PINX:ACRI Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

FORM 10-Q

 

[x]                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2012

 

OR

 

[ ]                 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                     

 

Commission File Number 000-50482

 

ACRO Inc.

(Exact name of registrant as specified in its charter)

                                                                     

 Nevada   98-0377767
(State or Other Jurisdiction of   (IRS Employer
Incorporation or Organization)   Identification No.)

 

Ben Gurion Street 1, Bnei Brak, Israel   23840
(Address of Principal Executive Offices)   (Zip Code)

 

972-73-7963851
(Registrant’s Telephone Number, Including Area Code)

 

18 Halivne Street, Timrat, Israel
(Former Name, Former Address and Former Fiscal year, if changed since last report)

 

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) has been subject to such filing requirements for the past 90 days:

 

Yes [x] No [ ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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:

 

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):

 

Yes [ ] No [x]

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

 

As of March 31, 2012, there were 19,349,000 shares of the registrant’s common stock outstanding.

 

 

 
 

 

 

Table of Contents

ACRO INC.

 

INDEX

                                                                                                                                                    

PART I. FINANCIAL INFORMATION   2
Item  1. Financial Statements   2 - 10
Item  2. Management’s Discussion and Analysis of Financial Condition and Results of Operations   9
Item  3. Quantitative and Qualitative Disclosures about Market Risk  
Item  4T. Controls and Procedures   15
PART II. OTHER INFORMATION   16
Item  1. Legal Proceedings   16
Item  1A. Risk Factors   16
Item  2. Unregistered Sales of Equity Securities and Use of Proceeds   16
Item  3. Defaults Upon Senior Securities   16
Item  4. [Removed and Reserved]   16
Item  5. Other Information   16
Item  6. Exhibits   16
Signatures   17
Exhibit Index   18
Certification of CEO Pursuant to Section 302    
Certification of CFO Pursuant to Section 302    
Certification Pursuant to U.S.C. Section 1350    

1
 

 

 

Item  1. Financial Statement (Unaudited)

 

 

ACRO INC.  (A Development Stage Company) AND ITS SUBSIDIARY
     
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
     
AS OF
     
31-Mar-12
     
UNAUDITED 
     
INDEX
     
PART I - Financial Information PAGE
     
Item 1 - INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  
     
  Balance Sheets -  
  March 31, 2012 and December 31, 2011 3
     
  Statements of Operations -  
  Three months ended March 31, 2012 and 2011 and cumulative from inception date 4
     
  Statements of Cash Flows -  
  Three months ended March 31, 2012 and 2011 and cumulative from inception date 5
     
  Notes to the Financial Statements 6 - 8

 

 

2
 

ACRO INC. (A Development Stage Company) AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
US Dollars
       
  As of   As of
  March 31,   December 31,
  2012   2011
  Unaudited   Audited
       
CURRENT ASSETS      
       
Cash and cash equivalents                           (50)                                 -
Short term deposits                               -                                 -
Trade Receivables                               -   0
Prepaid Expenses & Other Current Assets                     20,850                       20,850
       
TOTAL CURRENT ASSETS                    20,800                      20,850
       
Other non current assets                               -                                0
Property and equipment, net                       4,907                         5,488
Intangible assets, net  -                                  -
       
TOTAL ASSETS                    25,707                      26,338
       
LIABILITIES AND SHAREHOLDERS' DEFICIENCY      
       
CURRENT LIABILITIES:      
       
Short term bank credit 50   -
Related party 46,821   33,164
Accounts payable and other current liabilities 16,667   6,000
       
TOTAL CURRENT LIABILITIES 63,538   39,164
       
COMMITMENTS (Note 4)      
       
SHAREHOLDERS' EQUITY DEFICIENCY:      
       
Share capital -      
Common stock of $ 0.01 par value –       
700,000,000 shares authorized; 19,349,000 shares issued and outstanding as of  March 31, 2012 and December 31, 2011, respectively.  193,488   193,488
Additional paid-in capital 4,097,913   4,097,913
Deficit accumulated during the development stage               (4,329,182)                 (4,304,227)
       
TOTAL SHAREHOLDERS' DEFICIENCY                    (37,781)                      (12,826)
       
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY 25,757   26,338
       
       
The accompanying notes are an integral part of the consolidated financial statements.

 

3
 

 

ACRO INC. (A Development Stage Company) AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
US Dollars (except share and per share data)
           
          Cumulative
          from Inception
  For the Three Months   (May 22, 2002)
  Ended March 31,   to March 31,
  2012   2011   2012
  Unaudited   Unaudited
           
Revenues  -                        3,300                   227,803
           
Costs and expenses:          
           
Research and development  -                      (2,949)                 (585,401)
Sales and marketing  -     -                  (324,350)
General and administrative *                 (24,905)                   (77,472)              (3,689,302)
Impairment of Intangible assets  -     -                    (62,507)
           
Total operating expenses                 (24,905)                   (80,421)              (4,661,560)
           
Operating  loss                 (24,905)                   (77,121)              (4,433,757)
           
Interest and other expenses, net                        (50)                   (14,944)                 (126,398)
Income from forgiveness of debts  -                      35,000                   299,000
Loss before taxes on income                 (24,955)                   (57,065)              (4,261,155)
Taxes on income   -     -                    (68,027)
           
Net loss for the period                  (24,955)                   (57,065)              (4,329,182)
           
Basic and diluted net loss per common share                           -                         (0.01)                       (0.68)
           
Number of shares used in computing basic and diluted net loss per share            19,349,000                6,882,372                6,329,977
           
           
* Includes $0, $5,835 and $1,118,263 stock-based compensation for the three months periods ended
 march 31, 2012, 2011 and for the cumulative period from May 22, 2002 (date of inception) to March 31, 2012, respectively.
           
The accompanying notes are an integral part of the consolidated financial statements

 

4
 

ACRO INC. (A Development Stage Company) AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
US Dollars
           
          Cumulative
          from Inception
  For the Three Months   (May 22, 2002)
  Ended March 31,   to March 31,
  2012   2011   2012
  Unaudited   Unaudited
           
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss for the period       (24,955)         (57,065)             (4,329,182)
Adjustments to reconcile net loss to net cash used in operating activities:          
Services contributed by officers  -     -                       3,500
Depreciation and amortization             581            2,586                  262,084
Expenses for beneficial conversion feature  -           14,857                  218,370
Stock-based compensation  -             5,835               1,118,263
Income from settlement of liability  -          (35,000)                (299,000)
Changes in assets and liabilities:          
Decrease  in trade receivables  -             1,067    - 
Decrease (Increase) in accounts expenses and receivables  -             4,856                  (20,850)
Increase  in related party and accounts payable         24,324          53,469                  346,485
           
Net cash used in operating activities              (50)           (9,395)             (2,700,330)
           
CASH FLOWS FOR INVESTING ACTIVITIES:          
Purchase and production of property and equipment  -     -                 (146,991)
Purchase of intangible assets  -     -                 (120,000)
           
Net cash used in investing activities  -     -                 (266,991)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Increase (Decrease) in convertible promissory note  -             2,500                    (1,096)
Proceeds from issue of common stock  -     -                3,206,907
Short-term bank credit           50    -                            50
Offering costs  -     -                 (238,540)
           
Net cash provided by financing activities              50            2,500               2,967,321
           
Decrease in cash and cash equivalents  -            (6,895)    - 
Cash and cash equivalents at the beginning of the period  -             7,429    - 
Cash and cash equivalents at the end of the period  -                534    - 
           
APPENDIX A -          
Supplemental disclosure of non-cash financing activities and cash flow information:          
Conversion of shareholders' loans to equity  -     -                     19,000
Conversion of convertible promissory note to equity  -     -                   185,773
           
           
The accompanying notes are an integral part of the consolidated financial statements.

 

5
 

ACRO INC. (A Development Stage Company) AND ITS SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

US Dollars

 

Note 1:- GENERAL

 

a.     General

 

ACRO Inc. (A Development Stage Company) was incorporated on May 22, 2002, under the laws of the State of Nevada, as Medina International Corp. On May 4, 2006, the Company changed its name to ACRO Inc. ACRO Inc. was originally an oil and gas consulting company in Canada and in the United States. However, during 2006, following a change of control and a private placement financing, ACRO Inc. ceased to engage in oil and gas consulting and engaged in development of products for the detection of military and commercial explosives for the homeland security market.

 

Hereinafter, ACRO Inc. and its wholly owned subsidiary in Israel will be referred to as "the Company."

 

Since its inception, the Company had no significant revenues and in accordance with ASC 915 codified from Statement of Financial Accounting Standard (“SFAS”) No. 7 “Accounting and Reporting by Development Stage Enterprises”, the Company is considered a development stage company.

 

b.    Going concern

 

The accompanying financial statements have been prepared on a basis which assumes that the Company will continue as a going concern and which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.  The Company has a limited operating history, and has incurred losses of approximately $4.3 million from operations as of March 31, 2012 and has a deficit in working capital of approximately $43 thousand for this period.  These circumstances raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans with regard to these matters include financing from related party Top Alpha Capital S.M. Ltd.  There is no assurance that the Company will be successful in obtaining sufficient revenues from its products or financing on terms acceptable to the Company.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

c.  On July 5, 2011 the Company entered into a share purchase agreement (the "Agreement") with Top Alpha Capital, an Israeli corporation, (hereinafter – "Top Alpha") to purchase 49.9% of the Company outstanding share capital, for the total consideration of $160,000 ("Transaction").

 

Simultaneously with closing of the transaction the convertible notes in the aggregate amount of approximately $185,000 were converted into shares of the Company common stock. In addition, at the closing all outstanding warrants and options to purchase the Company shares were cancelled.

 

As of the reported date there are no outstanding Company warrants and options.

 

6
 

ACRO INC. (A Development Stage Company) AND ITS SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

US Dollars

 

Note 2:- SIGNIFICANT ACCOUNTING POLICIES

 

a.   Basis of Presentation

 

The accompanying consolidated financial statements are presented in accordance with Form 10-Q and item 310 under subpart A of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments (consisting of normal and recurring adjustments) necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ended December 31, 2011. The accompanying consolidated financial statements and the notes thereto should be read in conjunction with the Company's audited consolidated financial statements as of and for the year ended December 31, 2011 included in the Company's Form 10-KSB filed March 31, 2012.

 

b.    Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The reported amounts of revenues and expenses during the reporting period may be affected by the estimates and assumptions management is required to make. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period that they are determined to be necessary. Actual results could differ from those estimates.

 

c.    Financial Statements in U.S. dollars

 

As the majority of the Company's financing is received in U.S. dollars. Accordingly, the Company has determined the U.S. dollar as the currency of its primary economic environment and thus, its functional and reporting currency. Non-dollar transactions and balances have been remeasured into US dollars. All transaction gains and losses from the re-measurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statements of operations as financial income or expenses, as appropriate.

 

 

d.   Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and its wholly-owned Israeli subsidiary, Acrosec Ltd. All material intercompany transactions and balances have been eliminated in consolidation.

 

e.   Exchange Rates

 

Exchange and linkage differences are charged or credited to operations as incurred.

 

Exchange rates:

 

      March 31,   December 31,
      2012   2011
  New Israeli Shekel (NIS)   $0.27   $0.26
           
           Three  Months Ended March 31,
  Increase in Rate of Exchange:   2012   2011
  NIS   2.67%   1.95%

 

 

 

f.   Implementation of new accounting Standards

 

In July 2010, the FASB issued an update to ASC 310, "Receivables," that requires enhanced and additional disclosures that will provide financial statement users with greater transparency about a reporting entity's allowance for credit losses and the credit quality of its financial receivables. The new and amended disclosure requirements focus on such areas as nonaccrual and past due financing receivables, allowance for credit losses related to financing receivables, impaired loans, credit quality information and modifications. The ASU requires an entity to disaggregate new and existing disclosures based on how it develops its allowance for credit losses and how it manages credit exposures. For public entities, the disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010.

 

In January 2011, the FASB issued an additional update to ASC 310 which temporarily delayed the effective date of the disclosures in regard to troubled debt restructuring above-mentioned. Currently, that guidance is anticipated to be effective for interim and annual periods ending after June 15, 2011. The adoption of this Standard is not expected to have an effect on the Company.

 

7
 

ACRO INC. (A Development Stage Company) AND ITS SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

US Dollars

 

Note 3: – RELATED PARTY TRANSACTIONS

 

a. During the three months period ended March 31, 2012 and 2011, the Company incurred an expense of $0 and $31,680, respectively, for consulting services provided by the Company’s previous CEO and chairman of the board of directors.

 

b. During the three month period ended March 31, 2012 and 2011, the Company incurred an expense of $12,000 and $0, respectively for salary for the CEO, President and CFO of the Company,

     See also Note 5b.

 

 

Note 4: - COMMITMENTS

 

On October 28, 2007, the Company’s technology agreement with LSRI – Life Science Research Israel Ltd., a subsidiary of IIBR – Israel Institute for Biological Research, became effective. Under the terms of the agreement, LSRI will license the technology of IIBR’s explosives testing kit (ETK) to the Company, for incorporation into the Company’s pen-like device, allowing the detection of commercial and military explosives. The agreement is subject to minimum annual revenues to be achieved by the Company and royalties to be paid to LSRI. The new device complements the ACRO-P.E.T., the Company’s peroxide explosive tester for the detection of improvised explosives.

  

 

Note 5: – OTHER SIGNIFICANT CURRENT PERIOD EVENTS 

 

a. On January, 2012, the Company executed a one-for-ten reverse split of all ordinary shares. Following the reverse split, The number of outstanding ordinary shares decreased from 193,487,806 to 19,349,000 and the par value per ordinary share increased from $ 0.001 to $ 0.01. All fractional shares resulting from the reverse split that are one-half share or more were increased to the next higher whole number of shares and all fractional shares that are less than one-half share were decreased to the next lower whole number of shares.

 

b.  On April 1, 2012 the Company has approved a contract with the company CEO, President and CFO at an annual salary of $70,000. The term of employment shall be two years. This employment agreement is effective as of February 1, 2012.

 

 

NOTE 6:- SUBSEQUENT EVENTS

 

 

After the balance sheet date, the Company signed a loan agreement in the amount of $30,821 in the form of a convertible promissory note from Top Alpha Capital which owns 49.9% of the Company's common stock, this note shall accrue interest at the rate of 6% per annum, the interest shall be payable semi-annually on June 30 and December 31. The above amount should be paid on or before December 31, 2012

This note is convertible up to 1,863,614 shares of the Company's common stock, at a price of $0.0165383 per share.

 

 

8
 

 

Item  2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

You should read the following discussion in conjunction with our consolidated financial statements and related notes thereto. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Our actual results could differ materially and adversely from those anticipated in such forward-looking statements as a result of certain factors

 

This quarterly report contains forward-looking statements as that term is defined in the Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  These statements relate to future events or our future financial performance.  In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology.  These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of 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.  Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.  In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars.  All references to “common stock” refer to our shares of common stock.

 

As used in this quarterly report, the terms “we”, “us”, “our”, and “ACRO” means ACRO Inc., unless otherwise indicated.

 

General

 

We develop and market products for the detection of military and commercial explosives for the homeland security market. We were incorporated under the laws of the State of Nevada on May 22, 2002, under the name of Medina International Corp. On May 4, 2006, we changed our name to ACRO Inc. We effected this change of name by merging our company with a wholly-owned subsidiary of our company that we had formed specifically for this purpose. We have a wholly-owned subsidiary, Acrosec Ltd. (Acrosec), incorporated under the laws of the State of Israel. Effective January 1, 2009, we entered into an Intellectual Property Assignment and Services Termination Agreement with our wholly owned subsidiary, Acrosec Ltd., pursuant to which, among others, we effected a transfer of all of our intellectual property, including patents and technology, to Acrosec, in consideration for an amount representing the value of the intellectual property as will be determined by an independent third-party appraiser selected by us and Acrosec. Concurrently, the services agreement between us and Acrosec, dated March 7, 2007, pursuant to which Acrosec provided us certain research, development, manufacturing and management services, was terminated. The Intellectual Property Assignment and Services Termination Agreement effectively render ACRO as a holding company.

 

9
 

Initially, our business had been to provide professional consulting services for the technical and economic evaluation of petroleum and natural gas resources.

 

However, since we were not successful in implementing our initial business plan for consulting services, we decided to no longer offer consulting services to oil and gas companies.  Accordingly, on March 15, 2006, we completed our acquisition of a patent for $120,000 pursuant to a patent purchase agreement with Prof. Ehud Keinan, which we refer here as the Patent Purchase Agreement. The patent, U.S. Patent No. 6,767,717, describes a method of detection of peroxide-based explosives. Through a consulting services agreement that we signed at the same time, Prof. Keinan, the inventor of the method described in the patent, has agreed to provide consulting services to us in order to develop the patent into a commercially viable product.  We are a development stage company with little history of research and development of explosives detection equipment. We are currently contemplating to cease our current operations and purchase new technologies.

 

On January 19, 2006, we closed a private placement consisting of 20,200,012 shares of common stock for total gross proceeds of $43,286 in the form of a promissory note payable upon demand, in which Gadi Aner and Prof. Ehud Keinan, who were not directors at that time, and Zeev Bronfeld, beneficial owner of more than 5% of our common stock, participated. Pursuant to the private placement, we issued, among others: (i) 2,300,004 shares of common stock to Mr. Aner for a total consideration of $4,929; (ii) 2,800,000 Shares to M.G-Net Ltd., a private company, wholly-owned by Mr. Aner and his wife, for a total consideration of $6,000; (iii) 5,999,994 shares of common stock to Mr. Bronfeld for a total consideration of $12,857.13; and (iv) 6,400,002 shares of common stock to BioTech Knowledge LLC, a private company wholly-owned by Prof. Keinan, for a total consideration of $13,714. In addition, pursuant to a share purchase agreement dated January 10, 2006, two of our former directors, Nick DeMare and Brad Colby, sold their entire interests in us, 14,000,000 shares of common stock, to BioTech Knowledge LLC.

  

On March 15, 2006, we consummated a second private placement, pursuant to which, we issued to certain investors 2,376,000 shares of common stock, together with warrants to purchase 2,376,000 shares of common stock at an exercise price of $ 0.75 per share, exercisable until March 15, 2008, in consideration of an aggregate gross proceeds of $1,188,000, less transaction cost of $ 99,031.

 

On February 27, 2007, the Company consummated a private placement of 2,000,000 units, at a price of $0.75 per unit, for aggregate proceeds of $1,500,000, each unit comprising one share of the Company’s common stock and one warrant to purchase one share of the Company’s common stock at an exercise price per share of $1.25 exercisable within five years (“Unit”). In connection with the private placement, the Company paid a finder’s fee of $120,000 in cash and issued a warrant to purchase 160,000 Units to the finder.

 

On February 22, 2009, we received from BioTech Knowledge LLC an interest-free loan in the aggregate amount of $93,274 in the form of a convertible promissory note, convertible into up to 11,659,250 shares of our common stock, at a price of $0.008 per share, within 12 months from February 22, 2009, with each share of common stock such converted awarding a warrant to purchase one share of our common stock at the price per share of $0.016 exercisable within three years

 

On March 15, 2010, we closed a private placement of 500,000 units, at a price of $0.05 per unit, for aggregate proceeds of $25,000.  Each unit is comprised two shares of our common stock and one warrant to purchase one share of our common stock at the price per share of $0.025, exercisable within twelve months from March 15, 2010. In connection with this private placement, we issued the finder a warrant to purchase 40,000 shares of our common stock at a price per share of $0.025, exercisable within twelve months of the closing date.

 

10
 

During years 2009, 2010 and 2011, we received from BioTech Knowledge LLC additional interest-free loan in the aggregate amount of $92,500 in the form of a convertible promissory note, convertible into up to 11,562,500 shares of our common stock, at a price of $0.008 per share, within 12 months from March 24, 2010, with each share of common stock such converted awarding a warrant to purchase one share of our common stock at the price per share of $0.016 exercisable within three years.

 

On April 14, 2011 a loan agreement was signed with Oren Fuerst and Noam Yellin (the lenders), according to which we were supposed to receive a loan of an aggregated amount of $53,000 ($26,500 from each), in a form of convertible promissory note. Of this amount, we received only $19,000 before the lenders decided to withdraw from the agreement and not to lend us the rest of the money. The board of directors decided to cancel the agreement with the lenders.

 

2011 Private Placement

 

On July 5, 2011, we entered into a share purchase agreement (the "Agreement") with Top Alpha Capital, an Israeli corporation, for the sale of 96,613,788 shares of our common stock, representing 49.9% of our outstanding share capital, for the total consideration of US$160,000 ("Transaction"). The purchase price was funded by available funds. Top Alpha is a non-U.S. person (as that term is defined in Regulation S of the Securities Act of 1933, as amended) and the issuance of the shares was made in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933, as amended.

 

The share purchase closed on July 28, 2011.

 

Pursuant to the Agreement, simultaneously with the closing of the Transaction, the convertible notes held by BioTech Knowledge LLC in the aggregate amount of $185,774, were converted into 23,221,750 shares of our common stock. In addition, at the closing, all outstanding warrants and options to purchase our shares were cancelled.

 

Pursuant to the Agreement, as long as Mr. Aner and Mr. Bronfeld will hold any of our shares they hold as of the closing, they shall have the right to veto any transaction with Top Alpha, e.g., the issuance of shares or compensation to Top Alpha.  This veto right shall terminate upon any of the following events:  (a) a merger between ACRO and another entity; (b) an asset acquisition by ACRO; (c) ACRO’s purchase of shares of another entity, or (d) acquisition by a third party of a controlling interest in ACRO.  In any case, such veto right shall not apply to issuance of additional shares to Top Alpha in the event ACRO shall have outstanding debts on the closing of the Transaction.  In such event, we shall issue Top Alpha shares based on a company valuation of $160,000 proportionate to the outstanding debt.

 

Following the closing of the Transaction and until six months thereafter, Top Alpha was obligated to supply office services, management, consulting and investment banking services to ACRO at no cost.

 

Effective as of the closing of the Transaction, all existing officers and directors, except for Ehud Keinan resigned from their office, and the officers chosen by Top Alpha were appointed and stockholders were asked by written consent to approve the election of Asaf Porat, the investment banker of Top Alpha, as a director.  Following the closing, Top Alpha agreed to vote for the reappointment of Mr. Keinan as a director of ACRO until Mr. Keinan’s share holdings shall comprise of less than ten percent (10%) of our outstanding common stock. Mr. Keinan resigned in January 2012.

 

As a result of this transaction Top Alpha owns 49.9% of our common stock.

 

11
 

Employees

 

Mr. Asaf Porat serves as the Chairman, Chief Executive Officer and Chief Financial Officer of ACRO, Inc.   

 

Cash Requirements

 

We believe that awe will need additional funds to continue operations over the next twelve months and for the implementation of our plan of operation and developing and commercializing our potential explosive detection device.  We expect that we may have to raise funds through additional offerings of our securities.

 

At March 31, 2012, we had working capital deficit of approximately $43,000.  We are now operating under a minimal activity note, until we successfully raise additional funds or receive a significant order to our products. We anticipate that we will require additional funds of up to approximately $200,000 to keep operating our business for the next twelve-month period. In such event that we do not generate sufficient revenues or raise sufficient additional funds by a public offering or a private placement, we will consider alternative financing options, if any, or be forced to cease our operations.

 

 

 

Our Products

 

Our first product is called the Peroxide Explosives Tester (ACRO-P.E.T.). ACRO-P.E.T. is a small, disposable, pen-like probe which detects the presence of peroxide-based explosives using three chemical solutions and relies on direct contact with the suspicious substance. ACRO-P.E.T. has been designed for rapid, on-site detection of peroxide-based explosives. Its main advantages are high sensitivity, high selectivity, fast response, simple operation, high mobility, small size and cost effectiveness. In November 2006, we completed the first production of the ACRO-P.E.T. for evaluation by potential customers. In 2007, we developed a new version of ACRO-P.E.T. which enables easier verification of peroxide-based explosives, such as triacetone triperoxide (TATP). In addition, in the new version we improved the sampling device to enable easy and immediate sampling of suspicious liquids, in addition to all other forms of explosives, such as powder. The new version has been available for sale since mid 2007.

 

In addition, we developed the ACRO-N.E.T. (Nitride Explosives Tester), which detects the presence of commercial and military explosives. ACRO-N.E.T. incorporates into our pen-like device the explosive testing kit of the Israel Institute for Biological Research (IIBR), licensed to us under an agreement dated October 28, 2007, with a subsidiary of IIBR called Life Science Research Israel Ltd. (LSRI). ACRO-N.E.T. is based on the LSRI explosive detecting kit, called ETK. The ETK is capable of identifying the full range of well known types of military and commercially available explosives, and also of homemade explosives based on nitrate and chlorate salts. This device, ACRO-N.E.T., complements ACRO-P.E.T. by providing the possibility to detect explosives other than TATP. Its operation system and advantages are the same as the ACRO-P.E.T.; however, it uses different solutions and detects different explosives. We also signed several agreements with LSRI pursuant to which we may distribute the ETK and ETK 5, exclusively, in several countries. The ETK’s kits complete our products.

 

12
 

The ACRO-SET is a sensitive, rapid and reliable kit for field detection and identification of trace explosives. Weighing about one-quarter of a pound, this kit contains the ACRO-PET, which detects improvised explosives such as TATP, and the ACRO-NET, which detects the entire range of the nitro explosives including all conventional explosives, the improvised ammonium nitrate, ANFO, and urea nitrate. Conveniently packed in a belt pouch, the Acro-SET is, in effect, a portable, inexpensive micro-laboratory for identification of all explosives by any law enforcement personnel.

 

Since the fourth quarter of 2007, we delivered samples of ACRO-SET to several distributors and potential clients in many countries including the USA, UK, China, Canada, Spain, Singapore, Japan, South Africa, Australia, Serbia, Italy, Germany, Luxemburg, South Korea, India, New Zealand and Russia.

 

  During 2009, we had sales in the aggregate amount of $73,358. During 2010, we had sales in the aggregate amount of $79,227.

  

ACRO-N.E.T. is based on the LSRI explosive detecting kit, called ETK.   Nevertheless, we cannot assure that ACRO-P.E.T. and ACRO-N.E.T. will gain commercial acceptance in the marketplace.

 

During 2008, we developed a product called “TATP Simulant”. The TATP Simulant is a hands-on tool of practicing detection and identification of peroxide based explosives such as TATP and HMTD. We delivered samples of TATP Simulant to several clients, but at this stage we cannot estimate the commercial value of this product, if any.

 

During 2009, we developed the ACRO-CH.E.T. (Chlorates Explosives Tester) which detects chlorate based explosives traces and the ACRO-U.E.T (Urea nitrate Explosives Tester) which detects the presence urea nitrate traces. Both products have low false positive and negative alarm rates.

 

During the first quarter of 2010, we completed the development, Acro-ANET, a specific tester and a trace-detector of ammonium nitrate. The white crystals of ammonium nitrate are commonly used in agriculture as high-nitrogen fertilizer and are the main component of ammonium nitrate fuel oil (ANFO), an increasingly popular component of improvised explosive devices.

 

We are currently contemplating the cessation of our current operations and purchase new technologies.

 

Financial Condition, Liquidity and Capital Resources

 

Three Months Ended March 31, 2011 Compared to March 31, 2012.

 

During the three months ended March 31, 2011, we had revenues of $3,300, compared with revenues of $0 for the comparative period in 2012.

 

During the three months ended March 31, 2012, we had $24,905 of operating loss, $50 of interest and other expenses, and $35,000 income from forgiveness of debt.

 

During the three months ended March 31, 2011, we incurred $80,421 of operating expenses, comprised of $14,944 for interest expenses, and $77,472 for general and administrative costs.

 

  As of March 31, 2012, we had a working capital deficit of approximately $43,000.

 

As of March 31, 2012, we had total assets of $25,757, which consisted of receivables of $20, 850 and property and equipment of $4,907.

 

From January 1, 2012 to March 31, 2012, we had sales of $0.

 

13
 

Going Concern

 

The continuation of our business is dependent upon our raising additional financial support or on our ability to purchase new technologies. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial or other loans, assuming those loans would be available, would increase our liabilities and future cash commitments.

 

We have historically incurred losses, and from inception through March 31, 2012, we have incurred losses of $4,329,182. Because of these historical losses, we will require additional working capital to develop our business operations.

 

There can be no assurance that additional funds will be available on terms acceptable to us, or at all. These conditions raise substantial doubt about our ability to continue to operate as a going concern. The audited financial statements attached to this annual report do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

 

Recent Private Placements

 

On March 15, 2010, we closed a private placement of 500,000 units, at a price of $0.05 per unit, for aggregate proceeds of $25,000.  Each unit is comprised two shares of our common stock and one warrant to purchase one share of our common stock at the price per share of $0.025, exercisable within twelve months from closing date (i.e. March 15, 2011). In connection with this private placement, we issued the finder a warrant to purchase 40,000 shares of our common stock at a price per share of $0.025, exercisable within twelve months of the closing date.

 

On July 28, 2011, we closed a share purchase pursuant to which Top Alpha Capital, an Israeli Corporation (“TAC” or “Top Alpha”) purchased a total of 96,613,77 shares of our common stock, representing 49.9% of our outstanding common stock, for $160,000 (the “Transaction”).  This offering was conducted pursuant to Regulation S and/or Section 4(2) of the Securities Act of 1933.

 

Pursuant to the Agreement, simultaneously with the closing of the Transaction, the convertible notes held by BioTech Knowledge LLC in the aggregate amount of $185,774, were converted into 23,221,750 shares of our common stock. In addition, at the closing, all outstanding warrants and options to purchase our shares were cancelled.

 

 

Following the closing of the Transaction and until six months thereafter, Top Alpha had the option to purchase the 11,195,623 shares of our common stock held by Mr. Gadi Aner and the shares held by Mr. Zeev Bronfeld at a price per share of $0.0038. Top Alpha did not exercise this option.

 

Following the closing of the Transaction and until six months thereafter, Top Alpha shall have the option to purchase up to 15,515,052 (1,551,505 post-reverse split) of the shares held by BioTech Knowledge LLC, at a price per share of $0.0018. Top Alpha did not exercise this option.

 

 

14
 

Pursuant to the Agreement, as long as Mr. Aner and Mr. Bronfeld will hold any of our shares they hold as of the closing, they shall have the right to veto any transaction with Top Alpha, e.g., the issuance of shares or compensation to Top Alpha.  This veto right shall terminate upon any of the following events:  (a) a merger between ACRO and another entity; (b) an asset acquisition by ACRO; (c) ACRO’s purchase of shares of another entity, or (d) acquisition by a third party of a controlling interest in ACRO.  In any case, such veto right shall not apply to issuance of additional shares to Top Alpha in the event ACRO shall have outstanding debts on the closing of the Transaction.  In such event, we shall issue Top Alpha shares based on a company valuation of $160,000 proportionate to the outstanding debt.

 

Following the closing of the Transaction and for six months thereafter, Top Alpha supplied office services, management, consulting and investment banking services to ACRO at no cost.

 

Effective as of the closing of the Transaction, all existing officers and directors, except for Ehud Keinan resigned from their office, and the officers chosen by Top Alpha were appointed and stockholders were asked by written consent to approve the election of Asaf Porat, the investment banker of Top Alpha, as a director.  Following the closing, Top Alpha agreed to vote for the reappointment of Mr. Keinan as a director of ACRO until Mr. Keinan’s share holdings shall comprise of less than ten percent (10%) of our outstanding common stock. Mr. Keinan resigned in January 2012.

 

As a result of this transaction Top Alpha owns 49.9% of our common stock.

 

Critical Accounting Policies

 

Share Based Compensation

 

The Company accounts for stock-based awards to employees in accordance with (ASC) 718-10 and related interpretations, which requires all share-based payments to employees to be recognized based on their fair values.  The Company recorded the stock based compensation granted to a consultant on the date the consultant earned the awarded shares in the same manner as if the Company paid cash to the consultant for his services.

 

The Company accounts for convertible debt with beneficial conversion feature in accordance with ASC 470-20, which requires the Company to recognize separately, at issuance, the embedded beneficial conversion feature in additional paid-in capital. The recognition is done by allocating a portion of the proceeds equal to the intrinsic value of that feature in additional paid-in capital. The intrinsic value is calculated as the difference between the effective conversion price of the convertible debt and the fair value of the shares at issuance date.

 

The Company accounts for intangible assets in accordance with ASC 360-10 under which recoverability of assets are tested whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.

 

The financial hardship of the Company together with the difficulties in sales experienced in the recent year and lack of forecasted improvement, led the Company to evaluate the recoverability of its intangible assets. The result of the evaluation was the decision that the intangible assets are not recoverable and should be written off entirely.

 

Item  3. Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable.

   

 

15
 
Item  4T. Controls and Procedures

 

As of the end of the period covered by this report, we performed an evaluation of the effectiveness of our disclosure controls and procedures that are designed to ensure that the material financial and non-financial information required to be disclosed in our annual report and filed with the Securities and Exchange Commission is recorded, processed, summarized and reported timely within the time period 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 Securities Act, is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on our evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d – 15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report are effective at such reasonable assurance level.

 

There can be no assurance that our disclosure controls and procedures will detect or uncover all failures of persons within our company to disclose material information otherwise required to be set forth in our reports. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving the desired control objectives.

 

There were no changes in our internal controls over financial reporting identified with the evaluation thereof that occurred during the quarter ended March 31, 2012, that have materially affected, or are reasonable likely to materially affect our internal control over financial reporting.

  

 

Part II — OTHER INFORMATION

 

Item  1. Legal Proceedings

 

There are no material legal proceedings to which we are a party, other than ordinary routine litigation incidental to our business.

 

Item  1A. Risk Factors

 

Not applicable.

 

Item  2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None. 

 

Item  3. Defaults Upon Senior Securities

 

None.

 

Item  4. [Removed and Reserved]

 

 

Item  5. Other Information

 

None.

 

Item  6. Exhibits

 

The exhibits listed in the Exhibit Index immediately preceding the exhibits are filed as part of this quarterly report on Form 10-Q and such Exhibit Index is incorporated herein by reference.

 

 

16
 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  ACRO INC.  
  (Registrant)  
       
Date: May 17, 2012  By:    /s/ Asaf Porat  
    Asaf Porat  
    President, Chief Executive Officer & Director ,  
    Chief Financial Officer  
       
       
       
       
       
       

 

 

 

 

  

 

 

17
 

Exhibit Index

 

Number   Description   Method of Filing
         
(3)   Articles of Incorporation and By-laws    
         
3.1   Articles of Incorporation, as amended.   Incorporated by reference to Exhibit 3.1 to our registration statement on Form SB-2 filed November 21, 2003
         
3.2   Bylaws, dated February 25, 2005.   Incorporated by reference to Exhibit 3.1 to our current report on Form 8-K filed March 17, 2005 and March 21, 2005
         
3.3   Certificate of Change Pursuant to NRS 78.209 filed with the State of Nevada effective as of January 25, 2006.   Incorporated by reference to Exhibit 3.3 to our annual report on Form 10-KSB filed March 28, 2007
         
3.4   Certificate of Change Pursuant to NRS 78.209 filed with the State of Nevada effective as of October 25, 2006.   Incorporated by reference to Exhibit 3.4 to our annual report on Form 10-KSB filed March 28, 2007
         
3.5   Certificate of Change Pursuant to NRS 78.209 filed with the State of Nevada effective as of October 30, 2006.   Incorporated by reference to Exhibit 3.5 to our annual report on Form 10-KSB filed March 28, 2007
         
(10)   Material Contracts    
         
10.1   Agreement and Plan of Merger for the Merger of ACRO Inc. with and into Medina International Corp., dated April 25, 2006.   Incorporated by reference to Exhibit 10.2 to our current report on Form 8-K filed May 4, 2006
         
10.2   Patent Purchase Agreement between the Registrant and Prof. Ehud Keinan, dated February 1, 2006.   Incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed February 3, 2006
         
10.3   Consulting Agreement between the Registrant and BioTech Knowledge LLC, dated February 1, 2006.   Incorporated by reference to Exhibit 10.2 to our current report on Form 8-K filed February 3, 2006
         
10.4   Letter of Agreement between the Registrant and BioTech Knowledge LLC, dated February 1, 2006.   Incorporated by reference to Exhibit 10.3 to our current report on Form 8-K filed February 3, 2006
         
10.5   Advisory Board Agreement between the Registrant and Prof. Richard E. Lerner, dated May 31, 2006.   Incorporated by reference to Exhibit 99.2 to our current report on Form 8-K filed June 5, 2006
         
10.6   Advisory Board Agreement between the Registrant and Prof. K. Barry Sharpless, dated September 28, 2006.   Incorporated by reference to Exhibit 10.8 to our annual report on Form 10-KSB filed March 28, 2007
         

 

 

 

 

18
 

10.7   Consulting Agreement between Acrosec Ltd. and M.G NET Ltd., dated March 26, 2007   Incorporated by reference to Exhibit 10.10 to our annual report on Form 10-KSB filed March 28, 2007
         
10.8   Cooperation and Licensing Agreement between the Registrant and Life Science Research Israel Ltd., dated October 28, 2007.   Incorporated by reference to Exhibit 10.11 to our annual report on Form 10-KSB filed March 13, 2008
         
10.9   Intellectual Property Assignment and Services Termination Agreement, dated March 30, 2009.   Incorporated by reference to Exhibit 10.12 to our annual report on Form 10-K filed March 30, 2009
         
10.10   Convertible Promissory Note between the Registrant and BioTech Knowledge LLC, dated February 22, 2009.   Incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed February 23, 2009
         
10.11   Warrant between the Registrant and BioTech Knowledge LLC, dated February 22, 2009.   Incorporated by reference to Exhibit 10.14 to our annual report on Form 10-K filed March 30, 2009
         
10.12   Convertible Promissory Note between the Registrant and BioTech Knowledge LLC, dated March 24, 2010.   Incorporated by reference to Exhibit 10.12 to our annual report on Form 10-K filed March 29, 2010
         
10.13   Warrant between the Registrant and BioTech Knowledge LLC, dated March 24, 2010.   Incorporated by reference to Exhibit 10.13 to our annual report on Form 10-K filed March 29, 2010
         
10.14   The Registrant’s 2008 Israeli Share Option Plan   Incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed May 1, 2008
         
10.15   Finders Agreement between the Registrant and Siden Investment Inc. dated March 13, 2010.   Incorporated by reference to Exhibit 10.15 to our annual report on Form 10-K filed March 29, 2010
         
10.16   Promissory Note between the Registrant and Lindon Group, dated April 1, 2010.   Incorporated by reference to Exhibit 10.16 to our quarterly report on Form 10-Q filed May 20, 2010
         
(31)   Section 302 Certification    
         
31.1   Certification of Principal Executive Officer and Principal Financial Officer Rule 13a-14(a) pursuant to Rule13a- 14(a) of the Securities Exchange Act of 1934.   Filed herewith
         
(32)   Section 906 Certification    
         
32.1   Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, required by Section 906 of the Sarbanes-Oxley Act of 2002.   Filed herewith

 

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