---

---

# 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 June 30, 2008

# OR

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

+972-4-636-0297
(Registrants
Telephone Number, Including Area Code)(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 o

Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company:

| |                           |                            
| | ------------------------- | ---------------------------
|
|
|
|
| | Large accelerated filer o | Accelerated filer o        
| | Non-accelerated filer o   | Smaller reporting company 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

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

At
August 11, 2008, 67,790,936 shares of the registrants common stock were
outstanding.



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Table of Contents
 ACRO INC.("The Company")
INDEX

PART I. FINANCIAL INFORMATION

| | Item 1. Financial Statements                                                                  | 3 
| | --------------------------------------------------------------------------------------------- | --
| |                                                                                               |   
| | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | 12
| |                                                                                               |   
| | Item 3. Quantitative and Qualitative Disclosures about Market Risk                            | 16
| |                                                                                               |   
| | Item 4T. Controls and Procedures                                                              | 17

PART II. OTHER INFORMATION

| | Item 1. Legal Proceedings                                           | 17
| | ------------------------------------------------------------------- | --
| |                                                                     |   
| | Item 1A. Risk Factors                                               | 17
| |                                                                     |   
| | Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 17
| |                                                                     |   
| | Item 3. Defaults Upon Senior Securities                             | 17
| |                                                                     |   
| | Item 4. Submission of Matters to a Vote of Security Holders         | 17
| |                                                                     |   
| | Item 5. Other Information                                           | 17
| |                                                                     |   
| | Item 6. Exhibits                                                    | 17
| |                                                                     |   
| | Signatures                                                          | 17
| |                                                                     |   
| | Exhibit Index                                                       | 18
| |                                                                     |   
| | Certification of CEO Pursuant to Section 302                        |   
| |                                                                     |   
| | Certification of CFO Pursuant to Section 302                        |   
| |                                                                     |   
| | Certification Pursuant to U.S.C. Section 1350                       |   

2

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---



ACRO Inc. (A Development Stage Company)Consolidated Financial Statements

# PART I - FINANCIAL
INFORMATION

|Item 1. Financial StatementsConsolidated Balance Sheets
|-------------------------------------------------------
|                                                       

|                                                                 | June 30
2008 | December 31
2007
|---------------------------------------------------------------- | ------------ | ----------------
|
|
|
|
|Assets                                                           |              |                 
|                                                                 |              |                 
|Current assets:                                                  |              |                 
|Cash and cash equivalents                                        |              |                 
|Short term deposits                                              |              |                 
|Restricted cash                                                  |              |                 
|Trade receivables                                                |              |                 
|Prepaid expenses and other current assets                        |              |                 
|                                                                 |              |                 
|Total current assets                                             |              |                 
|                                                                 |              |                 
|Other non-current assets                                         |              |                 
|Property and equipment, net (Note 3)                             |              |                 
|Intangible assets, net                                           |              |                 
|                                                                 |              |                 
|                                                                 |              |                 
|Total assets                                                     |              |                 
|                                                                 |              |                 
|                                                                 |              |                 
|Liabilities and stockholders' equity (deficit)                   |              |                 
|                                                                 |              |                 
|Current liabilities:                                             |              |                 
|Accounts payable and accrued liabilities                         |              |                 
|                                                                 |              |                 
|                                                                 |              |                 
|Total current liabilities                                        |              |                 
|                                                                 |              |                 
|                                                                 |              |                 
|Accrued severance pay                                            |              |                 
|                                                                 |              |                 
|Total liabilities                                                |              |                 
|                                                                 |              |                 
|                                                                 |              |                 
|Commitments (Notes 5 and 7)                                      |              |                 
|                                                                 |              |                 
|Stockholders' equity:                                            |              |                 
|Common stock;  $0.001 par value;  700,000,000 shares authorized; |              |                 
|67,757,604  and  67,543,275 shares issued and outstanding as of  |              |                 
|June 30, 2008 and December 31, 2007, respectively                |              |                 
|Additional paid-in capital                                       |              |                 
|Deficit accumulated during the development stage                 |              |                 
|                                                                 |              |                 
|Total stockholders' equity                                       |              |                 
|                                                                 |              |                 
|Total liabilities and stockholders' equity                       |              |                 
|                                                                 |              |                 

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

3

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ACRO Inc. (A Development Stage Company)Consolidated Financial Statements

|Consolidated Statements
of Operations
|-------------------------------------
|                                     

|                                                | Three months ended June 30 | Six months ended June 30 | Cumulative
from Inception
(May 22, 2002)
to June 30
2008 |           
|----------------------------------------------- | -------------------------- | ------------------------ | -------------------------------------------------------- | ----------
|
|
|
|
|Revenues                                        |                            |                          |                                                          | 15,312    
|                                                |                            |                          |                                                          |           
|Costs and expenses :                            |                            |                         
|                                                |                            |                         
|Research and development                        |                            |                          |                                                          | 50,199    
|Sales and marketing                             |                            |                          |                                                          | 66,527    
|General and administrative*                     |                            |                          |                                                          | 206,846   
|                                                |                            |                          |                                                          |           
|                                                |                            |                         
|Total operating expenses                        |                            |                          |                                                          | 323,572   
|                                                |                            |                          |                                                          |           
|                                                |                            |                         
|Operating loss                                  |                            |                          |                                                          | (308,260  
|                                                |                            |                         
|Interest and other income (expenses), net       |                            |                          |                                                          | (603      
|                                                |                            |                          |                                                          |           
|                                                |                            |                         
|Loss before income tax                          |                            |                          |                                                          | (308,863  
|Income tax                                      |                            |                          |                                                          | 8,865     
|                                                |                            |                          |                                                          |           
|                                                |                            |                         
|Net loss                                        |                            |                          |                                                          | (317,728  
|                                                |                            |                          |                                                          |           
|                                                |                            |                         
|Basic and diluted net loss per common share     |                            |                          |                                                          | (0.00     
|                                                |                            |                          |                                                          |           
|                                                |                            |                         
|Weighted average shares used in computing basic |                            |                         
|and diluted net loss per common share           |                            |                          |                                                          | 67,612,507
|                                                |                            |                          |                                                          |           

|* | Includes
$25,743, $83,666; $28,077, $253,664, and $1,028,734 in stock-based compensation to
non-employees for the three months ended June 30, 2008 and 2007; for the six months ended
June 30, 2008 and 2007, and for the cumulative period from May 22, 2002 (date of
inception), to June 30, 2008, respectively.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

4

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ACRO Inc. (A Development Stage Company)Consolidated Financial Statements

|Consolidated
Statements of Cash Flows
|-------------------------------------
|                                     

|                                                      | Six months ended June 30 | Cumulative from inception (May 22, 2002) to June 30 2008
|----------------------------------------------------- | ------------------------ | --------------------------------------------------------
|
|
|
|
|
|Cash flows from operating activities:                 |                          |                                                         
|Net loss                                              |                          |                                                         
|                                                      |                          |                                                         
|Adjustments to reconcile net loss to net cash used in |                          |                                                         
|operating activities:                                 |                          |                                                         
|Services contributed by officers                      |                          |                                                         
|Depreciation and amortization                         |                          |                                                         
|Stock-based compensation                              |                          |                                                         
|                                                      |                          |                                                         
|Changes in operating assets and liabilities:          |                          |                                                         
|Increase in Trade receivables                         |                          |                                                         
|Decrease in Prepaid expenses and other current assets |                          |                                                         
|Decrease in Accounts payable and accrued liabilities  |                          |                                                         
|Increase in Accrued severance pay                     |                          |                                                         
|                                                      |                          |                                                         
|                                                      |                          |                                                         
|Net cash used in operating activities                 |                          |                                                         
|                                                      |                          |                                                         
|                                                      |                          |                                                         
|Cash flows from investing activities:                 |                          |                                                         
|Decrease (increase) in long term deposit              |                          |                                                         
|Increase in restricted cash                           |                          |                                                         
|Decrease (Increase) in short term deposits            |                          |                                                         
|Purchase of property and equipment                    |                          |                                                         
|Purchase of intangible assets                         |                          |                                                         
|                                                      |                          |                                                         
|Net cash used in investing activities                 |                          |                                                         
|                                                      |                          |                                                         
|                                                      |                          |                                                         
|Cash flows from financing activities:                 |                          |                                                         
|Increase in short term bank-credit                    |                          |                                                         
|Proceeds from issuance of common stock                |                          |                                                         
|Offering costs                                        |                          |                                                         
|                                                      |                          |                                                         
|                                                      |                          |                                                         
|Net cash provided by financing activities             |                          |                                                         
|                                                      |                          |                                                         
|Net (decrease) increase in cash and cash equivalents  |                          |                                                         
|                                                      |                          |                                                         
|Cash and cash equivalents at beginning of period      |                          |                                                         
|                                                      |                          |                                                         
|                                                      |                          |                                                         
|Cash and cash equivalents at end of period            |                          |                                                         
|                                                      |                          |                                                         
|Non-cash activities                                   |                          |                                                         
|Acquisition of property and equipment on credit       |                          |                                                         
|                                                      |                          |                                                         
|                                                      |                          |                                                         
|Supplemental disclosures of cash flow information:    |                          |                                                         
|Cash paid for interest                                |                          |                                                         
|                                                      |                          |                                                         
|Cash paid for taxes                                   |                          |                                                         
|                                                      |                          |                                                         

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

5

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ACRO Inc. (A Development Stage Company)
Consolidated Financial Statements

|Notes to the Consolidated Financial
Statements as of June 30, 2008
|------------------------------------------------------------------
|                                                                  

Note 1  Business

| | 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 Statement
of Financial Accounting Standard (SFAS) No. 7 Accounting and Reporting
by Development Stage Enterprises, the Company is considered a development stage
company.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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, has incurred losses of $3,289,959 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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. | Financial
Statement Preparation
| | -- | -------------------------------

| | The
unaudited condensed consolidated financial statements of ACRO Inc. (collectively referred
to in this report as the Company, we, us, or our),
of which these notes are a part, have been prepared in accordance with generally accepted
accounting principles for interim financial information and pursuant to the instructions
of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting principles for
annual financial statements. In the opinion of our management, all adjustments
(consisting only of normal recurring accruals) considered necessary for a fair
presentation of the financial information as of and for the periods presented have been
included.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
results for the interim periods presented are not necessarily indicative of the results
that may be expected for any future period. The unaudited condensed consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements and notes for the year ended December 31, 2007, included in our
Annual Report on Form 10-K for the year ended December 31, 2007.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6

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ACRO Inc. (A Development Stage Company)
Consolidated Financial Statements

|Notes to the
Consolidated Financial Statements as of June 30, 2008
|------------------------------------------------------------------
|                                                                  

Note 2  Summary of Significant
Accounting Policies (contd)

| | C. | 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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
significant accounting policies applied in the annual financial statements of the Company
as of December 31, 2007, are applied consistently in these financial statements.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | D. | Principles
of Consolidation
| | -- | ---------------------------

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

| | E. | Recently
Issued Accounting Standards
| | -- | ------------------------------------

| | In
May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, the
purpose of the new standard is to improve financial reporting by providing a consistent
framework for determining what accounting principles should be used when preparing U.S.
GAAP financial statements. The Board believes that the previous GAAP hierarchy under SAS
69 was flawed.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Under
this new Statement, the hierarchy is as follows:
| | ------------------------------------------------------

| | Level
A  FASB Statements of Financial Accounting Standards and Interpretations, FASB
Statement 133 Implementation Issues, FASB Staff Positions, AICPA Accounting Research
Bulletins and APB Opinions that are not superseded by actions of the FASB, and rules and
interpretive releases of the SEC for SEC registrants.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Level
B  FASB Technical Bulletins and, if cleared by the FASB, AICPA Industry Audit and
Accounting Guides and Statements of Position.
| | --------------------------------------------------------------------------------------------------------------------------------------

| | Level
C  AICPA Accounting Standards Executive Committee Practice Bulletins that have been
cleared by the FASB, consensus positions of the EITF, and Topics discussed in Appendix D
of EITF Abstracts.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Level
D  Implementation Guides (Q&As) published by the FASB staff, AICPA Accounting
Interpretations, AICPA Industry Audit and Accounting Guides and Statements of Position
not cleared by the FASB, and practices that are widely recognized and prevalent either
generally or in the industry.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | FAS
162 is effective 60 days following the SECs approval of the Public Company
Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles. The Company expects no material
effect on its financial position, result of operations and cash flows as a result of
adoption FAS 162.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

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ACRO Inc. (A Development Stage Company)
Consolidated Financial Statements

|Notes to the
Consolidated Financial Statements as of June 30, 2008
|------------------------------------------------------------------
|                                                                  

Note 2  Summary of Significant
Accounting Policies (contd)

| | F. | Recently
Adopted Accounting Standards
| | -- | -------------------------------------

| | In
February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities  including an
amendment of FASB Statement No. 115 (Statement 159). Statement 159 gives the Company the
irrevocable option to carry most financial assets and liabilities at fair value that are
not currently required to be measured at fair value. If the fair value option is elected,
changes in fair value would be recorded in earnings at each subsequent reporting date.
SFAS 159 is effective for the Companys 2008 fiscal year. The Company expects no
material effect on its financial position, result of operations and cash flows as a
result of adoption SFAS 159.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurement (Statement
157). Statement 157 defines fair value, establishes a framework for the measurement of
fair value, and enhances disclosures about fair value measurements. The Statement does
not require any new fair value measures. The Statement is effective for fair value
measures already required or permitted by other standards for fiscal years beginning
after November 15, 2007. The Company is required to adopt Statement 157 beginning on
January 1, 2008. Statement 157 is required to be applied prospectively, except for
certain financial instruments. Any transition adjustment will be recognized as an
adjustment to opening retained earnings in the year of adoption.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Note 3  Property and
Equipment

| | Property
and equipment consist of the following:
| | ------------------------------------------------

| |                                                  | Estimated
useful life
(years) | June 30
2008 | December 31
2007
| | ------------------------------------------------ | ----------------------------- | ------------ | ----------------
|
|
|
|
| | Computer equipment                               |                               |              |                 
| | Production equipment                             |                               |              |                 
| | Furniture                                        |                               |              |                 
| | Leasehold improvements                           |                               |              |                 
| |                                                  |                               |              |                 
| |                                                  |                               |              |                 
| | Less - Accumulated depreciation and amortization |                               |              |                 
| |                                                  |                               |              |                 
| |                                                  |                               |              |                 
| |                                                  |                               |              |                 

(*)
          over the lease term

| | Depreciation
expense for the three month and six month periods ended June 30, 2008 and 2007, and for
the cumulative period from May 22, 2002 (date of inception), to June 30, 2008 were
$9,276, $18,396, $7,862, $15,012 and $64,035, respectively.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8

---

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ACRO Inc. (A Development Stage Company)
Consolidated Financial Statements

|Notes to the
Consolidated Financial Statements as of June 30, 2008
|------------------------------------------------------------------
|                                                                  

Note 4  Intangible Assets

| | In
March 2006, the Company purchased a patent from Prof. Ehud Keinan (Prof. 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 the three month and six month periods ended June 30,
2008 and 2007, and for the cumulative period from May 22, 2002 (date of inception), to
June 30, 2008, were $3,000, $6000, $3,000, $6,000 and $27,493, respectively.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 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 and six months periods ended June 30, 2008, 2007 and for the cumulative period
from May 22, 2002 (date of inception), to June 30, 2008, the consultants were entitled to
33,332 shares (which shares were issued to the consultants after the date of financial
statement, on July 16, 2008), 66,664, 199,998, 399,996, and 1,033,927 shares,
respectively. During the three and six months periods ended June 30, 2008, 2007 and for
the cumulative period from May 22, 2002 (date of inception), to June 30, 2008,
compensation expense recorded in respect of the shares entitlement by the consultant
amounted to $2,000, $4,334, $83,666, $253,664, and $1,004,991, respectively.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Compensation
expense was calculated by multiplying the amount of shares entitled 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 entitled to receive up to an additional
144,332 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 50% 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. 143,488 options are fully vested and 17,936
options shall vest at the end of each subsequent quarter, following June 30, 2008, for a
period of 4 quarters.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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. 600,000 of the
options shall vest on or after December 31, 2008, and 150,000 of the options shall vest
at the end of each subsequent quarter, following December 31, 2008, for a period of 2
years. 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).
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9

---

---



ACRO Inc. (A Development Stage Company)
Consolidated Financial Statements

|Notes to the
Consolidated Financial Statements as of June 30, 2008
|------------------------------------------------------------------
|                                                                  

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 4), whereby Prof. Keinan has agreed to provide consulting services
for duration of three years at a monthly fee of $3,000. Starting from July 2008, Prof.
Keinan agreed that the Company may defer the payment of 50% of his monthly fee until
further notice. The Company may terminate the Consulting Agreement with 60 days notice.
During the three months periods ended June 30, 2008 and 2007, the Company incurred $9,000
and $9,000, 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
the three months periods ended June 30, 2008 and 2007, the Company incurred an expense of
$32,238 and $27,356, respectively, for consulting services provided by the Companys
CEO and chairman of the board of directors. Starting from July 2008, the companys
CEO and chairman of the board of directors agreed that the Company may defer the
payment of 50% of his monthly fee until further notice.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

# Note 7  Commitments

| | The
Company entered into non-cancellable operating lease agreements for vehicles and
premises. The future minimum lease payments under these leases at June 30, 2008, are as
follows:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                              | Amount
| | ---------------------------- | ------
|
|
|
|
| | Year ending December 31,     |       
| | 2008                         |       
| | 2009                         |       
| | 2010                         |       
| |                              |       
| | Total minimum lease payments |       
| |                              |       

| | Car
lease expenses for each of the three months periods ended June 30, 2008 and 2007 and for
the cumulative period from May 22, 2002 (date of inception), to June 30, 2008, were
$8,349, $5,670 and $39,008, respectively.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10

---

---



ACRO Inc. (A Development Stage Company)
Consolidated Financial Statements

|Notes to the
Consolidated Financial Statements as of June 30, 2008
|------------------------------------------------------------------
|                                                                  

Note 7  Commitments (contd)

| | On
October 16, 2007, the Company signed a non-binding letter of intent (LOI) to
acquire RAY Detection Technology Group (RAY) in an all-stock transaction. RAY develops
and provides advanced inspection and detection systems. Completion of the proposed
acquisition is subject to a number of conditions, including completion of definitive
documentation on terms satisfactory to the parties, due diligence, and the approval of
the proposed acquisition by both companies boards of directors and raising funds.
RAYs products are based on a proprietary technology, Discovery CERT, enabling trace
automated sampling of bulk goods and cargo for the detection of explosive, chemical, and
biological threats. On July 23, 2008, the time frame for the preparation and execution of
a definitive agreement was extended until November 30, 2008. In connection with the
proposed transaction under the LOI, the Company provided to RAY a loan in the amount of
$12,000 for the sole use in connection with its EP patent application No. 98930087.6
which was paid directly to RAYs patent attorney.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 8  Subsequent Event

| | Additional
33,332 shares which were earned by members of the advisory board during the three months
ended June 30, 2008, were issued on July 16, 2008.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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. 100,000 of the
options shall vest on or after September 30, 2008, and 100,000 of the options shall vest
at the end of each subsequent month for a period of 3 months.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11

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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. Factors that could cause
such differences include those described in Risk Factors in Item 1 of our
Annual Report on Form 10-KSB filed with the Securities and Exchange Commission (the
Commission) on March 13, 2008.

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., incorporated under the laws of the State of Israel, which provides us with
research and development, manufacturing, marketing and management services. Our principal
executive and head office is located at 37 Inbar Street, Caesarea, Israel.

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.

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. As a result of these two
transactions, BioTech Knowledge LLC is our largest stockholders with approximately 30.91%
of our common stock.

12

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On October 16, 2007, we signed a
non-binding letter of intent (LOI) to acquire RAY Detection Technology Group (RAY) in an
all-stock transaction. RAY develops and provides advanced inspection and detection systems
for explosive, chemical and biological threats. Completion of the proposed acquisition was
subject to a number of conditions, including completion of definitive documentation on
terms satisfactory to the parties, due diligence, the approval of the proposed acquisition
by both companies boards of directors and raising adequate financing. RAYs
products are based on a proprietary technology called Discovery CERT which enables
automated trace sampling of bulk goods and cargo for the detection of explosive, chemical
and biological threats. On July 23, 2008, we extended the time frame for the preparation
and execution of a definitive agreement until November 30, 2008. In connection with the
proposed transaction under the LOI, Acro provided Ray a loan in the amount of $12,000 for
the sole use in connection with its EP patent application No. 98930087.6 which was paid
directly to Rays patent attorney.

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.

As of June 30, 2008, we had not
realized any significant revenues from operations and experienced losses of $3,289,959.

Employees

We currently do not have any
employees, and our subsidiary Acrosec Ltd. provides us with management services. Our
subsidiary 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 (66% time),
Shy Markevitch, who serves as our Vice President Business Development, Marketing and Sales
and two other employees, one of them is employed on a part time basis.

Cash Requirements

Our cash requirement through June 30,
2009, is approximately $850,000 which we need for implementation of our plan of operation
and developing and commercializing our potential explosive detection device. We are
obligated to pay BioTech Knowledge LLC, a wholly owned limited liability company of Prof.
Ehud Keinan, $3,000 per month for consulting services to be provided by Prof. Keinan.
Starting from July 2008, Prof. Keinan agreed that the Company may defer the payment of 50%
of his monthly fee until further notice. Prof. Keinan is a stockholder who holds
approximately 30.91% of Acros outstanding common stock. We estimate our operating
expenses and working capital requirements beginning June 30, 2008, and through June 30,
2009, to be as follows:

|                                         | 
|---------------------------------------- | 
|
|
|
|
|Estimated Expenses through June 30, 2009 | 
|                                         | 
|Product Research and Development         | 
|                                         | 
|Sales and Marketing                      | 
|                                         | 
|General and Administrative               | 
|                                         | 
|Capital Expenditures                     | 
|                                         | 
|Tax Expenses                             | 
|                                         | 
|                                         | 
|Total                                    | 
|                                         | 

At June 30, 2008, we had a working
capital of $157,813. In accordance with our current monthly expenses we will need to raise
an additional amount of about $700,000 according to our current business structure to
satisfy our cash requirement until June 30, 2009. 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.

Purchase or Sale of
Equipment

During the next 12 months, we plan to
spend approximately $11,000 for software, furniture and office equipment.

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.

13

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In addition, we have developed
another device called 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 five. The ETK five 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. (it is the same device) but it is using
different solutions and detects different explosives.

We see as our main product the
ACRO-SET that includes both P.E.T. and N.E.T., and covers the total range of
explosives detecting. Since the fourth quarter of 2007, we delivered samples of ACRO-SET
to several distributors and potential clients in several countries including the USA, UK,
China, Canada, Spain, Singapore and Japan. During June and July, 2008, we received a few
purchase orders for our products from governmental bodies in the USA and China. However,
we have not yet had any significant sales.

To date, evidence of the efficacy 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 five.
Nevertheless, we cannot assure that ACRO-P.E.T. and ACRO-N.E.T. will gain commercial
acceptance in the marketplace. We plan to follow ACRO-P.E.T. and ACRO-N.E.T. with
additional products that detect explosives.

Plan of Operation

Our primary objectives over the 12
month period ending on June 30, 2009, are to manufacture and commercialize our product,
called the 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.

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 base worldwide.

Financial Condition,
Liquidity and Capital Resources

During the three months ended June
30, 2008, we incurred a loss of $317,728, compared to a net loss of $343,335 for the
comparative period in 2007. During the six months ended June 30, 2008, we incurred a loss
of $560,528, compared to a net loss of $698,649 for the comparative period in 2007.

During the six months ended June 30,
2008, we incurred $560,549 of operating expenses, comprised of $93,880 for research and
development costs, $28,077 for stock-based compensation expenses, $114,076 for sales and
marketing costs, $324,516 for general and administrative cost.

During the six months ended June 30,
2007, we incurred $690,098 of operating expenses, comprised of $113,613 for research and
development costs, $253,664 for stock-based compensation expenses, $9,082 for sales and
marketing costs, $313,739 for general and administrative cost.

At June 30, 2008, we had working
capital of $157,813.

At June 30, 2008, our Company had
total assets of $505,576, which consisted of cash and equivalents, cash deposits and
restricted cash of $276,229, fixed assets of $82,243, intangible assets of $92,507 and
prepaid expenses and other current and non-current assets of $54,597.

Until June 30, 2008, we had sales of
$35,000. During June 2008, we received a commercial purchase order from a Chinese
governmental body in the amount of $18,000, which was delivered in July 2008.

14

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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, ACRO-P.E.T. and ACRO-N.E.T. 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 June 30, 2008, we have incurred losses of $3,289,959. 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 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 will be dependent on its 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 February 27, 2007, we closed a
private placement of 2,000,000 units, at a price of US$0.75 per unit, for aggregate
proceeds of US$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

Prior to fiscal 2006, the Company
applied the intrinsic value method as prescribed in Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees (APB No. 25), and related
interpretations, in accounting for stock options granted under the stock option plan.
Under the intrinsic value method, no compensation cost is recognized if the exercise price
of the Companys employee stock options was equal to or greater than the market price
of the underlying stock on the date of the grant. No compensation cost was recognized in
the accompanying consolidated statements of income prior to fiscal year 2006 as no options
or similar instruments have been granted during that period. As of January 1, 2006 the
Company adopted Statement No. 123 (revised 2004), Share-Based Payment
(SFAS No. 123(R)). All stock-based awards to nonemployees are accounted for at
their fair value in accordance with SFAS No. 123(R) and in accordance with Emerging Issues
Task Force Issue No. 96-18, Accounting for Equity Instruments that are Issued to
Other than Employees for Acquiring, or in Conjunction with Selling, Goods and
Services (EITF 96-18).

The Company accounts for stock-based
awards to employees in accordance with SFAS No. 123(R) 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.

15

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Recent Accounting
Pronouncements

In May 2008, the FASB issued
Statement of Financial Accounting Standards No. 162, the purpose of the new standard is to
improve financial reporting by providing a consistent framework for determining what
accounting principles should be used when preparing U.S. GAAP financial statements. The
Board believes that the previous GAAP hierarchy under SAS 69 was flawed.

Under this new Statement, the
hierarchy is as follows:

Level A  FASB Statements of
Financial Accounting Standards and Interpretations, FASB Statement 133 Implementation
Issues, FASB Staff Positions, AICPA Accounting Research Bulletins and APB Opinions that
are not superseded by actions of the FASB, and rules and interpretive releases of the SEC
for SEC registrants.

Level B  FASB Technical
Bulletins and, if cleared by the FASB, AICPA Industry Audit and Accounting Guides and
Statements of Position.

Level C  AICPA Accounting
Standards Executive Committee Practice Bulletins that have been cleared by the FASB,
consensus positions of the EITF, and Topics discussed in Appendix D of EITF Abstracts.

Level D  Implementation Guides
(Q&As) published by the FASB staff, AICPA Accounting Interpretations, AICPA Industry
Audit and Accounting Guides and Statements of Position not cleared by the FASB, and
practices that are widely recognized and prevalent either generally or in the industry.

FAS 162 is effective 60 days
following the SECs approval of the Public Company Accounting Oversight Board
amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally
Accepted Accounting Principles. The Company expects no material effect on its financial
position, result of operations and cash flows as a result of adoption FAS 162.

Recently Adopted
Accounting Standards

In February 2007, the FASB issued
Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities  including an amendment of FASB Statement No. 115
(Statement 159). Statement 159 gives the Company the irrevocable option to carry most
financial assets and liabilities at fair value that are not currently required to be
measured at fair value. If the fair value option is elected, changes in fair value would
be recorded in earnings at each subsequent reporting date. SFAS 159 is effective for the
Companys 2008 fiscal year. The Company expects no material effect on its financial
position, result of operations and cash flows as a result of adoption SFAS 159.

In September 2006, the FASB issued
FASB Statement No. 157, Fair Value Measurement (Statement 157). Statement 157 defines fair
value, establishes a framework for the measurement of fair value, and enhances disclosures
about fair value measurements. The Statement does not require any new fair value measures.
The Statement is effective for fair value measures already required or permitted by other
standards for fiscal years beginning after November 15, 2007. The Company is required to
adopt Statement 157 beginning on January 1, 2008. Statement 157 is required to be applied
prospectively, except for certain financial instruments. Any transition adjustment will be
recognized as an adjustment to opening retained earnings in the year of adoption.

Off-Balance Sheet
Arrangements

We entered into non-cancellable
operating leases agreements for vehicles and premises. We have a commitment to pay a total
of $61,499 for the duration of these lease agreements.

Item 3. Quantitative and
Qualitative Disclosures about Market Risk

Not applicable.

16

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Item 4T. Controls and
Procedures

As of the end of the period covered
by this report, being June 30, 2008, 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 15(d)  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 June 30, 2008, that have materially affected, or are reasonable
likely to materially affect our internal control over financial reporting.

Part II  OTHER INFORMATION

# Item 1. Legal
Proceedings

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

Item 1A. Risk Factors

Not applicable.

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

During the period covered by this
report, there were no sales of our companys unregistered securities that have not
already been disclosed in a current report on Form 8-K prior to the filing of this report.

Item 3. Defaults
Upon Senior Securities

None.

Item 4. Submission
of Matters to a Vote of Security Holders

None.

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.

# 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 AnerPresident, Chief Executive Officer & Director Date: August 11, 2008 | By: /s/ Gabby Klausner
Gabby KlausnerTreasurer andChief Financial OfficerDate: August 11, 2008
| | --------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------

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# EXHIBIT INDEX

| | Listed
and indexed below are all Exhibits filed as part of this report.
| | -----------------------------------------------------------------------

|            |                                                             |                                                    
|----------- | ----------------------------------------------------------- | ---------------------------------------------------
|
|
|
|
|Exhibit No. | Description                                                 |                                                    
|            |                                                             |                                                    
|Number      | Description                                                 | Method of Filing                                   
|            |                                                             |                                                    
|(3)         | Articles of Incorporation and By-laws                       |                                                    
|            |                                                             |                                                    
|3.1         | Articles of Incorporation, as amended.                      | Incorporated by reference to Exhibit 3.1 to our    
|            |                                                             | registration statement on Form SB-2 filed November 
|            |                                                             | 21, 2003                                           
|            |                                                             |                                                    
|3.2         | Bylaws, dated February 25, 2005.                            | Incorporated by reference to Exhibit 3.1 to our    
|            |                                                             | current report on Form 8-K filed March 17, 2005 and
|            |                                                             | March 21, 2005                                     
|            |                                                             |                                                    
|3.3         | Certificate of Change Pursuant to NRS 78.209 filed          | Incorporated by reference to Exhibit 3.3 to our    
|            | with the State of Nevada effective as of January 25,        | annual report on Form 10-KSB filed March 28, 2007  
|            | 2006.                                                       |                                                    
|            |                                                             |                                                    
|3.4         | Certificate of Change Pursuant to NRS 78.209 filed          | Incorporated by reference to Exhibit 3.4 to our    
|            | with the State of Nevada effective as of October 25,        | annual report on Form 10-KSB filed March 28, 2007  
|            | 2006.                                                       |                                                    
|            |                                                             |                                                    
|3.5         | Certificate of Change Pursuant to NRS 78.209 filed          | Incorporated by reference to Exhibit 3.5 to our    
|            | with the State of Nevada effective as of October 30,        | annual report on Form 10-KSB filed March 28, 2007  
|            | 2006.                                                       |                                                    
|            |                                                             |                                                    
|(31)        | Section 302 Certification                                   |                                                    
|            |                                                             |                                                    
|31.1        | Rule 13a-14(a) Certification of Principal Executive Officer | Filed herewith                                     
|            |                                                             |                                                    
|31.2        | Rule 13a-14(a) Certification of Principal Financial         | Filed herewith                                     
|            | Officer.                                                    |                                                    
|            |                                                             |                                                    
|(32)        | Section 906 Certification                                   |                                                    
|            |                                                             |                                                    
|32.1        | Certification of Principal Executive Officer Pursuant       | Filed herewith                                     
|            | to 18 U.S.C. Section 1350, as Pursuant to Section 906       |                                                    
|            | of the Sarbanes-Oxley Act of 2002.                          |                                                    
|            |                                                             |                                                    
|32.2        | Certification of Principal Financial Officer Pursuant       | Filed herewith                                     
|            | to 18 U.S.C. Section 1350, as Pursuant to Section 906       |                                                    
|            | of the Sarbanes-Oxley Act of 2002.                          |                                                    

18

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