TRANSATLANTIC CAPITAL INC. - FORM 10-K/A

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EX-31.2 - TRANSATLANTIC CAPITAL INC.	v215995_ex31-2.htm
EX-31.1 - TRANSATLANTIC CAPITAL INC.	v215995_ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K/A

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

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

Commission File Number: 000-50482

ACRO INC.

(Exact Name of Registrant as Specified in its Charter)

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

37 Inbar St., Caesarea, Israel	30889
(Address of Principal Executive Offices)	(Zip Code)

+972-4-636-0297

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:

Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act:

Yes o No þ

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 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 þ No o

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 o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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 o	Accelerated filer o
	Non-accelerated filer o	Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes o No þ

The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2009, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $678,242 (based on the average bid and asked price for the registrant’s common stock on June 30, 2009 on the OTC Bulletin Board of $0.01 per share).

At March 29, 2010, 67,824,268 shares of the registrant’s common stock were outstanding.

EXPLANATORY NOTE

This Amendment No. 1 to our annual report on Form 10-K/A (the “Amendment”) speaks as of the filing date of our Form 10-K for the fiscal year ended December 31, 2009, as filed with the Securities and Exchange Commission (the “Commission”) on March 29, 2010 (the “Form 10-K”), except for the certifications which speak as of the filing date of the Amendment.

This Amendment is being filed to correct the report of independent registered public accounting firm and typographical errors in the Form 10-K and the certifications.

Other than as described above, this Amendment does not, and does not purport to, amend, update or restate any other information or disclosure included in the Form 10-K and does not, and does not purport to, reflect any events that have occurred after the date of the initial filing of the Form 10-K. As a result, our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, as amended by this Amendment, continues to speak as of the initial filing date of the Form 10-K.

Item 8. Financial Statements and Supplementary Data

Our, and our subsidiary’s consolidated financial statements beginning on pages F-1 through F-13, as set forth in the following index, are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.


Report of Independent Registered Public Accounting Firm	F - 1
Consolidated Balance Sheets	F - 2
Consolidated Statements of Operation	F - 3
Consolidated Statements Stockholders' Equity	F - 4
Consolidated Statements of Cash Flows	F - 5
Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of ACRO Inc. (A Development Stage Company)

We have audited the accompanying consolidated balance sheet of ACRO Inc. and subsidiary (a development stage company) (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statement of income, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2009, and for the period from May 22, 2002 (date of incorporation) to December 31, 2009. These financial statements are the responsibility of the Company’s Board of Directors and management. Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of ACRO Inc. and subsidiary as of December 31, 2009 and 2008, and the results of their operations and their cash flows for the years then ended, and for the period ended May 22, 2002 (date of incorporation) to December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company is a development stage company engaged in development of products for the detection of military and commercial explosives for the homeland security market. As discussed in Note 1 to the financial statements, the Company’s operating losses since inception to December 31, 2009, raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Brightman Almagor Zohar & Co.

Certified Public Accountants

A Member Firm of Deloitte Touche Tohmatsu

Tel Aviv, Israel March 29, 2010

F-1

ACRO Inc. (A Development Stage Company)

Consolidated Financial Statements

Consolidated Balance Sheets

	December 31			December 31
	2009			2008
	$			$
Assets

Current assets:
Cash and cash equivalents		25,812			36,943
Trade receivables (Note 3)		3,359			8,803
Prepaid expenses and other current assets		9,332			6,854

Total current assets		38,503			52,600

Other non-current assets		2,762			4,824
Property and equipment, net (Note 4)		28,555			63,113
Intangible assets, net		74,507			86,507

Total assets		144,327			207,044


Liabilities and stockholders’ equity (deficit)

Current liabilities:
Shot term bank credit		795			-
Accounts payable and accrued liabilities		285,693			167,228

Total current liabilities		286,488			167,228

Convertible Promissory Note		123,274			-

Total liabilities		409,762			167,228

Commitments (Notes 8 and 10)

Stockholders’ equity (Deficiency):
Common stock; $0.001 par value; 700,000,000 shares authorized;
and 67,824,268 shares issued and outstanding as of
December 31, 2009 and December 31, 2008, respectively		67,823			67,823
Additional paid-in capital		3,616,670			3,597,625
Deficit accumulated during the development stage		(3,949,928	)		(3,625,632	)

Total stockholders’ equity (Deficiency):		(265,435	)		39,816

Total liabilities and stockholders’ equity		144,327			207,044

F-2

ACRO Inc. (A Development Stage Company)

Consolidated Financial Statements

Consolidated Statements of Operations

							Cumulative
							from inception
							(May 22, 2002)
	Year ended December 31						to December 31
	2009			2008			2009
	$			$			$

Revenues		73,358			57,004			145,276

Costs and expenses :
Research and development		65,167			142,247			526,831
Sales and marketing		14,520			203,463			324,350
General and administrative *		325,921			602,260			3,240,923

Total operating expenses		405,608			947,970			4,092,104

Operating loss		(332,250	)		(890,966	)		(3,946,828	)
Interest income, net		7,954			2,105			64,927
Loss before income taxes		(324,296	)		(888,861	)		(3,881,901	)
Income tax expense		-			7,340			43,916

Net loss		(324,296	)		(896,201	)		(3,949,928	)


Basic and diluted net loss per common share		(0.00	)		(0.01	)		(0.08	)


Weighted average number of shares used in computing
basic and diluted net loss per common share		67,824,268			67,719,443			50,778,384

*	Includes $19,045, $63,545 and $1,083,247 in stock-based compensation to employees and non-employees for the years ended December 31, 2009, 2008 and for the cumulative period from May 22, 2002 (date of inception) to December 31, 2009 respectively.

F-3

ACRO Inc. (A Development Stage Company)

Consolidated Financial Statements

Statement of Stockholders’ Equity

					Additional						Total
	Common stock				paid-in			Deficit			stockholders’
	Shares		Amount		Capital			accumulated			equity (deficit)
			$		$			$			$

Balance as at December 31, 2007		67,543,275		67,543		3,534,360			(2,729,431	)		872,472

Issuance of common stock on January 22, 2008		33,332		33		(33	)		-			-
Issuance of common stock on April 27, 2008		180,997		181		(181	)		-			-
Issuance of common stock on July 14, 2008		33,332		33		(33	)		-			-
Issuance of common stock on October 29, 2008		33,332		33		(33	)		-			-
Stock-based compensation to employees and non-employees		-		-		63,545			-			63,545
Net loss for the year		-		-		-			(896,201	)		(896,201	)

Balance as at December 31, 2008		67,824,268		67,823		3,597,625			(3,625,632	)		39,816
Stock-based compensation to employees and non-employees		-		-		19,045			-			19,045
Net loss for the year		-		-		-			(324,296	)		(324,296	)

Balance as at December 31, 2009		67,824,268		67,823		3,616,670			(3,949,928	)		(265,435	)

F-4

ACRO Inc. (A Development Stage Company)

Consolidated Financial Statements

Consolidated Statements of Cash Flows

							Cumulative
							from inception
							(May 22, 2002)
	Year ended December 31						to December 31
	2009			2008			2009
	$			$			$
Cash flows from operating activities:
Net loss		(324,296	)		(896,201	)		(3,949,928	)

Adjustments to reconcile net loss to net cash used in
operating activities:
Services contributed by officers		-			-			3,500
Depreciation and amortization		46,557			49,018			162,707
Stock-based compensation		19,045			63,545			1,083,247

Changes in operating assets and liabilities:
Trade receivables		5,444			(4,177	)		(3,359	)
Prepaid expenses and other current assets		(2,478	)		63,307			(9,332	)
Accounts payable and accrued liabilities		118,466			(13,480	)		285,693
Accrued severance pay		-			(3,146	)		-

Net cash used in operating activities		(137,262	)		(741,134	)		(2,427,472	)

Cash flows from investing activities:
Decrease (increase) in long term deposit		2,062			5,855			(2,762	)
Decrease in restricted cash		-			30,000			-
Increase in short term deposits		-			650,000			-
Purchase of property and equipment		-			(4,937	)		(145,769	)
Purchase of intangible assets		-			-			(120,000	)

Net cash provided by (used) in investing activities		2,062			680,918			(268,531	)

Cash flows from financing activities:
Decrease in short term bank-credit		795			-			795
Convertible Promissory Note		123,274						123,274
Proceeds from issuance of common stock		-			-			2,836,286
Offering costs		-			-			(238,540	)

Net cash provided by financing activities		124,069			-			2,721,815

Net (decrease) increase in cash and cash equivalents		(11,131	)		(60,216	)		25,812

Cash and cash equivalents at beginning of period		36,943			97,159			-

Cash and cash equivalents at end of period		25,812			36,943			25,812

Supplemental disclosures of cash flow information:
Cash paid for interest		-			-			-

Cash paid for taxes		-			-			-

F-5

ACRO Inc. (A Development Stage Company)

Consolidated Financial Statements

Notes to the Consolidated Financial Statements as of December 31, 2009

Note 1 - Business

A. General

ACRO Inc. (A Development Stage Company) (the “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. The Company 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, the Company ceased to engage in the oil and gas consulting business and engaged in development of products for the detection of military and commercial explosives for the homeland security market.

Since its inception, the Company has 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 $3,949,928 from operations since its inception. 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 continued development, marketing and licensing of its products as well as seeking additional financing arrangements. Although, management continues to pursue these plans, 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.

In the event that we do not generate 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 scale down or perhaps even cease our operations.

Note 2 - Summary of Significant Accounting Policies

A. Basis of Presentation

The accompanying consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).

B. Use of Estimates in the Preparation of Financial Statements

The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the financial statement date and the reported expenses during the reporting periods. Actual results could differ from those estimates.

F-6

ACRO Inc. (A Development Stage Company)

Consolidated Financial Statements

Notes to the Consolidated Financial Statements as of December 31, 2009

Note 2 - Summary of Significant Accounting Policies (cont’d)

C. 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.

D. Recently Issued Accounting StandardS

In June 2008, the FASB Emerging Items Task Force reached a consensus on EITF Issue No. 07-5, “Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity’s Own Stock. The Consensus was reached on the following three issues:

How an entity should evaluate whether an instrument (or embedded feature) is indexed to its own stock.

How the currency in which the strike price of an equity-linked financial instrument (or embedded equity-linked feature) is denominated affects the determination of whether the instrument is indexed to an entity’s own stock.

How an issuer should account for market-based employee stock option valuation instruments.

This consensus will affect entities with (1) options or warrants on their own shares (not within the scope of Statement 150), including market-based employee stock option valuation instruments; (2) forward contracts on their own shares, including forward contracts entered into as part of an accelerated share repurchase program; and (3) convertible debt instruments and convertible preferred stock. Also affected are entities that issue equity-linked financial instruments (or financial instruments that contain embedded equity-linked features) with a strike price that is denominated in a foreign currency.

The consensus is effective for fiscal years (and interim periods) beginning after December 15, 2008. The consensus must be applied to outstanding instruments as of the beginning of the fiscal year in which the Issue is adopted as a cumulative-effect adjustment to the opening balance of retained earnings for that fiscal year. Early application is not permitted. The Company is currently evaluating the effect of EITF 07-5 and has not yet determined the impact of the consensus on its financial position or results of operations.

F-7

ACRO Inc. (A Development Stage Company)

Consolidated Financial Statements

Notes to the Consolidated Financial Statements as of December 31, 2009

Note 3 - Prepaid Expenses and Other Current Assets

	December 31 2009		December 31 2008
	$		$

Value-added tax receivable		3,414		1,429
Prepaid expenses		5,918		5,425
		9,332		6,854

Note 4 - Property and Equipment

Property and equipment consist of the following:

	Estimated useful life (years)			December 31 2009		December 31 2008
				$		$

Computer equipment		3			13,487		13,487
Production equipment		3			122,341		122,341
Furniture		7-15			7,924		7,924
Leasehold improvements		(	*)		2,017		2,017
					145,769		145,769
Less - Accumulated depreciation and amortization					117,214		82,656
					28,555		63,113

(*) over the lease term

Depreciation expense for the year ended December 31, 2009 and 2008 and for the cumulative period from May 22, 2002 (date of inception) to December 31, 2009, was $34,557, $37,018 and $117,214, respectively.

Note 5 - Intangible Assets

In March 2006, the Company purchased a patent from Prof. Ehud Keinan (“Keinan”), a stockholder who holds 30.91% of the Company’s shares of common stock, for $120,000. The patent is being amortized over the life of the asset which is estimated at 10 years. Amortization expense for each of the years ended December 31, 2009 and 2008 and for the cumulative period from May 22, 2002 (date of inception) to December 31, 2009 was $12,000, $12,000 and $45,493, respectively. The expected annual amortization expenses for each of the next four years are $12,000.

F-8

ACRO Inc. (A Development Stage Company)

Consolidated Financial Statements

Notes to the Consolidated Financial Statements as of December 31, 2009

Note 6 - Income Taxes

A. Income Taxes

Income taxes included in the consolidated statements of operations represent current taxes as a result of taxable income of the Israeli subsidiary, which was formed in March 2006, in accordance with local tax laws. In 2009 and 2008, income (loss) before income taxes of the Israeli subsidiary is $(261,914) and $65,335 respectively, and the loss before income taxes for the Company in the US is $34,274 and $954,198 respectively. The regular corporate tax rate in Israel for 2009 is 26%. The Israeli corporate tax rates for 2008 and thereafter are as follows: 2009 - 26%, and for 2010 - 25%, 2011 – 24%, 2012 – 23%, 2013 – 22%, 2014 – 21%, 2015 – 20%, 2016 and thereafter – 18% The applicable statutory tax rate for the Company in the US is 34%.

Loss from continuing operations, before income taxes, consists of the following:

	December 31 2009			December 31 2008
	$			$

United States		(34,274	)		(954,198	)
Israel		(261,914	)		65,335
		(296,188	)		(888,863	)

B. Deferred Tax

The components of the deferred tax assets are as follows:

	December 31 2008			December 31 2007
	$			$
Deferred tax assets:
Net operating loss carry forwards		1,286,057			1,206,307
Valuation allowance		(1,286,057	)		(1,206,307	)

Net deferred tax assets		-			-

The valuation allowance for deferred tax assets as of December 31, 2009 and 2008 was $1,502,495 and $1,206,307 respectively. The U.S. deferred tax assets have been fully offset by a valuation allowance. The net change in the total valuation allowance for the years ended December 31, 2009 and 2008 was an increase of $79,750 and $324,009, respectively. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. Management considers projected taxable income and tax planning strategies in making this assessment. In order to fully realize the deferred tax asset, the Company will need to generate future taxable income prior to the expiration of the deferred tax assets governed by the tax code. Based on the level of historical taxable losses, management believes that it is more likely than not that the Company will not realize the benefits of these deductible differences.

F-9

ACRO Inc. (A Development Stage Company)

Consolidated Financial Statements

Notes to the Consolidated Financial Statements as of December 31, 2009

Note 6 - Income Taxes (Cont’d)

As of December 31, 2009, the Company has net operating loss carry forwards for federal income tax purposes of approximately $3,844,151, after the consideration of approximately $201,400 of net operating loss carry forwards that are expected to expire unused due to an ownership change as defined under the Internal Revenue Code section 382 that occurred in early 2006. These federal net operating loss carry forwards will expire if not utilized on various dates through 2027.

C. Reconciliation of Income Tax Expense:

A reconciliation of the theoretical income tax computed on the loss before income taxes at the statutory tax rate and the actual income tax provision is presented as follows:

	Year ended December 31
	2009			2008
	$			$

Loss before income taxes as per the income statement		(296,188	)		(888,863	)

Tax calculated according to the statutory tax rate of 34%		(100,704	)		(302,213	)

Increase (decrease) in income tax resulting from:
Non-deductible expenses		-			4,870
Change in valuation allowance		79,750			324,009
Foreign tax rate differential		23,695			(4,573	)
Exchange rate differences		(2,741	)		(14,753	)
Total income tax expense		-			7,340

The income tax payable as of December 31, 2009 and 2008 was $9,880 and $29,954 respectively.

D. Accounting for Uncertainty in Income Taxes

The Company and its subsidiary adopted FIN 48 as of January 1, 2007, but the adoption had no effect on the financial statements.

As of January 1, 2009 and for the 12 months ended December 31, 2009, the Company and its subsidiary did not have any unrecognized tax benefits and do not expect that the amount of unrecognized tax benefits will change significantly within the next 12 months. The Company and its subsidiary’s accounting policy is to accrue interest and penalties related to unrecognized tax benefits as a component of income tax expense.

The Company and its subsidiary file income tax returns in the U.S. federal and state jurisdictions and in Israel. The Company’s tax returns remain subject to examination by the Internal Revenue Service for the tax years beginning in 2002. The Israeli subsidiary was incorporated in March 2006 and its tax returns remain subject to examination by the Israeli tax authorities for the years beginning in 2006.

F-10

ACRO Inc. (A Development Stage Company)

Consolidated Financial Statements

Notes to the Consolidated Financial Statements as of December 31, 2009

Note 7 – Stock Transactions

On March 15, 2010, the Company 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 one share of the Company’s common stock and one warrant to purchase one share of the Company’s 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, the Company issued the finder a warrant to purchase 40,000 shares of the Company’s common stock at a price per share of $0.025, exercisable within twelve months of the closing date.

During year 2009 and until March 31, 2010, the Company received an interest free loan in the amount of $40,000 from Bio Tech Knowledge LLC, convertible to up to 5,000,000 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 the Company’s common stock at the price per share of $0.016 exercisable within three years.

On February 22, 2009, the Company received an interest free loan in the amount of $93,274 in the form of a convertible promissory note with BioTech Knowledge LLC, convertible to up to 11,659,250 shares of our common stock, at a price of $0.008 per share, within 12 months from the closing date, with each share of common stock such converted awarding a warrant to purchase one share of the Company’s common stock at the price per share of $0.016 exercisable within three years. As of March 15, 2010, the note was converted in full into11,659,250 shares of our common stock.

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 6, 2006, the Company affected a seven-for-one stock split of its authorized and outstanding shares of common stock. As a result, the authorized capital was changed from 50,000,000 to 350,000,000 shares of common stock. The stock split did not vary the aggregate par value of the common stock. All stock figures and per share data have been retroactively restated to reflect the stock split.

On January 19, 2006, the Company consummated a private placement (“the January 2006 Private Placement”) pursuant to which the Company issued to certain investors 20,200,012 shares of common stock in consideration of a promissory note payable upon demand issued by such investors to the Company, in an aggregate gross proceeds of $43,286. The promissory note was paid in full by such investors in March 2006. In addition, pursuant to a share purchase agreement, two of the Company’s existing stockholders sold their entire interests in the Company to a new stockholder who also participated in the January 2006 Private Placement, resulting in a change of control in the Company. On March 15, 2006, the Company consummated a second private placement (“the March 2006 Private Placement”) pursuant to which the Company 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 aggregate gross proceeds of $1,188,000, less offering costs of $99,031.

F-11

ACRO Inc. (A Development Stage Company)

Consolidated Financial Statements

Notes to the Consolidated Financial Statements as of December 31, 2009

Note 7 – Stock Transactions (Cont’d)

On October 30, 2006, the Company affected a 2:1 stock split. As a result, the authorized capital was changed from 350,000,000 to 700,000,000 shares of common stock. The stock split did not vary the aggregate par value of the common stock. All stock figures and per share data have been retroactively restated to reflect the stock split.

Note 8 - Stock-Based Compensation

During 2006, the Company engaged three consultants to serve as members of its advisory board. The consultants are entitled to receive shares of common stock each quarter that they serve on the Company’s advisory board. One of the consultants resigned during 2007. During the years ended December 31, 2009, 2008 and for the cumulative period from May 22, 2002 (date of inception) to December 31, 2009, the consultants earned 80,512 shares, 133,328 shares and 1,264,407 shares respectively. 113,844 shares that were earned during the last four quarters, have not yet been issued. During the year ended December 31, 2009, 2008 and for the cumulative period from May 22, 2002 (date of inception) to December 31, 2009, compensation expense recorded in respect of the shares earned by the consultant amounted to $0, $5,550 and $1,006,207 respectively.

Compensation expense was calculated by multiplying the amount of shares earned by their fair market value on the last day of the service period completed by the consultants.

Under the agreements with the consultants they are not entitled to earn any more shares of common stock for future services to be performed.

In August 2006, the Company entered into an agreement with a director for his services as a member of the Company’s Board of Directors. As compensation, the director received a signing bonus of $5,000, and a quarterly fee of $1,500 until October 2007, and $3,000 per quarter thereafter. Starting from July 2008, the director agreed that the Company may defer the payment of 100% of his quarterly fee until further notice. In addition, following the adoption of a Stock Option Plan, on April 28, 2008, the Company’s board of directors approved the grant of an option to the director to purchase 215,232 shares of common stock of the Company at an exercise price per share that is equal to the par value of the Company’s common stock. All options became vested as of December 31, 2009.

On April 28, 2008, the Company’s board of directors approved the grant of options to purchase 1,800,000 shares of common stock of the Company to the trustee in trust for the Company’s executives, at an exercise price of $0.075 per share. 900,000 of the options became vested as of December 31, 2009, 450,000 options were expired and cancelled and 150,000 of the options shall vest at the end of each subsequent quarter, following December 31, 2009, for a period of 3 more quarters. An additional option to purchase 215,232 shares of common stock of the Company was granted to a director at an exercise price per share that is equal to the par value of the Company’s common stock (as described above).

On April 28, 2008, the Company’s board of directors further approved the issuance of 147,665 shares of common stock to two of the Company’s directors at a price per share that is equal to the par value of the Company’s common stock and other valuable consideration.

On July 8, 2008, the Company’s board of directors approved the grant of options to purchase 400,000 shares of common stock of the Company to the trustee in trust for two of the Company’s executives, at an exercise price of $0.06 per share. All options became vested as of December 31, 2009.

F-12

ACRO Inc. (A Development Stage Company)

Consolidated Financial Statements

Notes to the Consolidated Financial Statements as of December 31, 2009

Note 9 - Related Party Transactions

In February 2006, the Company entered into a consulting services agreement (the “Consulting Agreement”) with BioTech Knowledge LLC, a limited liability company wholly-owned by Prof. Keinan (see Note 5), whereby Prof. Keinan has agreed to provide consulting services for duration of three years at a monthly fee of $3,000. The agreement period was ended at February 1, 2009. Starting from July 2008, Prof. Keinan agreed that the Company may defer the payment of 100% of his monthly fee until further notice. The total amount of the deferred payment as of December 31, 2009, is $19,500 and is included at accounts payable. During the year ended December 31, 2009 and 2008, the Company incurred $3,000 and $36,046, respectively, for the consulting services provided by Prof. Keinan. In addition to the Consulting Agreement, the Company purchased a patent from Prof. Keinan in March 2006 (see Note 5).

During the year ended December 31, 2009 and 2008, the Company incurred an expense of $126,720 and $128,011, respectively, for consulting services provided by the Company’s CEO and chairman of the board of directors. Starting from October 2008, the Company’s CEO and chairman of the board of directors agreed that the Company may defer the payment of 100% of his monthly fee until further notice

The total amount of the deferred payment as of December 31, 2009, is $158,400 and is included at accounts payable.

On April 28, 2008, the Company’s board of directors approved the issuance of 147,665 shares of common stock to two of the Company’s directors. The Company’s board of directors further approved that future payments to Biotech Knowledge LLC, to M.G.-Net Ltd., a company wholly owned by the Company’s CEO and chairman of the board and his wife and to Mr. Dan Elnathan, one of our directors, shall be paid based on a minimum exchange rate of $1=4 New Israeli Shekels.

Note 10 – Commitments

On October 28, 2008, 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 will complement the ACRO-P.E.T., the Company’s peroxide explosive tester for the detection of improvised explosives.

F-13

ACRO Inc. (A Development Stage Company)

Consolidated Financial Statements

Notes to the Consolidated Financial Statements as of December 31, 2009

Note 11 – Subsequent Event

On March 15, 2010, the Company 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 the Company’s common stock and one warrant to purchase one share of the Company’s 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, the Company issued the finder a warrant to purchase 40,000 shares of the Company’s common stock at a price per share of $0.025, exercisable within twelve months of the closing date.

The Company has successfully completed the development of its new product, 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. It is the main component of ammonium nitrate fuel oil (ANFO), an increasingly popular component of improvised explosive devices.

* * * * * * * *

F-14

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		ACRO INC. (Registrant) By:
		/s/ Gadi Aner		/s/Gabby Klausner
		Gadi Aner		Gabby Klausner
		Chief Executive Officer and Chairman		Treasurer and Chief Financial Officer
		Date: March 25, 2011		Date: March 25, 2011

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