UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2010
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER 000-50482
ACRO INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 98-0377767
------ ----------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
18 HALIVNE STREET, TIMRAT ISRAEL 23840
ISRAEL -----
------ (Zip Code)
(Address of Principal Executive Offices)
+972-4-636-0297
---------------
(Registrant's Telephone Number, Including Area Code)
N/A
---
(Former Name, Former Address and Former Fiscal year,
if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:
Yes [X] No [_]
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.
232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).
Yes [_] No [_]
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer or a smaller reporting company:
Large accelerated filer [_] Accelerated filer [_]
Non-accelerated filer [_] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act):
Yes [_] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
As of May 13, 2010, 67,824,268 shares of the registrant's common stock
were outstanding.
1
TABLE OF CONTENTS
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ACRO INC.
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("THE COMPANY")
INDEX
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Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 16
Item 4T. Controls and Procedures 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 1A. Risk Factors 18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. [Removed and Reserved] 18
Item 5. Other Information 18
Item 6. Exhibits 18
Signatures 19
Exhibit Index 20
Promissory note between the registrant and Lindon Group 22
Certification of CEO Pursuant to Section 302 25
Certification of CFO Pursuant to Section 302 26
Certification Pursuant to U.S.C. Section 1350 27
2
ACRO Inc. (A Development Stage Company)
Consolidated Financial Statements
PART I- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------------------------------------------
MARCH DECEMBER
31 31
2010 2009
--------- ---------
$ $
--------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 20,125 25,812
Trade receivables 2,793 3,359
Prepaid expenses and other current assets 8,184 9,332
--------- ---------
TOTAL CURRENT ASSETS 31,102 38,503
Other non-current assets 3,425 2,762
Property and equipment, net (Note 3) 25,923 28,555
Intangible assets, net 71,507 74,507
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TOTAL ASSETS 131,957 144,327
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Shot term bank credit - 795
Accounts payable and accrued liabilities 313,530 285,693
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TOTAL CURRENT LIABILITIES 313,530 286,488
------- -------
Convertible Promissory Note (Note 7) 133,274 123,274
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TOTAL LIABILITIES 446,804 409,762
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Commitments (Notes 5 and 8)
STOCKHOLDERS' DEFICIENCY:
Subscription for units (Note 9) 25,000 -
Common stock; $0.001 par value; 700,000,000 shares authorized;
67,824,268 and 67,824,268 shares issued and outstanding as of
March 31, 2010 and December 31, 2009, respectively 67,823 67,823
Additional paid-in capital 3,622,506 3,616,670
Deficit accumulated during the development stage (4,030,176) (3,949,928)
---------- ----------
TOTAL STOCKHOLDERS' DEFICIENCY (314,847) (265,435)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY 131,957 144,327
========== ==========
========== ==========
The accompanying notes are an integral part of the consolidated financial statements
3
ACRO Inc. (A Development Stage Company)
Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------
CUMULATIVE
FROM INCEPTION
(MAY 22, 2002)
THREE MONTHS ENDED MARCH 31 TO MARCH 31
---------------------------
2010 2009 2010
--------- -------- ----------
$ $ $
--------- -------- ----------
REVENUES 20,374 6,612 165,650
COSTS AND EXPENSES:
Research and development 17,110 18,576 543,941
Sales and marketing 4,202 11,945 328,552
General and administrative* 73,881 98,977 3,314,804
------- -------- ----------
TOTAL OPERATING EXPENSES 95,193 129,498 4,187,297
------- -------- ----------
OPERATING LOSS (74,819) (122,886) (4,021,647)
------- -------- ----------
Interest and other income (expenses), net (5,429) (1,601) 59,498
------- -------- ----------
LOSS BEFORE INCOME TAX (80,248) (124,487) (3,962,149)
Income tax - - 43,916
------- -------- ----------
NET LOSS (80,248) (124,487) (4,030,176)
======= ======== ==========
BASIC AND DILUTED NET LOSS PER COMMON SHARE (0.00) (0.00)
======= ======== ==========
WEIGHTED AVERAGE SHARES USED IN COMPUTING BASIC AND DILUTED
COMMON SHARE 67,823,725 67,823,725 48,907,139
========== ========== ==========
* Includes $5,836, $8,218 and $1,089,083 in stock-based compensation to
employees and non-employees for the three months periods ended March 31, 2010,
and 2009 and for the cumulative period from May 22, 2002 (date of inception)
to March 31, 2010 respectively.
The accompanying notes are an integral part of the consolidated financial statements
4
ACRO Inc. (A Development Stage Company)
Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------------------------------------------
CUMULATIVE
FROM INCEPTION
(MAY 22, 2002)
THREE MONTHS ENDED MARCH 31 TO MARCH 31
---------------------------
2010 2009 2010
--------- -------- ----------
$ $ $
--------- -------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (80,248) (124,487) (4,030,176)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN
OPERATING ACTIVITIES:
Services contributed by officers - - 3,500
Depreciation and amortization 6,854 14,445 169,561
Stock-based compensation 5,836 8,218 1,089,083
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Decrease (Increase) in Trade receivables 566 7,318 (2,793)
Decrease (Increase) in Prepaid expenses and other current assets 1,148 1,245 (8,184)
Increase (Decrease) in Accounts payable and accrued liabilities 27,837 20,326 313,530
------- ------- ----------
NET CASH USED IN OPERATING ACTIVITIES (38,007) (72,935) (2,465,479)
------- ------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in long term deposit (663) 304 (3,425)
Purchase of property and equipment (1,222) - (146,991)
Purchase of intangible assets - - (120,000)
------- ------- ----------
NET CASH USED IN INVESTING ACTIVITIES (1,885) 304 (270,416)
------- ------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in short term bank credit (795) -
Increase in Convertible promissory note 10,000 93,274 133,274
Proceeds from Subscription for units 25,000 - 25,000
Proceeds from issuance of common stock - - 2,836,286
Offering costs - - (238,540)
------ ------ ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 34,205 93,274 2,756,020
------ ------ ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (5,687) 20,643 20,125
Cash and cash equivalents at beginning of period 25,812 36,943 -
------ ------ ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 20,125 57,586 20,125
====== ====== =========
NON-CASH ACTIVITIES
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for taxes - -
====== ====== =========
The accompanying notes are an integral part of the consolidated financial statements
5
ACRO Inc. (A Development Stage Company)
Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2010
- --------------------------------------------------------------------------------
NOTE 1 - BUSINESS
A. General
ACRO Inc. (A Development Stage Company) (the "Company") was incorporated
on May 22, 2002, under the laws of the State of Nevada, as Medina
International Corp. On May 4, 2006, the Company changed its name to ACRO
Inc. The Company was originally an oil and gas consulting company in
Canada and in the United States. However, during 2006, following a change
of control and a private placement financing, the Company ceased to engage
in the oil and gas consulting business and engaged in development of
products for the detection of military and commercial explosives for the
homeland security market.
Since its inception, the Company has no significant revenues and in
accordance with ASC 915 codified from Statement of Financial Accounting
Standard ("SFAS") No. 7 "Accounting and Reporting by Development Stage
Enterprises", the Company is considered a development stage company.
B. Going concern
The accompanying financial statements have been prepared on a basis which
assumes that the Company will continue as a going concern and which
contemplates the realization of assets and the satisfaction of liabilities
and commitments in the normal course of business. The Company has a
limited operating history, and has incurred losses of 4,030,176 from
operations since its inception. These circumstances raise substantial
doubt about the Company's ability to continue as a going concern.
Management's plans with regard to these matters include continued
development, marketing and licensing of its products as well as seeking
additional financing arrangements. Although, management continues to
pursue these plans, there is no assurance that the Company will be
successful in obtaining sufficient revenues from its products or financing
on terms acceptable to the Company. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
In the event that we do not generate revenues or raise sufficient
additional funds by a public offering or a private placement, we will
consider alternative financing options, if any, or be forced to scale down
or perhaps even cease our operations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Presentation
The accompanying consolidated financial statements are prepared in
accordance with U.S. generally accepted accounting principles ("U.S.
GAAP").
B. Use of Estimates in the Preparation of Financial Statements
The preparation of the consolidated financial statements in conformity
with US GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the financial statement date and the
reported expenses during the reporting periods. Actual results could
differ from those estimates.
6
ACRO Inc. (A Development Stage Company)
Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2010
- --------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
C. Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned Israeli subsidiary, Acrosec Ltd. All material
intercompany transactions and balances have been eliminated in
consolidation.
D. Accounting Standards Codification
Effective July 1, 2009, the FASB Accounting Standards Codification
("FASB ASC" or "the Codification") is the single source of
authoritative accounting principles recognized by the FASB to be
applied by non-governmental entities in the preparation of financial
statements in conformity with GAAP. The adoption of the FASB ASC does
not impact the Company's consolidated financial statements, however,
the Company's references to accounting literature within its notes to
the condensed consolidated financial statements have been revised to
conform to the Codification.
E. Initial Adoption of New Standards
ASU 2010-9 - SUBSEQUENT EVENTS (TOPIC 855): AMENDMENTS TO CERTAIN
RECOGNITION AND DISCLOSURE REQUIREMENTS.
In February 2010, the FASB issued ASU No. 2010-09, "Subsequent
Events", that amended its guidance on subsequent events. SEC filers
are not required to disclose the date through which an entity has
evaluated subsequent events. The amended guidance was effective upon
issuance for all entities.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
ESTIMATED
USEFUL LIFE MARCH 31 DECEMBER 31
(YEARS) 2010 2009
----------- --------- -----------
$ $
--------- -----------
Computer equipment 3 14,709 13,487
Production equipment 3 122,341 122,341
Furniture 7-15 7,924 7,924
Leasehold improvements (*) 2,017 2,017
--------- -----------
146,991 145,769
Less - Accumulated depreciation and amortization 121,068 117,214
--------- -----------
25,923 28,555
========= ===========
(*) over the lease term
7
ACRO Inc. (A Development Stage Company)
Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2010
- --------------------------------------------------------------------------------
NOTE 3 - PROPERTY AND EQUIPMENT (CONT'D)
Depreciation expense for the three month period ended March 31, 2010 and
2009, and for the cumulative period from May 22, 2002 (date of inception),
to March 31, 2010 were $3,854, $11,445, and $121,068, respectively.
NOTE 4 - INTANGIBLE ASSETS
In March 2006, the Company purchased a patent from Prof. Ehud Keinan
("Keinan"), a stockholder who holds 30.91% of the Company's shares of
common stock, for $120,000. The patent is being amortized over the life of
the asset which is estimated at 10 years. Amortization expense for each of
the three months periods ended March 31, 2010 and 2009 and for the
cumulative period from May 22, 2002 (date of inception) to March 31, 2010
was $3,000, $3,000 and $48,493, respectively. The expected annual
amortization expenses for each of the next five years are $12,000.
NOTE 5 - STOCK-BASED COMPENSATION
During 2006, the Company engaged three consultants to serve as members of
its advisory board. The consultants are entitled to receive shares of
common stock each quarter that they serve on the Company's advisory board.
One of the consultants resigned during 2007. During the three month period
ended March 31, 2010, 2009 and for the cumulative period from May 22, 2002
(date of inception) to March 31, 2010, the consultants earned 80,512
shares, 133,328 shares and 1,264,407 shares respectively. 113,844 shares
that were earned during the year ended December 31, 2009, have not yet
been issued. During the three months period ended March 31, 2010, 2009 and
for the cumulative period from May 22, 2002 (date of inception) to March
31, 2010, compensation expense recorded in respect of the shares earned by
the consultant amounted to $0, $0 and $1,006,207 respectively.
Compensation expense was calculated by multiplying the amount of shares
earned by their fair market value on the last day of the service period
completed by the consultants. Under the agreements with the consultants
they are not entitled to earn any more shares of common stock for future
services to be performed.
In August 2006, the Company entered into an agreement with a director for
his services as a member of the Company's Board of Directors. As
compensation, the director received a signing bonus of $5,000, and a
quarterly fee of $1,500 until October 2007, and $3,000 per quarter
thereafter. Starting from July 2008, the director agreed that the Company
may defer the payment of 100% of his quarterly fee until further notice.
In addition, following the adoption of a Stock Option Plan, on April 28,
2008, the Company's board of directors approved the grant of an option to
the director to purchase 215,232 shares of common stock of the Company at
an exercise price per share that is equal to the par value of the
Company's common stock. All options became vested as of March 31, 2010.
On April 28, 2008, the Company's board of directors approved the grant of
options to purchase 1,800,000 shares of common stock of the Company to the
trustee in trust for the Company's executives, at an exercise price of
$0.075 per share. 1,050,000 of the options became vested as of March 31,
2010, 450,000 of the options expired and cancelled and 150,000 of the
options shall vest at the end of each subsequent quarter, following March
31, 2010, for a period of 2 additional quarters. An additional option to
purchase 215,232 shares of common stock of the Company was granted to a
director at an exercise price per share that is equal to the par value of
the Company's common stock (as described above).
8
ACRO Inc. (A Development Stage Company)
Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2010
- --------------------------------------------------------------------------------
On April 28, 2008, the Company's board of directors further approved the
issuance of 147,665 shares of common stock to two of the Company's
directors at a price per share that is equal to the par value of the
Company's common stock and other valuable consideration.
On July 8, 2008, the Company's board of directors approved the grant of
options to purchase 400,000 shares of common stock of the Company to the
trustee in trust for two of the Company's executives, at an exercise price
of $0.06 per share. All options became vested as of March 31, 2010.
NOTE 6 - RELATED PARTY TRANSACTIONS
In February 2006, the Company entered into a consulting services agreement
(the "Consulting Agreement") with BioTech Knowledge LLC, a limited
liability company wholly-owned by Prof. Keinan (see Note 5), whereby Prof.
Keinan has agreed to provide consulting services for duration of three
years at a monthly fee of $3,000. The agreement was terminated on February
1, 2009. Starting from July 2008, Prof. Keinan agreed that the Company may
defer the payment of 100% of his monthly fee until further notice. The
total amount of the deferred payment as of March 31, 2010, is $19,500 0and
is included at accounts payable. During the three months period ended
March 31, 2010 and 2009, the Company incurred $0 and $3,000 respectively,
for the consulting services provided by Prof. Keinan. In addition to the
Consulting Agreement, the Company purchased a patent from Prof. Keinan in
March 2006 (see Note 4).
During year 2009 and until March 31, 2010, the Company received from
BioTech Knowledge LLC an interest free loan in the aggregate amount of
$133,274 in the form of a convertible promissory note , convertible into
up to 16,659,250 shares of the Company's common stock, at a price of
$0.008 per share, within 12 months from March 24, 2010, with each share of
common stock such converted awarding a warrant to purchase one share of
the Company's common stock at the price per share of $0.016 exercisable
within three years.
During the three months period ended March 31, 2010 and 2009, the Company
incurred an expense of $31,680 and $34,771, respectively, for consulting
services provided by the Company's CEO and chairman of the board of
directors.
Starting from October 2008, the Company's CEO and chairman of the board of
directors agreed that the Company may defer the payment of 100% of his
monthly fee until further notice
The total amount of the deferred payment as of March 31, 2010, is $190,080
and is included at accounts payable.
On April 28, 2008, the Company's board of directors approved the issuance
of 147,665 shares of common stock to two of the Company's directors. The
Company's board of directors further approved that future payments to
Biotech Knowledge LLC, to M.G.-Net Ltd., a company wholly owned by the
Company's CEO and chairman of the board and his wife and to Mr. Dan
Elnathan, one of our directors, shall be paid based on a minimum exchange
rate of$1=4 New Israeli Shekels.
9
ACRO Inc. (A Development Stage Company)
Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2010
- --------------------------------------------------------------------------------
NOTE 7 - CONVERTIBLE PROMISSORY NOTE
During 2009 and until March 31, 2010, the Company received from BioTech
Knowledge LLC an interest free loan in the aggregate amount of $133,274
(of which $10,000 was received in the current quarter) in the form of a
convertible promissory note, convertible into up to 16,659,250 shares of
our common stock, at a price of $0.008 per share, within 12 months from
March 24, 2010, with each share of common stock such converted awarding a
warrant to purchase one share of the Company's common stock at the price
per share of $0.016 exercisable within three years.
NOTE 8 - COMMITMENTS
On October 28, 2007, the Company's technology agreement with LSRI - Life
Science Research Israel Ltd., a subsidiary of IIBR - Israel Institute for
Biological Research, became effective. Under the terms of the agreement,
LSRI will license the technology of IIBR's explosives testing kit (ETK) to
the Company, for incorporation into the Company's pen-like device,
allowing the detection of commercial and military explosives. The
agreement is subject to minimum annual revenues to be achieved by the
Company and royalties to be paid to LSRI. The new device complements the
ACRO-P.E.T., the Company's peroxide explosive tester for the detection of
improvised explosives.
NOTE 9 - STOCK TRANSACTIONS
On March 15, 2010, the Company closed a private placement of 500,000
units, at a price of $0.05 per unit, for aggregate proceeds of $25,000.
Each unit is comprised of two shares of the Company's common stock and one
warrant to purchase one share of the Company's common stock at the price
per share of $0.025, exercisable within twelve months from closing date
(i.e. March 15, 2011). In connection with this private placement, the
Company issued the finder a warrant to purchase 40,000 shares of the
Company's common stock at a price per share of $0.025, exercisable within
twelve months of the closing date. As of March 31, 2010, the 500,000
shares of our common stock were not yet issued.
NOTE 10 - SUBSEQUENT EVENT
On April 1, 2010, the Company received a loan from Lindon Group Inc.,
Rhode Island Corporation in the amount of US$35,000, baring a yearly
interest of 6%, in the form of a promissory note.
* * * * * * * *
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
You should read the following discussion in conjunction with our
consolidated financial statements and related notes thereto. In addition to
historical information, this discussion contains forward-looking statements that
involve risks, uncertainties and assumptions that could cause actual results to
differ materially from management's expectations. Our actual results could
differ materially and adversely from those anticipated in such forward-looking
statements as a result of certain factors
This quarterly report contains forward-looking statements as that term is
defined in the Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These statements relate to future events or our
future financial performance. In some cases, you can identify forward-looking
statements by terminology such as "may", "should", "expects", "plans",
"anticipates", "believes", "estimates", "predicts", "potential" or "continue" or
the negative of these terms or other comparable terminology. These statements
are only predictions and involve known and unknown risks, uncertainties and
other factors that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by
these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.
Our financial statements are stated in United States Dollars (US$) and are
prepared in accordance with United States Generally Accepted Accounting
Principles. In this quarterly report, unless otherwise specified, all dollar
amounts are expressed in United States dollars. All references to "common stock"
refer to our shares of common stock.
As used in this quarterly report, the terms "we", "us", "our", and "ACRO"
means ACRO Inc., unless otherwise indicated.
GENERAL
We develop and market products for the detection of military and
commercial explosives for the homeland security market. We were incorporated
under the laws of the State of Nevada on May 22, 2002, under the name of Medina
International Corp. On May 4, 2006, we changed our name to ACRO Inc. We effected
this change of name by merging our company with a wholly-owned subsidiary of our
company that we had formed specifically for this purpose. We have a wholly-owned
subsidiary, Acrosec Ltd. (Acrosec), incorporated under the laws of the State of
Israel. Effective January 1, 2009, we entered into an Intellectual Property
Assignment and Services Termination Agreement with 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. 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.
11
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 March 15, 2010, and pursuant to the
conversion in full of the note, BioTech Knowledge LLC is our largest
stockholder, holding approximately 30.91% of our common stock.
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 2009 and until March 31, 2010, we received from BioTech Knowledge
LLC additional interest-free loan in the aggregate amount of $40,000 in the form
of a convertible promissory note, convertible into up to 5,000,000 shares of our
common stock, at a price of $0.008 per share, within 12 months from March 24,
2010, with each share of common stock such converted awarding a warrant to
purchase one share of our common stock at the price per share of $0.016
exercisable within three years.
On April 1, 2010, we received a loan from Lindon Group Inc., Rhode Island
Corporation in the amount of US$35,000, baring a yearly interest of 6%, in the
form of a promissory note.
As of March 31, 2010, we had not realized any significant revenues from
operations and experienced losses of $4,030,176.
EMPLOYEES
As of May 20, 2010, we do not have any employees. Our subsidiary, Acrosec,
hired the services of Gadi Aner, who serves as our Chairman and our Chief
Executive Officer, Gabby Klausner, who serves as our Chief Financial Officer.
Commencing on September 2009, Ms. Klausner provides her services as a freelance
consultant.
12
CASH REQUIREMENTS
Our cash requirement through March 31, 2011, is approximately $300,000
which we need for implementation of our plan of operation and developing and
commercializing our potential explosive detection device. We estimate our
operating expenses and working capital requirements beginning March 31, 2010,
and through March 31, 2011, to be as follows:
Estimated Expenses through March 31, 2010
Product Research and Development $ -
Sales and Marketing $ 50,000
General and Administrative $ 250,000
Capital Expenditures $ -
Tax Expenses $ -
---------------
Total $ 300,000
---------------
At March 31, 2010, we had a deficit in working capital of $(282,428), out
of which $216,925 are payable to directors, which agreed to defer their fees
until further notice. 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 $590,000 to keep activating our
business for the next twelve-month period. In such event that we do not generate
sufficient revenues or raise sufficient additional funds by a public offering or
a private placement, we will consider alternative financing options, if any, or
be forced to cease our operations.
OUR PRODUCTS
Our first product is called the Peroxide Explosives Tester (ACRO-P.E.T.).
ACRO-P.E.T. is a small, disposable, pen-like probe which detects the presence of
peroxide-based explosives using three chemical solutions and relies on direct
contact with the suspicious substance. ACRO-P.E.T. has been designed for rapid,
on-site detection of peroxide-based explosives. Its main advantages are high
sensitivity, high selectivity, fast response, simple operation, high mobility,
small size and cost effectiveness. In November 2006, we completed the first
production of the ACRO-P.E.T. for evaluation by potential customers. In 2007, we
developed a new version of ACRO-P.E.T. which enables easier verification of
peroxide-based explosives, such as triacetone triperoxide (TATP). In addition,
in the new version we improved the sampling device to enable easy and immediate
sampling of suspicious liquids, in addition to all other forms of explosives,
such as powder. The new version has been available for sale since mid 2007.
In addition, we developed the ACRO-N.E.T. (Nitride Explosives Tester),
which detects the presence of commercial and military explosives. ACRO-N.E.T.
incorporates into our pen-like device the explosive testing kit of the Israel
Institute for Biological Research (IIBR), licensed to us under an agreement
dated October 28, 2007, with a subsidiary of IIBR called Life Science Research
Israel Ltd. (LSRI). ACRO-N.E.T. is based on the LSRI explosive detecting kit,
called ETK. The ETK is capable of identifying the full range of well known types
of military and commercially available explosives, and also of homemade
explosives based on nitrate and chlorate salts. This new 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 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,
13
Italy, Germany, Luxemburg, South Korea, India, New Zealand and Russia. During
2009, we had sales in the aggregate amount of $73,358.
To date, evidence of the efficiency of ACRO-P.E.T. is derived from
laboratory research and limited product sales. We had performed independent
research at the Technion, Israel Institute of Technology, laboratory, which
indicated that the ACRO-P.E.T. quickly and accurately detects TATP explosives.
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 new
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 hexamethylene triperoxide diamine (HMTD). We delivered samples of the
TATP Simulant to several clients, but at this early stage we cannot estimate the
commercial value of this product, if any.
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 early 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. Our new product, ACRO U.E.T is
based on a technology of detection and diagnostic characterization of the
improvised explosive urea nitrate, and other explosives that contain the uronium
cation developed by Prof. Yossi Almog, licensed to us under an agreement dated
November 25, 2009, with Yissum Research Development Company of the Hebrew
University.
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 also entered into an agreement with one of our distributors in Europe,
pursuant to which we may sell its products, which are mainly kits for
identification of drugs, in Israel and several other countries.
PLAN OF OPERATION
Our primary objectives over the 12 month period ending on March 31, 2011,
are to manufacture and commercialize our products: ACRO - SET, that includes
both the ACRO-P.E.T (Peroxide Explosives Tester), and ACRO-N.E.T (Nitride
Explosives Tester), which are detection devices for explosive materials using
the intellectual property covered in U.S. Patent No. 6,767,717 and the license
agreement with LSRI. ACRO UET, ACRO CHET and ACRO ANET, We also continue our
efforts to sell the ETK kit and the MINI ETK. Another main business objective is
to expand our technology base by purchasing additional technologies.
Furthermore, we plan to continue to develop our headquarters as our main
research and development base in Israel, and to initiate international marketing
and sales to reach a market worldwide.
On October 28, 2007, our technology agreement with LSRI, a subsidiary of
IIBR - Israel Institute for Biological Research, became effective. Under the
terms of the agreement, LSRI licensed the long-proven technology of IIBR's
explosives testing kit to Acro, for incorporation into our pen-like device. This
allows our pen-like device to detect commercial and military explosives. The
agreement is subject to minimum annual revenues to be achieved by us and
royalties to be paid to LSRI. The device complements the ACRO-P.E.T., which
detects peroxide-based explosives in improvised explosive devices.
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.
On November 25, 2009, we entered into a technology agreement with Yissum
Research Development Company of the Hebrew University ("Yissum"). Under the
14
terms of the agreement, Yissum licensed us the technology of detecting Uronium
salts traces. This enabled us developing our new product, the ACRO U.E.T. which
is based on a technology of detection and diagnostic characterization of the
improvised explosive urea nitrate, and other explosives that contain the uronium
cation developed by Prof. Yossi Almog.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 2010, we incurred a loss of
$80,248, compared to a net loss of $124,487 for the comparative period in 2009.
During the three months ended March 31, 2010, we incurred $95,193 of
operating expenses, comprised of $17,110 for research and development costs,
$5,836 for stock-based compensation expenses, $4,202 for sales and marketing
costs, $68,045 for general and administrative cost.
During the three months ended March 31, 2009, we incurred $129,498 of
operating expenses, comprised of $18,576 for research and development costs,
$8,218 for stock-based compensation expenses, $11,945 for sales and marketing
costs, $90,759 for general and administrative cost.
As of March 31, 2010, we had deficit in working capital of $(282,428) out
of which $216,925 are payable to directors, which agreed to defer their fees
until further notice.
As of March 31, 2010, we had total assets of $131,957, which consisted of
cash and equivalents of $20,125, fixed assets of $25,923, intangible assets of
$71,507 and prepaid expenses and other current, non-current assets and trade
receivables of $14,402.
From January 1, 2010 to March 31, 2010, we had sales of $20,374.
GOING CONCERN
The continuation of our business is dependent upon our raising additional
financial support or on our ability to create significant sales of our
commercial products. The issuance of additional equity securities by us could
result in a significant dilution in the equity interests of our current
stockholders. Obtaining commercial or other loans, assuming those loans would be
available, would increase our liabilities and future cash commitments.
We have historically incurred losses, and from inception through March 31,
2010, we have incurred losses of $4,030,176. Because of these historical losses,
we will require additional working capital to develop our business operations.
There are no assurances that we will be able to either (i) achieve a level
of revenues adequate to generate sufficient cash flow for operations; or (ii)
obtain additional financing through either private placement, public offerings
and/or bank financing necessary to support our working capital requirements. To
the extent that funds generated from operations and from the last private
placement are insufficient to meet our ongoing capital requirements, we will
have to raise additional working capital by means of private placements, public
offerings and/or bank financing. No assurance can be given that additional
financing will be available, or if available, will be on terms acceptable to us.
If adequate working capital is not available, we may not increase our operations
and, if we are unable to raise additional funds, we may cease operations.
The viability of ACRO for a significant period of time is dependent on our
ability to generate cash flow from future product sales or to obtain additional
financing. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Recent Private Placements
- -------------------------
On March 15, 2010, we closed a private placement of 500,000 units, at a
price of $0.05 per unit, for aggregate proceeds of $25,000. Each unit is
comprised two shares of our common stock and one warrant to purchase one share
of our common stock at the price per share of $0.025, exercisable within twelve
months from closing date (i.e. March 15, 2011). In connection with this private
placement, we issued the finder a warrant to purchase 40,000 shares of our
common stock at a price per share of $0.025, exercisable within twelve months of
the closing date. As of May 20, 2010, the 500,000 shares of our common stock
were not yet issued.
15
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 March 15, 2010, and pursuant to the
conversion in full of the note, BioTech Knowledge LLC is our largest
stockholder, holding approximately 30.91% of our common stock.
During 2009 and until March 31, 2010, we received from BioTech Knowledge
LLC additional interest-free loan in the aggregate amount of $40,000 in the form
of a convertible promissory note, convertible into up to 5,000,000 shares of our
common stock, at a price of $0.008 per share, within 12 months from March 24,
2010, with each share of common stock such converted awarding a warrant to
purchase one share of our common stock at the price per share of $0.016
exercisable within three years.
On February 27, 2007, we closed 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
comprised one share of our common stock and one warrant to purchase one share of
our common stock at the price per share of $1.25 exercisable within five years.
In connection with the private placement, we paid a finder's fee of $120,000 in
cash and issued a warrant to purchase 160,000 units to the finder.
CRITICAL ACCOUNTING POLICIES
Share Based Compensation
- ------------------------
The Company accounts for stock-based awards to employees and nonemployees
in accordance with ASC 718, 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.
Initial adoption of New Accounting Standards
- --------------------------------------------
ASU 2010-9 - SUBSEQUENT EVENTS (TOPIC 855): AMENDMENTS TO CERTAIN
RECOGNITION AND DISCLOSURE REQUIREMENTS.
In February 2010, the FASB issued ASU No. 2010-09, "Subsequent Events", that
amended its guidance on subsequent events. SEC filers are not required to
disclose the date through which an entity has evaluated subsequent events. The
amended guidance was effective upon issuance for all entities
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
16
ITEM 4T. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, being March 31, 2010,
we performed an evaluation of the effectiveness of our disclosure controls and
procedures that are designed to ensure that the material financial and
non-financial information required to be disclosed in our annual report and
filed with the Securities and Exchange Commission is recorded, processed,
summarized and reported timely within the time period specified in the SEC's
rules and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by an issuer in the reports that it files or submits under the
Securities Act, is accumulated and communicated to the issuer's management,
including its principal executive and principal financial officers, or persons
performing similar functions, as appropriate to allow timely decisions regarding
required disclosure. Based on our evaluation, our management, including our
Chief Executive Officer and Chief Financial Officer, have concluded that our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d -
15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the
period covered by this report are effective at such reasonable assurance level.
There can be no assurance that our disclosure controls and procedures will
detect or uncover all failures of persons within our company to disclose
material information otherwise required to be set forth in our reports. Our
disclosure controls and procedures are designed to provide reasonable assurance
of achieving the desired control objectives.
There were no changes in our internal controls over financial reporting
identified with the evaluation thereof that occurred during the quarter ended
March 31, 2010, that have materially affected, or are reasonable likely to
materially affect our internal control over financial reporting.
17
PART II -- OTHER INFORMATION
- ----------------------------
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings to which we are a party, other
than ordinary routine litigation incidental to our business.
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On March 15, 2010, we closed a private placement of 500,000 units, at a
price of $0.05 per unit, for aggregate proceeds of $25,000. Each unit is
comprised two shares of our common stock and one warrant to purchase one share
of our common stock at the price per share of $0.025, exercisable within twelve
months from closing date (i.e. March 15, 2011). In connection with this private
placement, we issued the finder a warrant to purchase 40,000 shares of our
common stock at a price per share of $0.025, exercisable within twelve months of
the closing date. We issued the securities to a non-U.S. person (as that term is
defined in Regulation S of the Securities Act of 1933, as amended) in an
offshore transaction relying on Regulation S and/or Section 4(2) of the
Securities Act of 1933, as amended. As of May 20, 2010, the 500,000 shares of
common stock were not yet issued
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. [REMOVED AND RESERVED]
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The exhibits listed in the Exhibit Index immediately preceding the
exhibits are filed as part of this quarterly report on Form 10-Q and such
Exhibit Index is incorporated herein by reference.
18
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACRO INC.
(Registrant)
By:
s/ Gadi Aner
------------------
Gadi Aner
President, Chief Executive Officer
& Director
Date: May 20, 2010
/s/Gabby Klausner
------------------
Gabby Klausner
Treasurer and
Chief Financial Officer
Date: May 20, 2010
19
EXHIBIT INDEX
NUMBER DESCRIPTION METHOD OF FILING
(3) ARTICLES OF INCORPORATION AND BY-LAWS
3.1 Articles of Incorporation, as amended. Incorporated by reference to Exhibit 3.1 to
our registration statement on Form SB-2 filed
November 21, 2003
3.2 Bylaws, dated February 25, 2005. Incorporated by reference to Exhibit 3.1 to
our current report on Form 8-K filed March 17,
2005 and March 21, 2005
3.3 Certificate of Change Pursuant to NRS Incorporated by reference to Exhibit 3.3 to
78.209 filed with the State of Nevada our annual report on Form 10-KSB filed March
effective as of January 25, 2006. 28, 2007
3.4 Certificate of Change Pursuant to NRS Incorporated by reference to Exhibit 3.4 to
78.209 filed with the State of Nevada our annual report on Form 10-KSB filed March
effective as of October 25, 2006. 28, 2007
3.5 Certificate of Change Pursuant to NRS Incorporated by reference to Exhibit 3.5 to
78.209 filed with the State of Nevada our annual report on Form 10-KSB filed March
effective as of October 30, 2006. 28, 2007
(10) MATERIAL CONTRACTS
10.1 Agreement and Plan of Merger for the Incorporated by reference to Exhibit 10.2 to
Merger of ACRO Inc. with and into Medina our current report on Form 8-K filed May 4,
International Corp., dated April 25, 2006. 2006
10.2 Patent Purchase Agreement between the Incorporated by reference to Exhibit 10.1 to
Registrant and Prof. Ehud Keinan, dated our current report on Form 8-K filed February
February 1, 2006. 3, 2006
10.3 Consulting Agreement between the Registrant Incorporated by reference to Exhibit 10.2 to
and BioTech Knowledge LLC, dated February our current report on Form 8-K filed February
1, 2006. 3, 2006
10.4 Letter of Agreement between the Registrant Incorporated by reference to Exhibit 10.3 to
and BioTech Knowledge LLC, dated February our current report on Form 8-K filed February
1, 2006. 3, 2006
10.5 Advisory Board Agreement between the Incorporated by reference to Exhibit 99.2 to
Registrant and Prof. Richard E. Lerner, our current report on Form 8-K filed June 5,
dated May 31, 2006. 2006
10.6 Advisory Board Agreement between the Incorporated by reference to Exhibit 10.8 to
Registrant and Prof. K. Barry Sharpless, our annual report on Form 10-KSB filed March
dated September 28, 2006. 28, 2007
10.7 Consulting Agreement between Acrosec Ltd. Incorporated by reference to Exhibit 10.10
and M.G NET Ltd., dated March 26, 2007 to our annual report on Form 10-KSB filed
March 28, 2007
10.8 Cooperation and Licensing Agreement between Incorporated by reference to Exhibit 10.11
the Registrant and Life Science Research to our annual report on Form 10-KSB filed
Israel Ltd., dated October 28, 2007. March 13, 2008
10.9 Intellectual Property Assignment and Incorporated by reference to Exhibit 10.12 to
Services Termination Agreement, dated our annual report on Form 10-K filed March 30,
March 30, 2009. 2009
10.10 Convertible Promissory Note between the Incorporated by reference to Exhibit 10.1 to
Registrant and BioTech Knowledge LLC, our current report on Form 8-K filed
dated February 23, 2009 February 22, 2009.
10.11 Warrant between the Registrant and BioTech Incorporated by reference to Exhibit 10.14 to
Knowledge LLC, dated February 22, 2009. our annual report on Form 10-K filed March 30,
2009
20
10.12 Convertible Promissory Note between the Incorporated by reference to Exhibit 10.12 to
Registrant and BioTech Knowledge LLC, our annual report on Form 10-K filed March 29,
dated March 24, 2010. 2010
10.13 Warrant between the Registrant and BioTech Incorporated by reference to Exhibit 10.13 to
Knowledge LLC, dated March 24, 2010. our annual report on Form 10-K filed March
29, 2010
10.14 The Registrant's 2008 Israeli Share Option Incorporated by reference to Exhibit 10.1 to
Plan our current report on Form 8-K filed May 1,
2008
10.15 Finders Agreement between the Registrant Incorporated by reference to Exhibit 10.15 to
and Siden Investment Inc. dated March 13, our annual report on Form 10-K filed March 29,
2010. 2010
10.16 Promissory Note between the Registrant Filed herewith
and Lindon Group, dated April 1, 2010.
(31) SECTION 302 CERTIFICATION
31.1 Rule 13a-14(a) Certification of Principal Filed herewith
Executive Officer
31.2 Rule 13a-14(a) Certification of Principal Filed herewith
Financial Officer.
(32) SECTION 906 CERTIFICATION
32.1 Certification of Principal Executive Filed herewith
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.
21
EXHIBIT 10.16
- -------------
PROMISSORY NOTE
US$35,000.00 APRIL 1, 2010
FOR VALUE RECEIVED, the undersigned, ACROSEC LTD., an Israeli company
having a principal place of business at 37 Inbar Street, Caesarea, Israel 30889
(" (the "Maker"), by this Promissory Note (this "Note"), absolutely and
unconditionally promises to pay to the order of LINDON GROUP, INC., a Rhode
Island corporation (the "Payee") the lesser of (i) the principal sum Thirty Five
Thousand and 00/100 Dollars (US$35,000.00) or (ii) the aggregate unpaid
principal amount of all loans made by the Payee to the Maker.
Interest on the unpaid principal balance hereof existing from time to time
will accrue at a rate of 6% (the "Interest Rate"). Interest will be computed on
the basis of a 360-day year.
Principal and interest shall be payable in accordance with Schedule A
attached hereto (the "Repayment Schedule"). Interest on the outstanding
principal amount will accrue from the date hereof until the entire principal
balance, together with all unpaid interest, fees, expenses and other charges is
paid in full which shall, if not sooner paid, in any event be paid on the
Maturity Date (as defined below). All sums paid under this Note shall be applied
first to any interest, fees, expenses and other charges then due and unpaid, in
such order Payee shall determine, with the remaining balance, if any, to be
applied to unpaid principal.
The "Maturity Date" of this Note shall be the earlier to occur of (a) an
Event of Default of the Maker under this Note, or (b) the second anniversary of
the date hereof.
Upon the Maturity Date, this Note shall become and be absolutely due and
payable hereunder, and the Maker hereby promises to pay to the order of the
Payee, the balance (if any) of the principal hereof then remaining unpaid, all
of the unpaid interest accrued hereon and all other charges related hereto.
All sums payable hereunder are payable in lawful money of the United States
of America and in immediately available funds at the Payee's address set forth
above or at such place or places as the Payee, its successors or assigns (the
"Holder") may designate in writing.
The Maker shall have the right to prepay the unpaid principal amount of
this Note in full at any time, or in part from time to time, without any premium
or prepayment penalty, with all accrued interest to the date of prepayment. Each
partial prepayment of principal shall be applied to the installments of
principal due hereunder in the inverse order of maturity.
The occurrence of any one or more of the following events will constitute
an Event of Default hereunder:
1. Nonpayment of any installment of principal and/or interest due under
this Note when it shall become due and payable (no prior demand therefor being
necessary).
2. The Maker shall default in the performance of any other obligation,
covenant or agreement contained in this Note (subject to any applicable grace
periods).
3. (a) (i) the appointment of a receiver, trustee, custodian or other
fiduciary, for, or for any of the property of, the Maker; (ii) the making of an
assignment for the benefit of creditors, or the making of or entering into a
trust mortgage or deed or other instrument or similar import for the benefit of
creditors, by the Maker; or (iii) the convening of a meeting of the creditors,
or the selection of a committee representing the creditors of the Maker and if
any of (i) through (iii) are involuntary, the failure to discharge same within
sixty (60) days; or
(b) The filing of a petition, complaint, motion or other pleading
seeking relief under any receivership, insolvency, or debtor relief law, or
seeking any readjustment of indebtedness, reorganization, composition, extension
or any similar type of relief, or the filing of a petition, complaint, or motion
under any chapter of the federal bankruptcy code, 11 U.S.C. 101 et seq., as the
same now exists or may hereafter be amended (the "Bankruptcy Code"), by the
Maker; or
(c) The filing of a petition, complaint, motion or other pleading
seeking any relief under any receivership, insolvency, or debtor relief law, or
under any chapter of the Bankruptcy Code, or seeking any readjustment of
indebtedness, reorganization, composition, extension or any similar type of
relief, or the entry of any order for relief under any chapter of the Bankruptcy
Code, against, the Maker; provided, however, that if the Maker shall immediately
notify Holder in writing of the filing of any such petition, complaint, motion
or other pleading against the Maker and shall provide evidence satisfactory to
Holder that the Maker has in good faith and within thirty (30) days after the
filing of any such petition, complaint, motion or other pleading filed an answer
thereto contesting same, then there shall be no Event of Default under this
subparagraph (c) until the earliest of (i) the entry of an order for relief or a
judgment under any proceedings referred to in this subparagraph (c), (ii) the
appointment of a receiver, trustee, custodian or other fiduciary in any such
proceeding or (iii) the expiration of a period of sixty (60) days, at the end of
which such petition, complaint, motion or other pleading remains undismissed; or
4. The dissolution, liquidation or termination of existence of the Maker or
a change of control, merger or sale of substantially all the assets of the
Maker; or
5. The use of proceeds from this Note for any purpose other than the
purchase of parts necessary for the manufacture of various types of explosives
testing and identification products produced by Maker ("Products").
Upon the occurrence of any Event of Default, this Note, at the option of
the Holder, shall become immediately due and payable without notice of any kind.
The Holder's failure to exercise such option shall not constitute a waiver of
the right to exercise it at any other time. Irrespective of the exercise or
non-exercise of the foregoing option, if any payment of principal and/or
interest is not paid in full within ten (10) days after the same is due, the
interest rate under this note on the overdue amount shall be increased to twelve
percent (12%) per annum until said amount is paid in full.
Notwithstanding any provisions of this Note, it is the understanding and
agreement of the Maker and the Holder that the maximum rate of interest to be
paid by the Maker to the Holder shall not exceed the highest or maximum rate of
interest permissible to be charged to a commercial borrower under any law
applicable hereto. Any amount paid in excess of such rate shall be considered to
have been payments in reduction of principal, and if there shall be no principal
amount then outstanding, such excess shall be returned to the Maker as an
overpayment of principal.
Wherever possible, each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or invalid under such law, such
provision shall be ineffective to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or the remaining provisions
of this Note.
The Maker agrees to pay the Payee's reasonable costs in collecting and
enforcing this Note, including reasonable attorneys' fees.
No waiver of any obligation of the Maker under this Note shall be
effective unless it is in writing and signed by the Payee. A waiver by the
Holder of any right or remedy under this Note on any occasion shall not be a bar
to exercise of the same right or remedy on any subsequent occasion or of any
other right or remedy at any time.
The Maker hereby expressly waives presentment, demand, and protest, notice
of demand, dishonor and nonpayment of this Note, and all other notices or
demands of any kind in connection with the delivery, acceptance, performance,
default or enforcement hereof, and hereby consents to any delays, extensions of
time, renewals, waivers or modifications that may be granted or consented to by
the Payee with respect to the time of payment or any other provision hereof.
This Note may not be transferred, sold, assigned, mortgaged, pledged or
otherwise encumbered without Maker's prior written consent.
No modification or waiver of any provision of this Note, and no consent of
the Holder to any departure therefrom by the Maker, shall be effective unless
such modification, waiver or consent shall be in writing signed by the Holder
and the same shall then be effective only for the period, on the conditions and
for the specific instances and purposes specified in such writing.
This Note is delivered in and shall be governed by and interpreted and
determined in accordance with the laws of the State of Rhode Island without
regard to its principles of conflicts of laws.
IN WITNESS WHEREOF, this Promissory Note has been executed as an
instrument under seal by the undersigned as of the day and in the year first
above written.
ACROSEC LTD.
By:/s/Gadi Aner
Name: Gadi Aner, CEO
Schedule A
Repayment Schedule
Principal and interest shall be payable in accordance with the following: (1)
upon delivery by Maker of Products to fulfill any purchase order(s) submitted by
Holder, Maker shall pay an amount equal to 6% of the total costs of goods sold
at a price per unit of $3.50 and the outstanding balance on the Note shall be
reduced by an amount equal to $3.50 per unit of Products so purchased; (2) upon
any sale of Products by Maker or any other party other than Holder, Maker shall
pay to Holder an amount equal to the lesser of (a) the outstanding balance of
principal and interest on the Note or (b) $3.50 per unit plus 6% of the total
units of Products sold; and (3) immediately, in full, upon the Maturity Date.
Payments made in accordance with this Schedule A shall be applied first to any
interest, fees, expenses and other charges then due and unpaid, in such order
Payee shall determine, with the remaining balance, if any, to be applied to
unpaid principal.
EXHIBIT 31.1
CERTIFICATION
I, Gadi Aner, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of ACRO Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, 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;
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors:
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
By: /s/Gadi Aner
------------
Gadi Aner
Chief Executive Officer and Chairman
Date: May 20, 2010
EXHIBIT 31.2
CERTIFICATION
I, Gabby Klausner, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of ACRO Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, 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;
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors:
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
By: /s/Gabby Klausner
-----------------
Gabby Klausner
Treasurer and Chief Financial Officer
Date: May 20, 2010
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of ACRO Inc. (the "Company") on Form 10-Q
for the period ending March 31, 2010, as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), we, Gadi Aner, Chief Executive
Officer and Chairman of the Company, and Gabby Klausner, Treasurer and Chief
Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to our
knowledge, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
By: /s/Gadi Aner
-------------
Gadi Aner
Chief Executive Officer and Chairman
By: /s/Gabby Klausner
-----------------
Gabby Klausner
Treasurer and Chief Financial Officer
Date: May 20, 2010