaging in any other similar business combination with a business that has operations or facilities located in Israel or which is a company operating outside of Israel, specifically in Europe, which management believes would benefit from establishing operations or facilities in Israel, preferably in the technology sector (“Business Combination”). All activity from inception (September 6, 2006) through March 31, 2011 was related to the Company’s formation and capital raising activities. The Company has selected December 31 as its fiscal year end.  Following the approval of our stockholders to continue our existence at a meeting of stockholders held on May 15, 2009, our objective is to achieve long-term growth potential through one or more combinations with operating companies or businesses.  We will not restrict our search for potential candidates to companies engaged in any specific business, industry or geographical location and, thus, may acquire any type of business.  We also will continue to pursue certain claims of the Company against a third party in connection with our intended Business Combination, as described below.
 
The Company is considered to be a development stage company and as such the financial statements presented herein are presented in accordance with Statement of Financial Accounting Standards ASC 915 "Development Stage Entities" (formerly SFAS No. 7).
 
The registration statement for the Company’s initial public offering (“Offering”) was declared effective on April 19, 2007. On April 25, 2007, the Company completed a private placement ("Private Placement") and received net proceed of $1.5 million. The Company consummated the Offering on April 25, 2007 for net proceeds of approximately $27 million (including the over allotment).
 
On October 27, 2008, the Company announced it had executed a letter of intent to effectuate a business combination with a privately-held company with its headquarters in Israel (the "LOI"). All parties to the LOI negotiated the terms of a definitive agreement and in fact, a definitive agreement (the "Agreement") was executed by all parties to the LOI. However, one of the parties to the Agreement claimed it never released its signature thereto and has since indicated that it no longer wished to pursue the proposed business combination.
 
The Company believes a binding, definitive agreement was executed by all parties and on December 8, 2009, the Company and others, filed a lawsuit against Elbit Systems Holdings Ltd. ("Elbit") and others, in the Petah Tikva District Court of Israel, for damages in the amount of NIS 37.7 million ($10 million)  (the "Lawsuit").
 
At a Special Meeting held on May 15, 2009, a majority of the Company stockholders voted in favor of the proposal to remove the blank check company restrictions from the Company’s charter, thereby allowing the Company to continue its corporate existence. In accordance with stockholder approval of the Company’s proposals, on May 19, 2009 the Company effectuated the redemption of the shares of common stock issued in the Company’s initial public offering in an amount of $9.91 per share from the Company’s trust account and distribution of one share of new common stock for every eight IPO Shares redeemed.  The stockholders also approved the creation of a new class of common stock called Class A Common Stock and exchanged each share of common stock held by the initial stockholders for five shares of Class A Common Stock. The class A shares rights are identical to the new common shares rights.
 
The Company’s warrants remained outstanding in accordance with the terms of the Warrant Agreement, dated April 19, 2007.  The warrant shares issuable upon exercise of the warrant were decreased in proportion to the decrease in the Company’s outstanding shares of capital stock and the exercise price was increased to $7.5336 per share.   (See Note 8)

 
F-7

 

PINPOINT ADVANCE CORP.
(A development stage corporation)
 
NOTES TO FINANCIAL STATEMENTS-Continued

Going concern consideration As indicated in the accompanying financial statements, at March 31, 2011, the Company had $3,930 in cash, current liabilities of $176,894 and working capital deficit of $171,064. Further, the Company has incurred and expects to continue to incur costs. These factors, among others, indicate that the Company may be unable to continue operations as a going concern unless further financing from related parties is consummated.
 
NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Cash and Cash Equivalents—Cash and cash equivalents are deposits with financial institutions as well as short-term money market instruments with maturities of three months or less when purchased. The Company did not hold any cash equivalents as of March 31, 2011.

Trust Account-The Company's restricted cash and cash equivalents was held in the Trust Account until May 19, 2009 and was invested in a money market fund. The Company recognized interest income $1,359,678 from inception (September 6, 2006) to May 19, 2009 on such money market fund, which is included in interest income on the accompanying statements of operations.
 
Concentration of Credit Risk-financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash and cash equivalents. The Company may maintain deposits in federally insured financial institutions in excess of federally insured limits. However, management believes the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.

Net Income per Share-Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Basic earnings per share subject to possible conversion is calculated by dividing accretion of Trust Account relating to common stock subject to possible conversion by 107,777 common shares subject to possible conversion. Diluted earnings per share reflect the additional dilution for all potentially dilutive securities such as stock warrants and options. The effect of the 1,500,000 outstanding warrants, issued in connection with the private placement described in Note 1 and the warrants issued in connection with the public offering has not been considered in the diluted net earnings per share since the warrants are contingently exercisable. The effect of the 125,000 units included in the underwriters purchase option, as described in Note 5, along with the warrants underlying such units, has not been considered in the diluted earnings per share calculation since the market price of the unit was less than the exercise price during the period.
 
Fair Value of Financial Instruments-the fair values of the Company’s assets and liabilities that qualify as financial instruments under ASC 825 "Financial Instrument" (SFAS No. 107) “Disclosures about Fair Value of Financial Instrument,” approximate their carrying amounts presented in the balance sheet at March 31, 2011.

 
F-8

 
 
PINPOINT ADVANCE CORP.
(A development stage corporation)
 
NOTES TO FINANCIAL STATEMENTS-Continued
 
Use of Estimates-The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that effect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
 
Income Taxes-Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis of assets and liabilities that will result in future taxable or deductible amounts and are based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized.
 
NOTE 3-DEFFERED UNDERWRITING FEE
 
In connection with the Offering, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with the underwriters in the Offering.
 
Pursuant to the Underwriting Agreement, the Company was obligated to the underwriters for certain fees and expenses related to the Offering, including underwriting discounts of $2.2 million (with over allotment exercised). The Company paid $1.4 million of the underwriting discount upon closing of the Offering (including the over allotment). The Company and the underwriters have agreed that payment of the balance of the underwriting discount of $862.5 thousand will be deferred until consummation of the Business Combination.  Such underwriting discounts were forfeited due to the Company not having consummated a Business Combination within the allotted time.
 
In connection with the Offering, the Company entered into an engagement agreement (the “Engagement Agreement”) with its legal counsel in the Offering.  Pursuant to the Engagement Agreement, the Company was obligated to its legal counsel for certain fees and expenses related to the Offering, including an aggregate legal fee of $250,000.  The Company paid $150,000 of the legal fee upon closing of the Offering.
 
The Company was unable to consummate a business combination within the time allotted and all deferred legal fees and deferred underwriter fees were distributed to stockholders as part of the trust distribution.
 
As discussed in Note 1, those fees has been reclassified to the Additional Paid-in capital and will not be payable upon liquidation.

 
F-9

 
 
PINPOINT ADVANCE CORP.
(A development stage corporation)
 
NOTES TO FINANCIAL STATEMENTS-Continued
 
NOTE 4- COMMITMENTS AND CONTINGENCIES
 
On December 8, 2009, the Company and others, filed a lawsuit against Elbit Systems Holdings Ltd. ("Elbit") and others, in the Petah Tikva District Court of Israel, for damages in the amount of NIS 37.7 million ($10 million)  (the "Lawsuit"). The Lawsuit is based on the following factual background:

 
a.
That following a period of extensive negotiations between inter alia, the Company and Elbit, a July 2008 Letter of Intent was signed, which contemplated inter alia, the Company purchase from Elbit of 31% of Kinetics, i.e. 18,716 Ordinary Shares of Kinetics Ltd. (the "Kinetics Shares"), in the amount of $ 26 million Following said purchase, a merger between the Company and Kinetics was to be effectuated;
 
 
b.
That the Company, as a blank check company and in order to fulfill its duty to obtain timely shareholders' approval, was compelled to finalize the deal by October 18, 2008;
 
 
c.
That based on the Letter of Intent, and a belief at the time of Elbit's good faith, the Company continued negotiating a definitive agreement with all parties involved in the transaction;
 
 
d.
That after lengthy negotiations, a definitive agreement was finalized, and signed, in early October 2009;
 
 
e.
That Elbit's signature on the definitive agreement was withheld, based on Elbit's claim that it had "just received" information about a new order that would raise the forecast of Kinetics' profits in 2009;
 
 
f.
That Elbeit’s remained a shareholder of Kinetics Shares after October 18, 2008.
 
The Lawsuit is in preliminary stages. The Lawsuit seeks reparation for damages caused to plaintiffs as a result of defendants' lack of good faith in negotiations, and requests that the Court hold that defendants materially breached the definitive agreement, that defendants are estopped from denying that the definitive agreement was finalized, and that defendants acted with fraud, and alternatively, with recklessness and without good faith (based inter alia, on representations made during negotiations). The Lawsuit also alleges that Elbit was unjustly enriched by its conduct, and that any enrichment as a result of Elbit's retention of the Kinetics Shares belongs to Pinpoint.
 
On February 22, 2011, the defendants filed a Statement of Defense. Pursuant to Court suggestion, the parties have submitted their dispute to non-binding mediation, before Professor Nily Cohen. The mediation is currently ongoing. 
 
NOTE 5-STOCKHOLDER’S EQUITY
 
In its Offering, effective April 19, 2007 (closed on April 25, 2007), the Company sold to the public 2,875,000 Units (the “Units”, each a “Unit”) at a price of $10.00 per Unit. Each Unit consisted of one share and one warrant. Each warrant entitles the holder to purchase one share of the Company's common stock at a price of $7.50. Proceeds from the Offering and the Private Placement totaled approximately $28.5 million, which was net of approximately $1.6 million in underwriting fees and other expenses paid at closing.
 
The Company also sold to underwriters for $100 an option to purchase up to 125,000 Units which option expired on May 19, 2009.
 
On May 19, 2009 in accordance with stockholder consent, the Company effectuated the exchange and redemption of its capital stock whereby holders of Company common stock purchased in the Offering received one share of new common stock for eight shares redeemed and holders of common stock sold in the Private Placement exchanged such shares and received five share of Class A Common Stock for each share of common stock redeemed for an aggregate of 359,402 shares of new common stock and 3,125,000 shares of Class A Common Stock. The Class A Common Stock is identical to the new common stock.
 
The Company’s warrants remained outstanding in accordance with the terms of the Warrant Agreement, dated April 19, 2007.  The warrant shares issuable upon exercise of the warrant were decreased in proportion to the decrease in the Company’s outstanding shares of capital stock and the exercise price was increased to $7.5336 per Share. (See Footnote 8 – Subsequent Events)
 
 
F-10

 
 
PINPOINT ADVANCE CORP.
(A development stage corporation)
 
NOTES TO FINANCIAL STATEMENTS-Continued
 
NOTE 6- WARRANTS AND OPTION TO PURCHASE COMMON STOCK
 
The Company was unable to effectuate the Business Combination within the time allotted and the deferred underwriting discount was distributed to stockholders as part of the Trust Account distribution.  Immediately prior to the Offering the Company sold to certain of the initial stockholders 1,500,000 warrants ("Private Warrants"), for an aggregate purchase price of $1.5 million. All of the proceeds received from the sale of the Private Warrants were placed in the Trust Account. All of the Company’s stockholders prior to the Offering (“Initial Stockholders”) waived their rights to participate in any liquidation distribution occurring upon failure of the Company to consummate a Business Combination.
 
The public warrants, and the underwriter's unit purchase option and the warrants included in the underwriter’s unit purchase option, are not subject to net cash settlement in the event the Company is unable to maintain an effective 1933 Act registration statement.  The Company must use best efforts to file and maintain the effectiveness of the registration statement for the warrants set forth above as well as the securities issuable upon exercise of the underwriter’s unit purchase option.  Such warrants are only exercisable to the extent the Company is able to maintain such effectiveness.  The unit purchase option (but not the underlying warrants), however, may be exercised by means of cashless exercise even in the absence of an effective registration statement for the underlying securities.  If a holder of public warrants or the holder of the underwriter’s unit purchase option, or warrants underlying the underwriter’s unit purchase option, does not, or is not able to, exercise such warrants then the public warrants, the underwriter’s unit purchase option and any warrants underlying such unit purchase option will expire worthless.
 
The Company’s warrants remained outstanding in accordance with the terms of the Warrant Agreement, dated April 19, 2007.  The warrant shares issuable upon exercise of the warrant were decreased in proportion to the decrease in the Company’s outstanding shares of capital stock and the exercise price was increased to $7.5336 per Share.  (See Note 8).
 
NOTE 7-CAPITAL STOCK
 
Preferred Stock
 
The Company is authorized to issue up to 1,000,000 shares of Preferred Stock with such designations, voting, and other rights and preferences as may be determined from time to time by the Board of Directors
 
Common Stock
 
On February 20, 2007, the number of outstanding shares decreased from 828,125 shares to 625,000 shares as a result of a reverse split of the Company's common stock.
 
On April 25, 2007, the number of outstanding shares was 3,125,000 after consummating the initial public offering.
 
On May 2, 2007, the number of outstanding shares was 3,500,000 after exercising the over-allotment option.
 
On May 19, 2009, the number of outstanding shares was decreased from 3,500,000 to 359,402 as a result of reverse split of 8 to 1 of the IPO Shares and redemption of common stock from the Initial Stockholders.
 
Class A, Common Stock
 
 On May 19, 2009, the number of outstanding share was 3,125,000 after issuance of common stock to initial stockholders.
 
NOTE 8- SUBSEQUENT EVENTS
 
On April 19, 2011, the Company’s warrants expired.  
 
 
F-11

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

The following discussion and analysis provides information that management believes is relevant for an assessment and understanding of our results of operations and financial condition.  The following selected financial information is derived from our historical financial statements and should be read in conjunction with such financial statements and notes thereto set forth elsewhere herein and the “Forward-Looking Statements” explanation included herein.  This information should also be read in conjunction with our audited historical consolidated financial statements which are included in our annual report on Form 10-K for the fiscal year ended December 31, 2010 (“Annual Report”) and Risk Factors contained in such Annual Report.

Overview

Pinpoint Advance Corp. (the “Company”, “we”, or “us”) is a blank check company. We were organized under the laws of the State of Delaware on September 6, 2006. We were formed for the purpose of acquiring, merging with, engaging in a capital stock exchange with, purchasing all or substantially all of the assets of, or engaging in any other similar business combination with a business that has operations or facilities located in Israel or which is a company operating outside of Israel, specifically in Europe, which management believes would benefit from establishing operations or facilities in Israel, preferably in the technology sector (“Business Combination”).  On May 18, 2009, our Second Amended and Restated Certificate of Incorporation became effective, to (i) effectuate the redemption of shares (“IPO Shares”) issued in the Company’s initial public offering (“IPO”) for cash from the trust account (“Trust Account”) in the amount per share of $9.91 (the “Redemption”), and in connection with the Redemption, distribute to holders of the IPO Shares one share of new common stock (“New Common Stock”) for every eight IPO Shares redeemed; (ii) create a new class of common stock called Class A Common Stock and exchange each share of common stock issued by the Company prior to its IPO (“Founder Shares”) for five shares of Class A Common Stock; and (iii) eliminate the blank check company restrictions by amending Article THIRD and deleting Article SIXTH in its entirety to allow for the continuation of our corporate existence.
 
On May 19, 2009, we completed the distribution of cash from our Trust Account in the aggregate amount of $28,491,250 to holders of 2,875,000 IPO Shares, which IPO Shares were redeemed and then cancelled, and in connection with the Redemption, we issued an aggregate of 359,402 shares of New Common Stock.  Holders of the New Common Stock own approximately 10% of the Company’s aggregate outstanding shares of common stock.  Any units issued in the IPO were split into their respective common stock and warrants, with the common stock being redeemed as described above.  The Company’s warrants remained outstanding in accordance with the terms of the Warrant Agreement, dated April 19, 2007.  The warrant shares issuable upon exercise of the warrant were decreased in proportion to the decrease in the Company’s outstanding shares of capital stock and the exercise price was increased to $7.5336 per share.
 
On May 19, 2009, we issued an aggregate of 3,125,000 shares of Class A Common Stock in exchange for surrender and cancellation of 625,000 Founder Shares.  The Class A Common Stock has the same rights, preferences and privileges as the New Common Stock. Holders of the New Common Stock and Class A Common Stock will vote together as one class on all matters (including the election of directors) submitted to a vote of the stockholders.  Our management has operated the Company since its formation and has over 100 years of combined experience in operating public companies.  Our management has agreed not to accept compensation until consummation of a business combination.
 
Business

All activity from inception (September 6, 2006) through May 19, 2009 was related to the Company’s formation and capital raising activities and seeking a suitable Business Combination.  Following the approval of our stockholders to continue our existence at a meeting of stockholders held on May 15, 2009, our objective is to achieve long-term growth potential through one or more combinations with operating companies or businesses.  We will not restrict our search for potential candidates to companies engaged in any specific business, industry or geographical location and, thus, may acquire any type of business.  We also will continue to pursue certain claims of the Company against a third party, as described below.

 
 

 
 
On October 27, 2008, the Company announced it had executed a letter of intent to effectuate a Business Combination with a privately-held company with its headquarters in Israel (the “LOI”). All parties to the LOI negotiated the terms of a definitive agreement and in fact, a definitive agreement (the “Agreement”) was executed by all parties to the LOI. However, one of the parties (the “Objecting Party”) to the Agreement claimed it never released its signature thereto and has since indicated that it no longer wished to pursue the proposed business combination.

The Company believes a binding, definitive agreement was executed by all parties.  However, because one of the parties had indicated its position that no binding agreement existed and that it did not wish to continue with negotiations, the Company determined to liquidate the Trust Account established by the Company for the benefit of its public stockholders, and return funds to the holders of shares of the Company’s common stock issued in the Offering, in accordance with its Offering prospectus and the terms of its amended and restated certificate of incorporation.

The Company’s Amended and Restated Certificate of Incorporation provided for mandatory liquidation of the Company in the event that the Company did not consummate a Business Combination within 18 months from the date of the consummation of its Offering, or 24 months from the consummation of the Offering if certain extension criteria had been satisfied.  In October 2008 the Company announced its termination of a letter of intent for potential business combination plans as well as its plan to distribute the amount held in the Trust Fund to its stockholders and to adopt a plan for continued corporate existence.

At a special meeting held on May 15, 2009, a majority of the Company’s stockholders voted in favor of the proposal to remove the blank check company restrictions from the Company’s charter, thereby allowing the Company to continue its corporate existence.  In accordance with stockholder approval of the Company’s proposals, on May 19, 2009 the Company effectuated the Redemption of IPO Shares in the amount of $9.91 per share from the Trust Account, and distributed one share of New Common Stock for every eight IPO shares redeemed, for an aggregate of 359,402 shares of New Common Stock.  The stockholders also approved the creation of the Class A Stock and the exchange of each share of common stock owned by the Company’s founder for five shares of Class A Stock, for an aggregate of 3,125,000 shares of Class A Stock.

On December 8, 2009, the Company and others, filed a lawsuit against Elbit Systems Holdings Ltd. ("Elbit") and others, in the Petah Tikva District Court of Israel, for damages in the amount of NIS 37.7 million ($10 million)  (the "Lawsuit"). The Lawsuit is based on the following factual background:

 
a.
That following a period of extensive negotiations between inter alia, the Company and Elbit, a July 2008 Letter of Intent was signed, which contemplated inter alia, the Company purchase from Elbit of 31% of Kinetics, i.e. 18,716 Ordinary Shares of Kinetics Ltd. (the "Kinetics Shares"), in the amount of $ 26 million Following said purchase, a merger between the Company and Kinetics was to be effectuated;
 
 
b.
That the Company, as a blank check company and in order to fulfill its duty to obtain timely shareholders' approval, was compelled to finalize the deal by October 18, 2008;
 
 
c.
That based on the Letter of Intent, and a belief at the time of Elbit's good faith, the Company continued negotiating a definitive agreement with all parties involved in the transaction;
 
 
d.
That after lengthy negotiations, a definitive agreement was finalized, and signed, in early October 2009;
 
 
e.
That Elbit's signature on the definitive agreement was withheld, based on Elbit's claim that it had "just received" information about a new order that would raise the forecast of Kinetics' profits in 2009;
 
 
f.
That Elbeit’s remained a shareholder of Kinetics Shares after October 18, 2008.
 
 
 

 

The Lawsuit is in preliminary stages. The Lawsuit seeks reparation for damages caused to plaintiffs as a result of defendants' lack of good faith in negotiations, and requests that the Court hold that defendants materially breached the definitive agreement, that defendants are estopped from denying that the definitive agreement was finalized, and that defendants acted with fraud, and alternatively, with recklessness and without good faith (based inter alia, on representations made during negotiations). The Lawsuit also alleges that Elbit was unjustly enriched by its conduct, and that any enrichment as a result of Elbit's retention of the Kinetics Shares belongs to Pinpoint.
 
On February 22, 2011, the defendants filed a Statement of Defense. Pursuant to Court suggestion, the parties have submitted their dispute to non-binding mediation, before Professor Nily Cohen. The mediation is currently ongoing. 
 
The Company continues to review new business opportunities for a potential business combination.  The analysis of new business opportunities has and will be undertaken by or under the supervision of our officers and directors.  We have unrestricted flexibility in seeking, analyzing and participating in potential business opportunities.  In our efforts to analyze potential target companies or businesses, we will consider, among others, the following factors:
 
 
(i)
Potential for growth, indicated by new technology, anticipated market expansion or new products;

 
(ii)
Competitive position as compared to other firms of similar size and experience within the relevant industry segment as well as within the industry as a whole;

 
(iii)
Strength and diversity of management, either in place or scheduled for recruitment;

 
(iv)
Capital requirements and anticipated availability of required funds, to be provided by us or from operations, through the sale of additional securities, through joint ventures or similar arrangements or from other sources;

 
(v)
The cost of participation by us as compared to the perceived tangible and intangible values;

 
(vi)
The extent to which the business opportunities can be advanced;

 
(vii)
The accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items; and

 
(viii)
Other relevant factors that we identify.
 
In applying the foregoing criteria, no one of which will be controlling, management will attempt to analyze all factors and circumstances and make a determination based upon reasonable investigative measures and available data.  Potentially available business opportunities may occur in many different industries, and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex.  Due to our limited capital we may not discover or adequately evaluate adverse facts about any opportunity evaluated or, ultimately, any transaction consummated.

Form of Acquisition
 
The manner in which we participate in an opportunity will depend upon the nature of the opportunity, our respective needs and desires and the promoters of the opportunity, and our relative negotiating strength and that of such promoters.

In the event the Company enters into a definitive agreement to acquire an operating company, the acquisition may not require stockholder approval, even if it constituted a change in control of the Company, provided the Company’s common stock is not then listed on a national exchange and the acquisition is structured so as not to require a stockholder vote under the Delaware code. Accordingly, stockholders may not be entitled to vote on any future acquisitions by the Company.
 
 
 

 

It is likely that we will acquire our participation in a business opportunity through the issuance of our common stock or other securities.  Although the terms of any such transaction cannot be predicted, it should be noted that in certain circumstances the criteria for determining whether or not an acquisition is a so-called “tax free” reorganization under Section 368(a)(l) of the Internal Revenue Code of 1986, as amended (the “Code”), depends upon whether the owners of the acquired business own 80% or more of the voting stock of the surviving entity.  If a transaction were structured to take advantage of these provisions rather than other “tax free” provisions provided under the Code, our then-existing stockholders would, in such circumstances retain 20% or less of the total issued and outstanding shares of the surviving entity.  Under other circumstances, depending upon the relative negotiating strength of the parties, our then-existing stockholders may retain substantially less than 20% of the total issued and outstanding shares of the surviving entity.  This will result in substantial additional dilution to the equity of our then-existing stockholders.
 
If we were to pursue a “tax-free” reorganization as described above, our then-existing stockholders would not have control of a majority of our voting shares following a reorganization transaction.  As part of such a transaction, all or a majority of our directors may resign and new directors may be appointed without any vote by our stockholders.
 
In the case of an acquisition of stock or assets not involving a statutory merger or consolidation directly involving us, the transaction may be accomplished upon the sole determination of management without any vote or approval by our stockholders.  In the case of a statutory merger or consolidation directly involving us, it will likely be necessary to call a stockholders’ meeting and obtain the approval of the holders of a majority of our outstanding shares.  The necessity to obtain such stockholder approval may result in delay and additional expense in the consummation of any proposed transaction and will also give rise to certain appraisal rights to dissenting stockholders.  Most likely, management will seek to structure any such transaction so that no stockholder approval is required.
 
It is anticipated that the investigation of specific business opportunities and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for third party professionals, accountants, attorneys and others.  If a decision is made not to participate in a specific business opportunity, these costs theretofore incurred in the related investigation would not be recoverable.  Furthermore, even if an agreement is reached for the participation in a specific business opportunity, the failure to consummate that transaction may result in our loss of the related costs incurred.
 
We presently have no employees apart from the officers named elsewhere herein.  Our officers and directors are engaged in outside business activities and anticipate that they will devote very limited time to our business until a business opportunity has been identified.  We expect no significant changes in the number of our employees other than such changes, if any, incident to a business combination transaction.

Forward Looking Statements

The statements discussed in this report include forward looking statements that involve risks and uncertainties detailed from time to time in our reports filed with the Securities & Exchange Commission.

Liquidity and Capital Resources
 
On May 19, 2009, we distributed $28,491,250 out of our Trust Account to holders of our IPO Shares.  As of March 31, 2011, we had approximately $3,930 of cash available for general corporate purposes.  As of March 31, 2011, our balance sheet reflected total liabilities of $176,894.  The board of directors anticipates that the Company will need to raise capital to fund ongoing operations, including the compliance cost of continuing to remain a public reporting company, and to fund the acquisition of an operating business.

In connection with our IPO, we were not required to pay the underwriters, Maxim Group LLC the remaining three percent (3%) of the gross proceeds ($862,500) of the initial public offering, as a result of the Company being unable to complete a business combination within the allotted time. The 3% deferred fee was part of the funds returned to our public stockholders from the trust account upon the Redemption.
  
 
 

 

The Company does not currently have any specific capital-raising plans. We may receive funds from some or all of our officers or directors, and we may seek to issue equity securities, including preferred securities for which we may determine the rights and designations, common stock, warrants, equity rights, convertibles notes and any combination of the foregoing. Any such offering may take the form of a private placement, public offering, rights offering, other offering or any combination of the foregoing at fixed or variable market prices or discounts to prevailing market prices. We cannot assure you that we will be able to raise sufficient capital on favorable, or any, terms. We believe the issuance of equity securities in such a financing will not be subject to stockholder approval if the Company’s common stock is not then listed on a national exchange or traded on NASDAQ. Accordingly, you may not be entitled to vote on any future financing by the Company. Moreover, stockholders have no preemptive or other rights to acquire any securities that the Company may issue in the future.
 
If the Company is deemed to be a “blank check company” for the purposes of the federal securities laws, regulatory restrictions that are more restrictive than those currently set forth in the Company’s Second Amended and Restated Certificate of Incorporation may apply to any future public offerings by the Company pursuant to Rule 419 of the Securities Act of 1933, as amended.

Other than contractual obligations incurred in the ordinary course of business, we do not have any other long-term contractual obligations.

Results of Operations

Net loss of $34,559 and $19,616 reported for the three months ended March 31, 2011 and 2010 respectively, consists primarily of $33,376 and $18,491 of expenses for administrative services, and $92 and $ 36 for franchise taxes.  Our objective is to achieve long-term growth potential through one or more combinations with operating companies or businesses.  We also will continue to pursue claims against Elbit.  The Company’s operations consist primarily of the Lawsuit and seeking a business combination target.

We consummated our IPO of 2,500,000 Units on April 25, 2007 and consummated the closing on the over-allotment option on May 2, 2007. Gross proceeds from the IPO were $30,250,000 (including the over-allotment option and warrants sold privately). We paid a total of $1,349,900 in underwriting discounts and commissions, and approximately $449,000 was paid for costs and expenses related to the IPO. After deducting the underwriting discounts and commissions and the offering expenses, we deposited $28,491,250 of the net proceeds into the trust account.
 
On May 19, 2009, we completed the distribution of cash from our trust account in the aggregate amount of $28,491,250 to holders of 2,875,000 IPO Shares, which IPO Shares were redeemed and then cancelled, and in connection with the Redemption, we issued an aggregate of 359,402 shares of New Common Stock.  Holders of the New Common Stock own approximately 10% of the Company’s aggregate outstanding shares of common stock.  Any units issued in the IPO were split into their respective common stock and warrants, with the common stock being redeemed as described above.  The Company’s warrants remained outstanding in accordance with the terms of the Warrant Agreement, dated April 19, 2007.  The warrant shares issuable upon exercise of the warrant were decreased in proportion to the decrease in the Company’s outstanding shares of capital stock and the exercise price was increased to $7.5336 per share.  Pursuant to the Warrant Agreement, the Company’s warrants expired April 19, 2011.  

On May 19, 2009, we issued an aggregate of 3,125,000 shares of Class A Common Stock in exchange for surrender of 625,000 Founder Shares.  The Class A Common Stock has the same rights, preferences and privileges as the New Common Stock. Holders of the New Common Stock and Class A Common Stock will vote together as one class on all matters (including the election of directors) submitted to a vote of the stockholders.  Our management has operated the Company since its formation and has over 100 years of combined experience in operating public companies.  Our management has agreed not to accept compensation until consummation of a business combination.  We currently have nominal assets and operations.

These factors, among others, indicate that the Company may be unable to continue operations as a going concern unless the Company is able to obtain further financing.  The directors of the Company have in the past loaned money to the Company to finance its operations.  They may but are not obligated to provide additional funds to the company.  As of the date of this Report, there were no commitments from any of the directors to provide such funds.  If the Company is unable to obtain financing on favorable terms, or at all, it will not be able to continue operating with its current resources.  Management has no current plans to raise additional capital.

 
 

 
 
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The information in this Item is not required to be disclosed by a smaller reporting company.

ITEM 4T. CONTROLS AND PROCEDURES.
 
Evaluation of Disclosure Controls and Procedures
 
As of the end of the period covered by this Quarterly Report, the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer (the “Certifying Officers”), conducted evaluations of the Company’s disclosure controls and procedures. As defined under Sections 13a–15(e) and 15d–15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the Certifying Officers, to allow timely decisions regarding required disclosures.
 
Based on this evaluation, the Certifying Officers have concluded that the Company’s disclosure controls and procedures were effective to ensure that material information is recorded, processed, summarized and reported by management of the Company on a timely basis in order to comply with the Company’s disclosure obligations under the Exchange Act and the rules and regulations promulgated thereunder.
 
Changes in Internal Control over Financial Reporting
 
Further, there were no changes in the Company’s internal control over financial reporting during the Company’s first fiscal quarter of 2011 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
Limitations on the Effectiveness of Internal Controls
 
Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
 
 
 

 

PART II
OTHER INFORMATION

Item 1 Legal Proceedings

On December 8, 2009, the Company and others, filed a lawsuit against Elbit Systems Holdings Ltd. ("Elbit") and others, in the Petah Tikva District Court of Israel, for damages in the amount of NIS 37.7 million ($10 million)  (the "Lawsuit"). The Lawsuit is based on the following factual background:

 
a.
That following a period of extensive negotiations between inter alia, the Company and Elbit, a July 2008 Letter of Intent was signed, which contemplated inter alia, the Company purchase from Elbit of 31% of Kinetics, i.e. 18,716 Ordinary Shares of Kinetics Ltd. (the "Kinetics Shares"), in the amount of $ 26 million Following said purchase, a merger between the Company and Kinetics was to be effectuated;
 
 
b.
That the Company, as a blank check company and in order to fulfill its duty to obtain timely shareholders' approval, was compelled to finalize the deal by October 18, 2008;
 
 
c.
That based on the Letter of Intent, and a belief at the time of Elbit's good faith, the Company continued negotiating a definitive agreement with all parties involved in the transaction;
 
 
d.
That after lengthy negotiations, a definitive agreement was finalized, and signed, in early October 2009;
 
 
e.
That Elbit's signature on the definitive agreement was withheld, based on Elbit's claim that it had "just received" information about a new order that would raise the forecast of Kinetics' profits in 2009;
 
 
f.
That Elbeit’s remained a shareholder of Kinetics Shares after October 18, 2008.
 
The Lawsuit is in preliminary stages. The Lawsuit seeks reparation for damages caused to plaintiffs as a result of defendants' lack of good faith in negotiations, and requests that the Court hold that defendants materially breached the definitive agreement, that defendants are estopped from denying that the definitive agreement was finalized, and that defendants acted with fraud, and alternatively, with recklessness and without good faith (based inter alia, on representations made during negotiations). The Lawsuit also alleges that Elbit was unjustly enriched by its conduct, and that any enrichment as a result of Elbit's retention of the Kinetics Shares belongs to Pinpoint.
 
On February 22, 2011, the defendants filed a Statement of Defense. Pursuant to Court suggestion, the parties have submitted their dispute to non-binding mediation, before Professor Nily Cohen. The mediation is currently ongoing. 
 
Item 6.               Exhibits

31.1
 
Section 302 Certification of Principal Executive Officer
     
31.2
 
Section 302 Certification of Principal Financial Officer
     
32.1
 
Section 906 Certification of Principal Executive Officer
     
32.2
 
Section 906 Certification of Principal Financial Officer
 
 

 

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
     
   
PINPOINT ADVANCE CORP.
  
   
Dated: May 16, 2011
 
/s/ Adiv Baruch
 
Adiv Baruch
 
President and Chief Executive Officer
 
(Principal executive officer)
 
Dated: May 16, 2011
 
/s/ Ronen Zadok
 
Ronen Zadok
 
Chief Financial Officer and Secretary 
 
(Principal financial and accounting officer)