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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-K

 

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, 2011

 

¨ 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   (IRS Employer
Incorporation or Organization)   Identification No.)

 

1 Ben Gurion Street,   51201
Bnei Brak,Israel   (Zip Code)
(Address of Principal Executive Offices)    

+###-##-#### 851

(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 ¨     No [x]                         

 

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 ¨     No [x]                         

 

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 ¨     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 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.

 

                                        

 

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 o     No [x]                         

 

The aggregate market value of the common stock held by non-affiliates of the registrant as of December 31, 2011, was approximately $7,739.512(based on the average bid and asked price for the registrant’s common stock on December 31, 2011 on the OTC Bulletin Board of $.04 per share).

 

At December 31, 2012, 193,487,806 shares of the registrant’s common stock were outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE: None

 

 

 

 
 

 

 

 

TABLE OF CONTENTS

 

      Page
PART I
Item 1. Business   1
Item 1A. Risk Factors   5
Item 1B. Unresolved Staff Comments   5
Item 2. Properties   5
Item 3. Legal Proceedings   5
Item 4. [Removed and Reserved]    
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters  and Issuers Purchases of Equity Securities   5
Item 6. Selected Financial Data   8
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations   8
Item 7A. Quantitative and Qualitative Disclosures About Market Risk   11
Item 8. Financial Statements and Supplementary Data   11
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   13
Item 9A.9A(T). Controls and Procedures   13
Item 9B. Other Information   14
PART III
Item 10. Directors, Executive Officers and Corporate Governance   14
Item 11. Executive Compensation   17
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters   19
Item 13. Certain Relationships and Related Transactions, and Director Independence   22
Item 14. Principal Accountant Fees and Services   22
PART IV
Item 15. Exhibits and Financial Statement Schedules   23
SIGNATURES   24
EXHIBIT INDEX   25

 

 

 

 

 
 

 

PART I

 

Item 1. Business

 

Certain statements in this Annual Report on Form 10-K are “forward-looking statements.”  These statements involve a number of risks, uncertainties and other factors that could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.  Investors are urged to consider these factors carefully in evaluating the forward looking statements and are cautioned not to place undue reliance on such forward-looking statements.  The forward-looking statements made herein are only made as of the date hereof and we will undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

 

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

 

In this Annual Report on Form 10-K, unless otherwise specified, all dollar amounts are expressed in United States dollars.

 

Unless otherwise indicated, all references to “we,” “us,” “our,” “Company” and “ACRO” means ACRO Inc.

 

Corporate Overview

 

We developed 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.

 

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 two of our current directors, 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. As of April 10, 2011, BioTech Knowledge LLC is our largest stockholder, holding approximately 30.91% of our common stock. As of April 10, 2011, we did not repay the loan and BioTech Knowledge LLC did not convert the note into shares.

 

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.

 

During years 2009 and 2010, we received from BioTech Knowledge LLC an additional interest-free loan in the aggregate amount of $90,000 in the form of a convertible promissory note, convertible into up to 11,250,000 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 our common stock at the price per share of $0.016 exercisable within three years.

 

 All outstanding warrants, options and loans outstanding as of July 28, 2011 have been cancelled.

 

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 shall 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.

 

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

 

As of December 31, 2011, we had not realized any significant revenues from operations and experienced an operating loss of $103,537.

 

Reverse Split

 

In January 2012, we effectuated a ten for one (10:1) reverse stock split. As a result, the outstanding common stock of ACRO, Inc. decreased from 193,487,806 to 19,348,780.

 

 

 

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.

 

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 have 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 and in 2011, we had sales of $3,300.

 

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 ceasing our current operations and purchasing new technologies.

 

The Market

 

Improvised explosive devices based on peroxide, as well as other explosives materials have increasingly been used in recent years by various terrorist organizations. This has generated growing interest in technology that can detect this threat.  The main reason for the growth in the use of peroxide-based explosives by terrorist groups is that such explosives can be easily “home-made” using inexpensive, readily-available starting materials which can be purchased in most hardware and paint stores, even in bulk quantities. One class of such peroxide-based explosives can be easily produced by reacting various carbonyl compounds (e.g. ketones, aldehydes and their derivatives) with hydrogen peroxide under acid catalysis. For example, when a mixture of acetone, hydrogen peroxide and small amounts of a mineral acid such as sulfuric acid is left for several hours at room temperature, white crystals of triacetone triperoxide, commonly referred to as TATP, and diacetone diperoxide, commonly referred to as DADP, are formed.

   

The three overall methods of explosives detection in use today are as follows:

 

  (a) Manual – searching by hand and/or with the use of specially-trained dogs. This practice involves obvious risks.

 

  (b) Bulk Detection – attempting to detect macroscopic mass on the basis of characteristic-specific gravity using X-ray or CT techniques.

 

  (c) Trace Detection – sensing the presence of explosives through chemical identification of microscopic residues of the compound, in either vapor or particle form. Trace detection is generally used to resolve alarms raised when suspicious items are identified either manually or through bulk detection.

 

Consequently, and in view of the increased use of such peroxide-based explosives by terrorists, especially in the Middle East as well as in other parts of the world, there exists an urgent need for highly-sensitive methods and devices for the early detection of peroxide-based explosives and improvised explosive devices employing them.

 

Competition

 

We are competing with other developers and manufacturers of explosive detection devices. Several of our competitors announced efforts to develop devices that detect TATP.  Most of these devices are based on air-sampling followed by spectral analysis using various methods.  These instruments, which are quite heavy and expensive, are designed primarily for checkpoint stations, such as airports and we do not consider them as competing products to ours. There are several more products in the market that are similar to our, but most of them are based on wet chemistry (it is necessary to drop different solutions on the suspected material), which is unfriendly and unsafe use. Another system used to identify explosives makes use of “spray” but it is unsafe and less accurate.

 

Manufacturing

 

We engage subcontractors for the manufacture of the plastic parts of our products.  We have no long-term supply agreement with our sole supplier and manufacturer, and cannot assure you that we will be able to obtain such components on a timely basis or at acceptable prices.

 

Intellectual Property

 

Our success will depend in part on our ability, and the ability of our future licensees, to obtain patent protection for the technology and processes we acquired pursuant to the Patent Purchase Agreement with Prof. Keinan. Under the Patent Purchase Agreement, we purchased the technology covered by United States Patent No. 6,767,717 issued on July 27, 2004.

 

This Patent involves a method for the detection of explosives. The abstract describes “a method of detecting a peroxide-based explosive in a sample suspected of consisting of or comprising such explosive, which method comprises dissolving said sample in a suitable organic solvent, contacting the solution with an aqueous solution of a strong acid capable of decomposing said explosive to release hydrogen peroxide, and contacting the resulting mixture with a peroxide enzyme.”

 

In addition, pursuant to our agreement with LSRI, we have obtained a license allowing us to incorporate the long-proven technology of IIBR’s explosives testing kit into our pen-like device.  This will enable our pen-like device to detect commercial and military explosives.

 

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. 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 agreement effectively renders ACRO a holding company.

 

We are currently contemplating ceasing our current operations and purchasing new technologies in which case, our success will depend on our ability to purchase such new technologies.

 

During the twelve months ended December 31, 2011, we did not invest funds in research and development activities. In 2010, we spent $58,738 on research and development. Most of the research and development activity was done by consultants and subcontractors.

 

Government Approvals

 

Our ability to develop and commercialize our products is dependent upon approval from certain governmental security organizations.

 

Employees

 

As of February 1st, 2012, we have entered into an employment agreement with Asaf Porat president, chief executive officer and chief financial officer, pursuant to it Mr. Porat shall receive an annual salary of 70,000$.

Mr. Porat agreed to temporarily defer its compensation.

 

Item 1A. Risk Factors

 

  1. We depend on key personnel, the loss of whom could adversely affect our ability to operate and manage our company.

 

Our success is substantially dependent on the performance of our executive officer, Asaf Porat. The loss of the service of Mr. Porat could have a material adverse effect on our business, results of operations and financial condition. Competition for senior management, marketing personnel and other employees is intense, and there can be no assurance that we will be successful in attracting and retaining such personnel. Failure to successfully manage our personnel requirements could cause a decrease in sales and revenues. While we intend to purchase key person life insurance for our executive officers, currently we do not have any such insurance.

 

  1. We will need, and may not be able to obtain, additional financing which could force us to slow down or suspend our operations.

 

ACRO needs to continue to market its products and services in order to expand its operations. In addition, we may need to engage in an offering of debt or equity securities in order to finance our operations and projected growth in 2012. However, there can be no assurance that additional capital will be available on acceptable terms. As such, we may not be able to fund our future operations, adequately promote our products, develop or enhance services or respond to competitive pressures. Any such inability could adversely affect our ability to enter into new contracts, which would prevent us from growing or maintaining operations of the company.

 

  1. If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial reporting, which would harm our business and the trading price of our stock.

 

Effective internal controls are necessary for us to provide reliable financial reports. If we cannot provide reliable financial reports, our business and operating results could be harmed.

 

During the year ended December 31, 2011, management carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Such an evaluation requires the check and testing of the existence of the required controls. Based on this examination, as December 31, 2011, management has concluded that its disclosure controls and procedures are effective. We will continue to carry out such evaluations in the future.

 

  1. Our auditors have included a note about our ability to continue as a going concern.

 

In its report our independent auditor, Barzily & Co., has stated that based on our limited operating history and accrued losses, there is a doubt about our ability to continue as a going concern. While we intend to raise additional capital during 2012, there is no assurance that we will be able to, or that we will be able to continue operations.

 

 

Item 1B. Unresolved Staff Comments

 

Not applicable.

 

Item 2.  Properties

 

We are currently using the premises of our Top Alpha Capital, our largest shareholder at 1 Ben Gurion Street, Bnei Brak, Israel on a rent free basis. There is no written lease agreement or other written contract for the space use.

 

Item 3.  Legal Proceedings

 

We are not a party to, or the subject of, any pending legal proceeding. We are not aware of any proceeding being contemplated by a governmental authority.

 

PART II

 

Item 4. [Removed and Reserved].

 

Item 5. Market for Common Equity, Related Stockholder Transactions and Small Business Issuer Purchases of Equity Securities.

 

Market Information

 

Our shares of common stock were initially approved for quotation on the Over-the-Counter Bulletin Board (OTCBB) under the symbol “MNAI” on September 14, 2004. On February 6, 2006, as a result of a seven-for-one forward stock split, the National Association of Securities Dealers, Inc. changed our trading symbol to “MDIN”.  However, no market for our common stock developed until March 23, 2006. 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.  As a result, our common stock is quoted on the OTCBB under the new symbol “ACRI”.

 

In January 2012, we instituted a ten to one (10:1) reverse stock split pursuant to which the 193,487,806 shares then outstanding became 19,348,780 shares.

 

The following table sets forth the high and low bid prices of our common stock, as reported by the OTCBB for each quarter since January 1, 2010. The quotations set forth below reflect inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions. Investors should not rely on historical prices of our common stock as an indication of its future price performance. The last sale price of our common stock as reported by the OTCBB on March 28, 2012, was $.036 per share.

 

 

 

 

    2010     2011  
    High     High     High     Low  
1st Quarter     0.12       0.02                  
2nd Quarter     0.09       0.02                  
3rd Quarter     0.04       0.01                  
4th Quarter     0.03       0.01                  

 

Outstanding Shares and Shareholders of Record

 

As of March 31, 2012, there were 19,348,780 shares of our common stock issued and outstanding. These shares were held by approximately thirty (30) shareholders of record.

 

Dividends

 

We have not paid any cash dividends on our common stock and we do not anticipate paying any cash dividends in the foreseeable future. Our current policy is to retain earnings, if any, to fund the development and growth of our business. Any future determination to pay cash dividends will be at the discretion of the board of directors and will be dependent upon our financial condition, operating results, capital requirements, applicable contractual restrictions and any other factors that our board of directors deems relevant.

 

 Recent Sales of Unregistered Securities

 

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 400,000 options are fully vested as of December 31, 2008.

 

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 to up to 11,659,250 shares of 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. During years 2009 and 2010 we received another interest-free loan from BioTech Knowledge LLC in the amount of $90,000, convertible to up to 11,250,000 shares of common stock, at a price of $0.008 per share, within 12 months from the closing date. These loans were cancelled in 2011.

 

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.

 

Following the closing of the Transaction and until 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 2011.

 

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

 

Use of Proceeds from Registered Securities

 

None.

 

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

 

None.

 

Securities Authorized for Issuance Under Equity Compensation Plans

 

none.

 

Item 6. Selected Financial Data

 

Not applicable.

 

Item 7.   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.

 

Going Concern

 

The continuation of our business is dependent upon our raising additional financial support and/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 December 31, 2011, we have incurred losses of $4,304,227. 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. 

 

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.

 

 

Financial Condition, Liquidity and Capital Resources

 

RESULTS OF OPERATIONS FOR ACRO, INC.

YEAR ENDED DECEMBER 31, 2011 COMPARED TO YEAR ENDED DECEMBER 31, 2011

 

Revenues

 

For the years ended December 31, 2010 and 2011, ACRO had revenues of $79,227 and $3,300, respectively, a decrease of $ 75,927 or 96%.

 

Cost of Revenues

 

Cost of Revenues, before consideration of depreciation expense, for the years ended December 31, 2010 and 2011 were $437,714 and $106,837 respectively, a decrease of $330,877 or 75.6%. As a percentage of gross revenues, cost of revenues, before consideration of depreciation expense, increased from 552% in 2010 to 3237% in 2011.

 

 

Research and Development

 

In 2010 we incurred $58,738 in research and development expenses and in 2011, we earned $168 for research and development activities.

Operating Expenses

 

General and administrative expenses decreased from $316,469 to $107,055, a decrease of $209,464, or 66.2% for the years ended December 2010 and 2011.

 

Financial Income (Expenses)

 

For the year ended December 31, 2010 we had $67,711of interest and expense income, and in the year ended December 31, 2011, we had $35,182 in interest expense, a decrease of $102,893.

 

Other Income (Expenses)

 

In 2011, we had $299,000 in income from forgiveness if debt. We had no such income in 2010.

 

 

Net Income (Loss)

 

As a result of the above, we finished 2011 with a net income of $160,281 compared to a net loss of $426,198 in 2010.

 

Liquidity and Capital Resources

 

Since our inception, we have been dependent on investment capital as our primary sources of liquidity. We had an accumulated deficit at December 31, 2011 of $4,304,227. During the year ended December 31, 2011, we incurred a net income of $160,281.

 

Investing and operating activities have historically been funded through our financing activities, which provided cash or approximately $119,205 in 2010 and $158,904 in 2011.

 

On December 31, 2011 ACRO had no long term debt.

 

Off-Balance Sheet Arrangements

 

None

 

 

Cash Requirements

 

Our cash requirement for the next 12 months is approximately 150,000$ We estimate our operating expenses and working capital requirements at our current minimal activity phase, for fiscal year 2012 to be as follows:

 

Estimated Expenses to December 31, 2012      
       
Sales and Marketing    $ 50,000  
General and Administrative    $ 100,000  
         
Total    $ 150,000  

 

 

We are now operating under minimal activity note, until we successfully raise additional funds or receive a significant order to our products, according to this low volume of activity, we anticipate that we will require additional funds of up to approximately $150,000 to keep activating our business for the next twelve-month period (considering the assumption that in such minimal activity volume, directors will continue to defer their fees).  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.

 

Purchase or Sale of Equipment

 

During the next 12 months, we do not plan to purchase software, furniture and office equipment.

 

Products Developed

 

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 2008 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 is available for sale since mid 2008.

   

In addition, we have developed another device called ACRO-N.E.T., 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, 2008 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 (it is the same device) but it is using different solutions and detects different explosives.

 

To date, the efficiency approval of ACRO-P.E.T is derived from laboratory research and limited sales. We had performed an independent research at the Technion institute laboratory, which indicated the ACRO-P.E.T to show accurate and fast results in detecting TATP explosives. ACRO-N.E.T which is based on the ETK – kit, has a large field experience and evidences for its efficiency. Nevertheless, we cannot assure that ACRO-P.E.T and ACRO-N.E.T will gain commercial acceptance in the marketplace.

 

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.

 

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 urea nitrate traces. Both products have low false positive and negative alarm rates. Our product,

 

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.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

Item 8.  Financial Statements and Supplementary Data

 

Our, and our subsidiary’s consolidated financial statements beginning on pages F-1 through F-16, 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.

 

 

Index to Consolidated Financial Statements

 

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   F-6 – F-14

 

 

 

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

None.

 

Item 9A. Controls and Procedures

 

(a)          Our management, including our chief executive officer and chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2011. Based on such review, our chief executive officer and chief financial officer have concluded that we have in place effective controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure, and is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

 

(b)          Our management, under the supervision of our chief executive officer and chief financial officer, is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is defined as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that:

 

  · pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;

 

  · provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

 

  · provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

 

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of our internal control over financial reporting as of December 31, 2011, based on the framework for Internal Control-Integrated Framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that the Company’s internal controls over financial reporting were effective as of December 31, 2011.

 

This management report on internal control over financial reporting shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended or otherwise subject to the liabilities of that Section.

 

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Commission that permit us to provide only management’s report in this Annual report.

 

(c)          There were no changes in our internal controls over financial reporting identified with the evaluation thereof that occurred during the quarter ended December 31, 2011, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

 

Item 9B. Other Information

 

None.

 

 

 

 

PART III

 

Item 9. Directors, Executive Officers and Corporate Governance

 

Directors and Executive Officers

 

The following table sets forth information regarding our current directors and executive officers, their ages, positions held and duration each person has held that position, as of April 10, 2011.

 

Name   Age   Position  

Date First Elected

or Appointed

Asaf Porat   34   President, CEO, Chairman, CFO   July 28, 2011
Baruch Mitzengendler   39   Director   July 28, 2011
             
             

 

 

 

Significant Employees

 

As of February 1st, 2012, we have entered into an employment agreement with Asaf Porat president, chief executive officer and chief financial officer, pursuant to it Mr. Porat shall receive an annual salary of 70,000$.

Mr. Porat agreed to temporarily defer its payment.

 

Family Relationships

 

There are no family relationships between any of our directors, executive officers and proposed directors or executive officers.

 

Business Experience

 

The following is a brief account of the education and business experience of each director and executive officer during at least the past five years, indicating each person’s principal occupation during the period, and the name and principal business of the organization by which he was employed.

 

Asaf Porat. Mr. Porat has been a partner at Top Alpha Capital, an Israeli investment company, since 2010. Top Alpha Capital is the controlling shareholder of Acro. From 2008 to 2010, Mr. Porat was a partner at Titan Investments, Inc., an Israeli investment company. From 2005 to 2008, Mr. Porat was an Investor Relations manager at "investor relations". He is a graduate of Tel Aviv University and Ben Gurion University.

 

Baruch Mitzengendler. Mr. Miztengendler has been an analyst and adviser at Top Alpha Capital since 2009, where he provides analysis services for investment companies. Top Alpha Capital is the controlling shareholder of Acro. From May 2004 through August 2008, he was a staff design engineer for Qimonda AG, a semiconductor manufacturer whose shares traded on the New York Stock Exchange under the symbol “QI.”

 

Involvement in Certain Legal Proceedings

 

None of our directors, executive officers, promoters or control persons have been involved in any of the following events during the past ten years:

 

  · any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
  · any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

 

  · being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
  · being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange   Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

 

Promoters and control persons.

 

None.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act requires our executive officers and directors, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and to provide us with copies of those filings. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during fiscal year ended December 31, 2011, all filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were complied with.

 

To the best of our knowledge, all executive officers, directors and greater than 10% stockholders filed the required reports in a timely manner.

 

Code of Ethics

 

Effective March 23, 2005, our Company’s board of directors adopted a Code of Business Conduct and Ethics and Compliance Program that applies to all of our Company’s officers, directors and employees. Our Code of Business Conduct and Ethics and Compliance Program was filed with the Securities and Exchange Commission as Exhibit 14.1 to our Form 10-KSB for the year ended December 31, 2004, filed on March 30, 2005. We will provide a copy of the Code of Business Conduct and Ethics and Compliance Program to any person without charge, upon request. Requests can be sent to: ACRO Inc., 1 Ben Gurion Street, Bnei Brak, Israel.

 

Corporate Governance

 

Audit, Compensation and Nominating Committees

 

Our board of directors is of the view that it is appropriate for us to have neither a standing compensation nor nominating committee because there are currently only two directors on our board of directors, neither of whom is an “independent director” under the rules of the National Association of Securities Dealers, Inc. Furthermore, we are currently quoted on the OTC Bulletin Board, which is sponsored by the National Association of Securities Dealers, Inc., under the symbol “ACRI” and the OTCBB does not have any listing requirements mandating the establishment of any particular committees. These directors have performed the functions of nominating and compensation committees and will continue to do so. There are no policies or procedures for stockholders to submit recommendations or nomination for directors. Our board of directors does not believe that a defined policy with regard to the consideration of candidates recommended by stockholders is necessary at this time. Given the early stage of our development as a company, a specific nominating policy would be premature and of little assistance until our business operations are at a more advanced level. The process of identifying and evaluating nominees for director is conducted by our board of directors.

 

 

Based on the information gathered, our board of directors then makes a decision on whether to recommend the candidates as nominees for director. We do not pay fees to any third party or parties to identify or evaluate or assist in identifying or evaluating potential nominees.

 

 

 

 

 

Item 10. Executive Compensation

 

Summary Compensation Table

 

The following table sets forth all compensation paid or accrued to former and current officers during the fiscal years ended December 31, 2011 and 2010.

 

SUMMARY COMPENSATION TABLE  

Name and

Principal Position

  Year  

Salary

($)

   

Bonus

($)

   

Stock

Awards

($)

   

Option

Awards

($)

   

Non-Equity

Incentive Plan

Compensation

(#)

   

Nonqualified

Deferred

Compensation

Earnings

($)

   

All Other

Compensation

($)

   

Total

($)

 

Asaf Porat

Chief Executive Officer, Chairman, and Chief Financial Officer (4)

   2010     n\a                                                           
    2011       0                                                     0  
Gadi Aner   2010     -       -       -       -       -       126,720 (1)     25,450 (1)     152,540  
Chief Executive Officer and Chairman (3)   2011     -       -       -       -       -                       0  
                                                                     
Gabby Klausner(2)   2010     -                       -               -       25,648 (2)     25,648  
Chief Financial Officer (3)   2011                                                                

 

(1) Earned by M.G-Net Ltd., a private company wholly-owned by Gadi Aner, for his services as Chairman of the Board and Chief Executive Officer.  

In the year ended 2010, the compensation to Mr. Aner, included car maintenance expenses of $25,450. Mr Aner resigned from all positions in the company in July 2011.

(2)  Ms Klausner resigned from all positions in the company in July 2011.

(3)     Both Mr. Aner and Ms. Klausner resigned in July 2011.

 

(4)     Appointed in July 2011.

 

 

Compensation of Directors

 

No directors received compensation in 2011.

 

Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

 

 

 

Security Ownership of Certain Beneficial Owners and Management

 

The following table sets forth certain information concerning the number of shares of our common stock known by us to be owned beneficially as of March 31, 2012, by: (i) each person (including any group) that owns more than 5% of any class of the voting securities of our company; (ii) each director and officer of our company; and (iii) directors and officers as a group. Unless otherwise indicated, the stockholders listed possess sole voting and investment power with respect to the shares shown.

 

In the following table, we have determined the number and percentage of shares beneficially owned in accordance with Rule 13d-3 of the Exchange Act based on information provided to us by our controlling shareholder, executive officers and directors, and this information does not necessarily indicate beneficial ownership for any other purpose. In determining the number of shares of our common stock beneficially owned by a person and the percentage ownership of that person, we include any shares as to which the person has sole or shared voting power or investment power, as well as any shares subject to warrants or options held by that person that are currently exercisable or exercisable within 60 days after March 31, 2012.

 

 
 

 

 

 

Title of Class  

Name and Address of

Beneficial Owner

 

Amount and Nature of

Beneficial Ownership

   

Percentage

of Class(1)(2)

 
                     
Common Stock   Asaf Porat (4)     0          0 %
   

1 Ben Gurion Street

 

               
   

Bnei Brak, Israel

 

               
                     
                     
                     
Common Stock   Baruch Mitzengender (4)     0       0 %
    1 Ben Gurion Street                
   

Bnei Brak, Israel

 

               
                     
                     
Common Stock   Top Alpha Capital (4)     9,661,379       49.9%  
   

1 Ben Gurion Street

Bnei Brak, Israel

 

               
Common Stock   Prof. Ehud Keinan (3)     4,455,727       23 %
    10550 North Torrey                
    Pines Road                
    MB-20, La Jolla                
    CA 92037                
                     
                     

 

 (1) Regulations under the Exchange Act, defines a beneficial owner of a security as: (a) any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares; (b) any person who, directly or indirectly, create or uses a trust, proxy, power of attorney, pooling arrangement or any other contract, arrangement or device with the purpose or effect of divesting such person of beneficial ownership of a security or preventing the vesting of such beneficial ownership. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on March 15, 2011.

 

(2) Based upon 19,348,780 issued and outstanding shares of common stock as of March 31, 2012.

 

 (3) Including 4,362,175 shares registered under BioTech Knowledge LLC, which is wholly-owned by Prof. Ehud Keinan.

 

(4) Mr Porat and Mr Mitzengender are affiliates of Top Alpha Capital.

 

 Item 12. Certain Relationships and Related Transactions, and Director Independence

 

Transactions with Related Persons

 

 

On March 7, 2007, we entered into a service agreement with our wholly-owned subsidiary, Acrosec Ltd. (Acrosec) pursuant to which Acrosec provides us with research and development, manufacturing, marketing and management services, in exchange for payment by us of the costs of such services plus an additional 0%-10%, based on the service provided. Effective as of January 1, 2009, we entered into an Intellectual Property Assignment and Services Termination Agreement with Acrosec 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. The services agreement between us and Acrosec pursuant to which Acrosec provided us certain research, development, manufacturing and management services was terminated. The agreement effectively renders ACRO as a holding company.

 

 

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.  

 

 

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 as a director in January 2011.

 

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

 

 

Transactions with a former Controlling Shareholder

 

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 to up to 11,659,250 shares of 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. BioTech Knowledge LLC currently holds approximately 4,362,175 of our common stock. As of March 30, 2012, this loan was cancelled .

 

During year 2009 and 2010, we received another interest-free loan from BioTech Knowledge LLC in the amount of $90,000, convertible to up to 11,250,000 shares of 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 our common stock at the price per share of $0.016 exercisable within three years. As of March 30, 2012, this loan was cancelled.

 

 

Promoters and certain control persons

 

None.

 

Parents

 

None.

 

Item 13. Principal Accountant Fees and Services

 

The following table shows the aggregate fees for professional services rendered by our accountants for the fiscal years ended December 31, 2011 and December 31, 2010. 

 

 

 

 

   

Fiscal Year Ended

December 31,

 
    2010     2011  
    (in thousands)  
Audit Fees   $ 15     $ 8  
Audit-Related Fees   $ -     $ -  
Tax Fees   $ 5     $ 1.5  
All Other Fees   $ -     $ -  
Total   $ 20     $ 9.5  

 

Audit Fees

 

For the fiscal year ended December 31, 2011, Barzily & Co., is expected to bill approximately 8000$ for the audit of our annual financial statements and review of our Form 10-K. For the fiscal year ended December 31, 2010, Brightman Almagor Zohar & Co. billed approximately $20,000 for these services.

 

Tax Fees

 

For the fiscal year ended December 31, 2011, Barzily & Co. is expected to bill approximately 1500 for the Israeli subsidiary’s tax reports reviewing and filing services. For the fiscal year ended December 31, 2010, Brightman Almagor Zohar & Co. billed $5,000 for these services.

 

All Other Fees

 

We do not use Barzily & Co. for financial information system design and implementation. These services, which include: designing and implementing a system that aggregates source data underlying the financial statements and generates information that is significant to our financial statements, are provided internally. We do not engage Barzily & Co. to provide compliance outsourcing services. Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before Barzily & Co. is engaged by us to render any auditing or permitted non-audit related service, the engagement be: approved by our audit committee; or entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee’s responsibilities to management. The audit committee pre-approves all services provided by our independent auditors. The audit committee has considered the nature and amount of fees billed by Barzily & Co. and believes that the provision of services for activities unrelated to the audit is compatible with maintaining Barzily & Co. independence.

 

PART IV

 

Item 14. Exhibits and Financial Statement Schedules

 

  (1) Financial Statements:  the response to this portion of Item 14 is submitted as a separate section of this report.

 

  (2) Financial Statement Schedule:  None

 

  (3) Exhibits:  Exhibits are as set forth in the section entitled “Exhibit Index” which follows the section entitled “Signatures” in this annual report on Form 10-K.

  


 
 

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF AND FOR THE YEARS ENDED

 

DECEMBER 31, 2011 AND 2010

 

 

 

 

 

INDEX

 

  Page
   
Report of Independent Registered Public Accounting Firm 2
   
Consolidated Balance Sheets 3-4
   
Consolidated Statements of Operations 5
   
Consolidated Statement of Changes in Shareholders' Deficiency 6
   
Consolidated Statements of Cash Flows 7
   
Notes to the Consolidated Financial Statements 8-18

 

 

 

 

- - - - - - - - - - - - - - - - -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Stockholders and Directors of ACRO Inc. (A Development Stage Company( and subsidiary:

 

We have audited the accompanying consolidated balance sheets of ACRO Inc. (A Development Stage Company( and its subsidiary (the “Company”) as of December 31, 2011 and the related consolidated statements of operations, changes in shareholders’ deficiency and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

The consolidated financial statements of the Company as of December 31, 2010 and for the year then ended were audited by other auditors. The other auditors' unqualified report was dated April 15, 2011.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statements presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2011, and the consolidated results of its operations, changes in shareholders' deficiency and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

 

 

Without qualifying our opinion, we draw attention to Note 1b, according to which 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 1b to the financial statements the Company has a limited operating history, and has incurred losses of approximately $4.3 million from operations as of December 31, 2011.  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 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

 

 

 

Barzily & Co.

Jerusalem, Israel

, 2012

 
 

ACRO INC. (A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

US Dollars

 

      December 31,
  Note   2011   2010
           
 ASSETS          
           
CURRENT ASSETS:          
           
Cash and cash equivalents     -   7,429
Trade receivables (net of allowance for doubtful accounts of $ zero as of December 31, 2011 and 2010)     -   1,067
Other accounts receivable 3   20,850   27,259
           
TOTAL CURRENT ASSETS     20,850   35,755
           
           
           
PROPERTY AND EQUIPMENT , NET 4   5,488   15,980
           
           
TOTAL ASSETS     26,338   51,735

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

 

 
 

ACRO INC. (A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

US Dollars

 

      December 31,
  Note   2011   2010
 LIABILITIES AND SHAREHOLDERS' EFICIENCY          
           
CURRENT LIABILITIES:          
           
Accounts payable and accrued liabilities     39,164   418,109
           
TOTAL CURRENT LIABILITIES     39,164   418,109
           
LONG-TERM LIABILITIES:          
           
Convertible Promissory Notes  and other 6   -   183,178
           
TOTAL LIABILITIES     39,164   601,287
           
COMMITMENTS 7        
           
SHAREHOLDERS' DEFICIENCY: 8        
           
Share capital -          

Common stock; $0.001 par value; 700,000,000 shares authorized;

and 193,487,806 and 68,824,268 shares issued and outstanding as of

December 31, 2011 and December 31, 2010, respectively

    193,488   68,823
Additional paid-in capital     4,097,913   3,846,133
Deficit accumulated during the development stage     (4,304,227)   (4,464,508)
           
TOTAL SHAREHOLDERS' DEFICIENCY     (12,826)   (549,552)
           

 

TOTAL LIABILITIES AND SHAREHOLDERS DEFICIENCY

    26,338   51,735

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

 

 
 

ACRO INC. (A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

US Dollars (except share and per share data)

 

 

 

Cumulative from Inception

(May 22, 2002) to

Year Ended December 31, December 31,
  Note 2011   2010   2011
             
Revenues   3,300   79,227   227,803
             
 Costs and expenses:            
             
Research and development   168   (58,738)   (585,401)
             
Sales and marketing   -   -    (324,350)
             
General and administrative *   (107,005)   (316,469)   (3,664,397)
             
Impairment of Intangible assets 5 -   (62,507)   (62,507)
             
Total operating expenses   (106,837)   (437,714)   (4,636.655)
             
             
Operating loss   (103,537)   (358,487)   (4,408,852)
             
Interest  and other expenses, net   (35,182)   (67,711)   (126,348)
Income from forgiveness of debts 8a, 6b              299,000   -   299,000
             
Income (Loss) before taxes on income   160,281   (426,198)   (4,236,200)
             
Income taxes 9 -   -   (68,027)
             
Net  income (loss)   160,281   (426,198)   (4,304,227)
             
Basic and diluted net loss per common share        (0.00)   (0.00)   (0.04)
             

Weighted average number of shares used in computing

basic and diluted net loss per common share

     120,935,343   68,199,067   96,485,429
             

 

* Includes $11,672, $23,344 and $1,118,263 stock-based compensation for the years ended December 31, 2011, 2010 and for the cumulative period from May 22, 2002 (date of inception) to December 31, 2011, respectively.

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

 

 

 
 

ACRO INC. (A Development Stage Company)

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIENCY

US Dollars (except shares data)

 

    Share capital            
    Shares   Amount   Additional Paid-in Capital   Accumulated Deficit   Total
Balance as of December 31, 2008   67,824,268   67,823   3,597,625   (3,625,632)   39,816
                     
Beneficial conversion feature (note 6)          -   -   122,119   -   122,119
Stock-based compensation   -   -   19,045   -   19,045

 

Loss for the year

  -   -   -   (412,678)   (412,678)
                     
Balance as of December 31, 2009   67,824,268   67,823   3,738,789   (4,038,310)   (231,698)
                     
Beneficial conversion feature (note 6)   -   -   60,000   -   60,000
Issuance of share capital in March, 2010                  1,000,000   1,000   24,000   -   25,000
Stock-based compensation   -   -   23,344   -   23,344

 

Loss for the year

                              -   -   -   (426,198)   (426,198)
                     
Balance as of December 31, 2010   68,824,268   68,824   3,846,132   (4,464,508)   (549,552)
                     
Beneficial conversion feature (note 6)   23,221,750   23,222   162,551   -   185,773
Issuance of share capital in July, 2011 (note 8b)   4,828,000   4,828   14,172   -   19,000
Issuance of share capital in July, 2011 (note 8a)   96,613,788   96,614   63,386   -   160,000
Stock-based compensation           -   -   11,672   -   11,672

 

Net Income for the year

  -   -   -   160,281   160,281
                     
Balance as of December 31, 2011   193,487,806   193,488   4,097,913   (4,304,227)   (12,826)

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 
 

ACRO INC. (A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

US Dollars

  Year Ended December 31,  

Cumulative from Inception

(May 22, 2002) to December 31,

      2011   2010   2011
CASH FLOWS FROM OPERATING ACTIVITIES:              
Net profit (loss)     160,281   (426,198)   (4,304,227)
               
Adjustments to reconcile net loss to net cash used in operating activities:          
           
Services contributed by officers     -   -   3,500
Depreciation and amortization     10,492   88,304   261,503
Expenses for Beneficial conversion feature     38,692   58,641   218,370
Stock-based compensation     11,672   23,344   1,118,263
Income from settlement of liability     299,000))   -   (299,000)
               
Changes in operating assets and liabilities:              
Decrease in trade receivables     1,067   2,292   -
Decrease (Increase) in other accounts receivable     6,409   (17,927)   (20,850)
Increase (Decrease) in accounts payable and other currents     95,946))   132,417   322,161
Net cash used in operating activities     (166,333)   (139,127)   (2,700,280)
               
CASH FLOWS FROM INVESTING ACTIVITIES:              
               
Decrease in long term deposit     -   2,761   -
Purchase of property and equipment     -   (1,222)   (146,991)
Purchase of intangible assets     -   -   (120,000)
               
Net cash provided by (used in) investing activities     -   1,539   (266,991)
               
CASH FLOWS FROM FINANCING ACTIVITIES:              
               
Short term bank-credit     -         (795)   -
Convertible Promissory Note and other     (1,096)   95,000   (1,096)
Proceeds from issuance of common stock     160,000   25,000   3,206,907
Offering costs     -   -   (238,540)
               
Net cash provided by financing activities     158,904   119,205   2,967,271
               
Decrease in cash and cash equivalents     7,429))   (18,383)   -
Cash and cash equivalents at the beginning of the period      7,429        25,812   -
Cash and cash equivalents at the end of the period     -          7,429   -
               
APPENDIX A -              
Supplemental disclosure of non-cash financing activities and cash flow information:              
Conversion of shareholders' loans to equity     19,000   -   19,000
Conversion of convertible promissory notes to equity     185,773   -   185,773
                 

 

The accompanying notes are an integral part of the consolidated financial statements.

 
 

ACRO INC. (A Development Stage Company)

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 December 31, 2011.  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") for the issue of 96,613,788 shares of common stock, representing 49.9% of the Company outstanding share capital, for the total consideration of $160,000 ("Transaction"). See also Note 8.

Simultaneously with closing of the transaction the convertible notes in the aggregate amount of approximately $185,000 were converted into 23,221,750 shares of the Company common stock. In addition, at the closing all outstanding warrants and options to purchase the Company shares were cancelled. See also Note 8a.

 

 
 

ACRO INC. (A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

US Dollars

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

 

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("US GAAP").

 

a.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 that are critical to the accompanying consolidated financial statements relate principally to depreciation and recoverability of long lived assets. The markets for the Company’s products are characterized by intense price competition, rapid technological development, evolving standards and short product life cycles; all of which could impact the future realization of its assets. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period that they are determined to be necessary. It is at least reasonably possible that management’s estimates could change in the near term with respect to these matters.

 

 

b. 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.

 

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.

 

 

 
 

ACRO INC. (A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

US Dollars

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (cont.)

 

d.Cash and cash equivalents

 

The Company considers all highly liquid investments originally purchased with maturities of three months or less at the date acquired to be cash equivalents.

 

 

e.Property and equipment

 

Property and equipment are stated at cost net of accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, at the following annual rates:

 

  %  
Leasehold improvements 10  
Computers and production equipment 15 – 33  
Office furniture and equipment 7  

 

 

f.Impairment of long-lived assets

 

The Company's long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. As of December 31, 2011, management believes that all of the Company’s long-lived assets are recoverable.

 

 

g.Research and Development costs

 

Research and Development costs are charged to the statement of operations as incurred.

 

 

h.   Convertible debt with beneficial conversion feature

 

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.

 
 

ACRO INC. (A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

US Dollars

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (cont.)

 

i. Exchange Rates

 

Exchange differences are charged or credited to operations as incurred.

 

Exchange rates:

 

    December 31,
    2011   2010
New Israeli Shekel (NIS)   $ 0.262   $ 0.282
         
         Year Ended December 31,
Decrease in Rate of Exchange:   2011   2010
NIS   (7.1%)   6.4%

 

j.Income taxes

 

The Company accounts for income taxes by the liability method whereby deferred tax assets and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary to reduce the amount of deferred tax assets to their estimated realizable value.

 

k.Basic and Diluted Net Income (Loss) per Share

 

Basic net income (loss) per share is computed based on the weighted average number of common shares outstanding during each year. Diluted loss per share is computed based on the weighted average number of common shares outstanding during each year, plus dilutive potential common shares considered outstanding during the year.

 

l.Implementation of new accounting Standards

 

In January 2010, the FASB issued Accounting Standards Update No. 2010-06 (ASU 2010-06), "Fair Value Measurement and Disclosures," which amends ASC Topic 820, adding new requirements for disclosures for Levels 1 and 2, separate disclosures of purchases, sales, issuances, and settlements relating to Level 3 measurements and clarification of existing fair value disclosures. ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010. The adoption did not have an effect on the company's consolidated financial statements.

 

 
 

ACRO INC. (A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

US Dollars

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (cont.)

 

Implementation of new accounting Standards (cont.)

 

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 abovementioned. 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.

 

m. Intangible Assets

 

The Company accounts for intangible assets by testing recoverability of assets 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.

 

 

 

NOTE 3:- OTHER ACCOUNTS RECEIVABLE

 

  December 31,
  2011   2010
       
Prepaid expenses 20,850   5,967
Value-Added Tax -   21,292
  20,850   27,259

 

 

 

 

 

 

 

 

 
 

ACRO INC. (A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

US Dollars

 

NOTE 4:- PROPERTY AND EQUIPMENT, NET

 

Property and equipment consist of the following:

    December  31,  
      2011     2010  
Cost:            
Production equipment     122,400   122,400  
Computer equipment     14,707   14,707  
Office furniture     7,924   7,924  
Leasehold improvements     2,017     2,017  
      147,048     147,048  
             
Accumulated depreciation:            
Production equipment     122,089   112,672  
Computer equipment     14,246   13,843  
Office furniture     3,208   2,536  
Leasehold improvements     2,017     2,017  
      141,560     131,068  
             
Depreciated cost     5,488     15,980  
             
                   

 

 

Depreciation expense for the year ended December 31, 2011 and 2010 and for the cumulative period from May 22, 2002 (date of inception) to December 31, 2011, was $10,492, $13,797 and $141,560, respectively.

 

 

NOTE 5:- INTANGIBLE ASSETS

 

In March 2006, the Company purchased a patent from Prof. Ehud Keinan (“Keinan”), a stockholder who holds 30.9% of the Company’s shares of common stock, for $120,000. The patent was being amortized over the life of the asset which was estimated at 10 years. As discussed in note 2m, and as a result of the financial hardship of the Company, the Company evaluated that this intangible asset is not recoverable and, therefore, the item was written it off entirely during 2010.

 
 

ACRO INC. (A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

US Dollars

 

 

NOTE 6:- CONVERTIBLE PROMISSORY NOTES AND OTHER

 

a. On February 22, 2009, the Company received an interest free loan in the amount of $93,273 in the form of a convertible promissory note with BioTech Knowledge LLC, convertible to up to 11,659,250 shares of the Company's 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. During the years 2009, 2010 and 2011, the Company received from Bio Tech Knowledge LLC additional interest free loans, with the same terms, in an aggregate amount of $92,500. The loans are convertible to up to 11,562,500 shares of the Company's common stock, at a price of $0.008 per share, within 12 months from the date of the grant, 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.

 

Consistent with provisions of ASC 470-20, the Company evaluated whether the notes contain a beneficial conversion feature ("BCF") and determined that in most cases the BCF amount exceeded the amount of notes, and as a result the notes initially recorded at nil and are to be amortized over the term of notes, which is one year (although as discussed below repayment or conversion did not occur during the one year period which has expired).

 

On July 5, 2011 in the framework of the purchase agreement, the convertible notes were converted into shares of the Company and all options expired. See Note 8a.

 

 

  As of December 31, 2011 and 2010 the Company recorded in the financial statements convertible promissory notes of $0 and $148,178, respectively, representing the carrying values of the notes net of unamortized discount.
   
b. On April 1, 2010, the Company received a loan from Lindon Group Inc., Rhode Island Corporation (which is a related party of one of the Company's former major customers) in the amount of $35,000, bearing a yearly interest of 6%, in the form of a promissory note. This loan was forgiven by Lindon group on March 8, 2011, along with terminating its distribution agreement with the Company.
   

 

 

NOTE 7:- 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 from the device 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.

 
 

ACRO INC. (A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

US Dollars

 

NOTE 8:- SHAREHOLDERS' DEFICIENCY

   
a.

On July 5, 2011 the Company entered into a share purchase agreement (the "Agreement") with Top Alpha Capital, an Israeli corporation, (hereinafter – "Top Alpha") for the issue of 96,613,788 shares of common stock, representing 49.9% of the Company outstanding shares capital, for the total consideration of $160,000 ("Transaction"). The purchase price was funded by available funds. As a result of this transaction, balances in the amount of $ 264,000 were deducted from the results of the operations for the year in regard to waiver of debts.

 

Pursuant to the Agreement, simultaneously with closing of the transaction the convertible notes held by Bio Tech Knowledge LLC in the aggregate amount of approximately $185,000 were converted into 23,221,750 shares of the Company common stock. In addition, at the closing all outstanding warrants and options to purchase the Company shares were cancelled.

See also Note 6.

 

Following the closing of the transaction and until six months thereafter, Top Alpha shall have the option to purchase 11,195,623 shares of the Company common stock held by Company directors: Mr. Gadi Aner and by Mr. Zeev Bronfeld, at a price per share of $0.0038.

On February 1, 2012 the options expired.

 

Following the closing of the transaction and until twelve months thereafter, Top Alpha shall have the option to purchase up to 15,515,052 of the shares held by BioTech Knowledge LLC, at a price per share of $0.0018. On February 1, 2012 the options expired.

 

Pursuant to the Agreement, as long as Mr. Aner and Mr. Bronfeld will hold any of the Company 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 the Company and another entity; (b) an asset acquisition by the Company; (c) The Company’s purchase of shares of another entity, or (d) acquisition by a third party of a controlling interest in the Company.  In any case, such veto right shall not apply to issue of additional shares to Top Alpha in the event the Company shall have outstanding debts on the closing of the Transaction.  In such event, the Company 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 shall supply office services, management, consulting and investment banking services to the Company at no cost.

 

Pursuant to the share purchase agreement between the Company and Top Alpha Capital, on July 28, 2011, Gadi Aner and Dan Einathan resigned as directors of the Company, and Asaf Porat and Boris Mitsengendler   were appointed as directors until the next annual shareholders meeting.  In addition, Gabby Klausner resigned as Chief Financial Officer and treasurer, and Gadi Aner resigned as President and Chief Executive Officer, and Asaf Porat was appointed Chief Executive Officer and President, and Chief Financial Officer.

As a result of this transaction Top Alpha owns 49.9% of the Company's common stock.

 

In the framework of the purchase agreement, all of the Options Plan expired.

 

 

 

 

 
 

ACRO INC. (A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

US Dollars

 

NOTE 8:- SHAREHOLDERS' DEFICIENCY (cont.)

 

   
b. On April 14, 2011 a loan agreement was signed with Oren Fuerst and Noam Yellin (the lenders), according to which  the company was entitled to receive a loan of an aggregated amount of $53,000 ($26,500 from each), in a form of convertible promissory note. As of May 23, 2011 the company received only $19,000. The lenders decided to withdraw from the agreement and not to lend the rest of the money to the company. Therefore the company board of directors decided to cancel the agreement with the lenders. On July 26, 2011, as part of the share acquisition agreement signed by the Company, an amount of 4,828 thousand shares were issued to Noam Yellin in consideration for waiver of the loan in the amount of $ 19,000.

 

 

NOTE 9:- INCOME TAXES

 

a.    Tax rates

 

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.

 

On July 23, 2009, a law for economic efficiency - amendments to the laws for implementation of the economic program for 2009-2010 (hereinafter: "the amendment") was published that determined, inter alia, an additional gradual reduction in corporate tax rates commencing 2011 and thereafter: 24% in 2011, 23% in 2012, 21% in 2014, 20% in 2015, and 18% in 2016 and thereafter.

On December 6, 2011, the Law for Tax Levy Changes (Amendments) was passed, based on the recommendations of the Trachtenberg Committee regarding tax issues. Accordingly, the gradual reduction of corporate tax to 18% nullified and, instead, commencing with 2012, corporate tax will be 25%.

The applicable statutory tax rate for the Company in the US is 34%.

 

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

 

 

      December 31,
      2011   2010
  United States     1,424   ((101,679
  Israel     158,857   (325,519)
        160,281   (426,198)
             

 

 
 

ACRO INC. (A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

US Dollars

 

NOTE 9:- INCOME TAXES (cont.)

 

b. Deferred Tax

      December 31,
      2011   2010
  Deferred tax assets:          
  Net operating loss carry forwards           1,417,955        1,419,379
  Valuation allowance     (1,417,955)   (1,419,379)
  Net deferred tax assets     -   -

 

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, 2011 and 2010 was a decrease of $1,424 and an increase of $108,950 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 reducible. 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.

As of December 31, 2011, the Company has net operating loss carry forwards for federal income tax purposes of approximately $4.3 million, 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:

 

      December 31,
      2011   2010
  Income (loss) before income taxes as per the income statement     160,281   (426,198)
             
  Tax calculated according to the statutory tax rate of 34%     54,496   (144,907)
             
  Increase (decrease) in income tax resulting from:          
  Change in valuation  allowance     (1,424)   108,950
  Foreign tax rate differential     (15,785)   29,205
  Exchange rate differences     (37,287)   6,752
  Total income tax expense     -   -
             
 

The income tax payable as of December 31, 2011 and 2010 was $0 and $1,375 respectively.

 

 
 

ACRO INC. (A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

US Dollars

 

NOTE 9:- INCOME TAXES (cont.)

 

d. Accounting for Uncertainty in Income Taxes

As of January 1, 2011 and for the 12 months ended December 31, 2011, 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 on 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.

 

NOTE 10:- RELATED PARTIES

 

a. 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.

See Note 8a in regard to changes in related parties.

 

b. 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.

 

During the years ended December 31, 2011 and 2010, the Company incurred an expense of $31,680 and $126,270, respectively, for consulting services provided by the Company’s CEO and chairman of the board of directors.

 

As of December 31, 2011, the remaining deferred amounts mentioned above were waived and offset against expenses. See also Note 8a.

 

 

NOTE 11:- SUBSEQUENT EVENTS

 

During January 2012 a reverse split of shares occurred proportionately 10:1 for the issued and outstanding Common shares of the Company.

 
 

 

 

Exhibit Index

 

Number   Description   Method of Filing
         
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
         
10.1   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

 

 

 

 

 

 

       
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 2010.   Incorporated by reference to Exhibit 10.13 to our annual report on Form 10-K filed March 29, 2010
         
10.16   Convertible Promissory Note between the Registrant and Oren Fuerst, dated March 31, 2011.   Filed herewith.
         
10.17   Convertible Promissory Note between the Registrant and Noam Yellin, dated March 31, 2011.   Filed herewith.
         
14.1   Code of Business Conduct and Ethics and Compliance Program   Incorporated by reference to Exhibit 14.1 to our Form 10-KSB for the year ended December 31, 2004, filed March 30, 2005
         
21   Subsidiaries of the Registrant   Incorporated by reference to Exhibit 21 to our annual report on Form 10-K filed March 30, 2009
         
31.1   Rule 13a-14(a) Certification of Principal Executive Officer   Filed herewith
         
31.2   Rule 13a-14(a) Certification of Principal Financial Officer.   Filed herewith
         
32.1   Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.   Filed herewith

 

 

 
 

 

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/    
  Asaf Porat    
  Chief Executive Officer, Chief Financial Officer,    
  and Chairman    
  Date: april 3, 2012    

 

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature   Title   Date
         
/s/ Asaf Porat   Chief Executive Office, Chief Financial Officer & Chairman   april 3, 2012
Asaf Porat   (principal executive office, principal financial officer, principal accounting officer)    
         

/s/ Baruch Mitzengendler

 

      april 3, 2012
Baruch Mitzengendler   Director