---

---

# 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 September 30, 2009

# 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)N/A(Former Name, Former Address and Former Fiscal year, if changed since last report)

Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days:

Yes x No 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:

As
of September 30, 2009, 67,824,268 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                                                                 | 3 
|Item 1. Financial Statements                                                                  | 3 
|Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | 11
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                            | 15
|Item 4T. Controls and Procedures                                                              | 16
|PART II. OTHER INFORMATION                                                                    | 17
|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 Statements
Consolidated Balance Sheets
|--------------------------------------------------------

---

|                                                               | September 302009 | December 312008
|-------------------------------------------------------------- | ---------------- | ---------------
|
|
|
|
|Assets                                                         |                  |                
|                                                               |                  |                
|Current assets:                                                |                  |                
|Cash and cash equivalents                                      |                  |                
|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                                      |                  |                
|                                                               |                  |                
|Convertible Promissory Note                                    |                  |                
|                                                               |                  |                
|Total liabilities                                              |                  |                
|                                                               |                  |                
|                                                               |                  |                
|Commitments (Notes 5 and 7)                                    |                  |                
|                                                               |                  |                
|Stockholders' equity (deficiency):                             |                  |                
|Common stock; $0.001 par value; 700,000,000 shares authorized; |                  |                
|67,824,268 and 67,824,268 shares issued and outstanding as of  |                  |                
|September 30, 2009 and December 31, 2008, respectively         |                  |                
|Additional paid-in capital                                     |                  |                
|Deficit accumulated during the development stage               |                  |                
|                                                               |                  |                
|Total stockholders' equity (deficiency)                        |                  |                
|                                                               |                  |                
|Total liabilities and stockholders' equity (deficiency)        |                  |                
|                                                               |                  |                

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 September 30 | Nine months ended September 30 | Cumulative
From Inception
(May 22, 2002)
to September
30
2009
|----------------------------------------- | ------------------------------- | ------------------------------ | -------------------------------------------------------------
|
|
|
|
|Revenues                                  |                                 |                                |                                                              
|                                          |                                 |                                |                                                              
|                                          |                                 |                               
|Costs and expenses :                      |                                 |                               
|                                          |                                 |                               
|Research and development                  |                                 |                                |                                                              
|Sales and marketing                       |                                 |                                |                                                              
|General and administrative*               |                                 |                                |                                                              
|                                          |                                 |                                |                                                              
|                                          |                                 |                               
|Total operating expenses                  |                                 |                                |                                                              
|                                          |                                 |                                |                                                              
|                                          |                                 |                               
|Operating loss                            |                                 |                                |                                                              
|                                          |                                 |                                |                                                              
|                                          |                                 |                               
|Interest and other income (expenses), net |                                 |                                |                                                              
|                                          |                                 |                                |                                                              
|                                          |                                 |                               
|Loss before income tax                    |                                 |                                |                                                              
|Income tax                                |                                 |                                |                                                              
|                                          |                                 |                                |                                                              
|                                          |                                 |                               
|Net loss                                  |                                 |                                |                                                              
|                                          |                                 |                                |                                                              
|                                          |                                 |                               
|Basic and diluted net loss per common     |                                 |                               
|share                                     |                                 |                                |                                                              
|                                          |                                 |                                |                                                              
|                                          |                                 |                               
|Weighted average shares used in           |                                 |                               
|computing basic and diluted net loss per  |                                 |                               
|common share                              |                                 |                                |                                                              
|                                          |                                 |                                |                                                              

|* | Includes
$-, $17,188; $16,464, $45,265 and $1,080,666 in stock-based compensation to employees and
non-employees for the three months periods ended September 30, 2009, and 2008; for the
nine months periods ended September 30, 2009, and 2008 and for the cumulative period from
May 22, 2002 (date of inception) to September 30, 2009 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
|-------------------------------------

---

|                                                                 | Nine months ended September 30 | Cumulative
From inception
(May 22, 2002)
to September 30
2009
|---------------------------------------------------------------- | ------------------------------ | -------------------------------------------------------------
|
|
|
|
|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:                     |                                |                                                              
|Decrease (Increase) in Trade receivables                         |                                |                                                              
|Decrease (Increase) in Prepaid expenses and other current assets |                                |                                                              
|Increase (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                         |                                |                                                              
|Decrease (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 Convertible promissory note                          |                                |                                                              
|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                                              |                                |                                                              

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 September 30, 2009
|-----------------------------------------------------------------------

---

# Note 1  Business

| | A. | General
| | -- | -------

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

| | Since
its inception, the Company has no significant revenues and in accordance with Statement
of Financial Accounting Standard (SFAS) No. 7 Accounting and Reporting
by Development Stage Enterprises, the Company is considered a development stage
company.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | B. | Going
concern
| | -- | -------------

| | The
accompanying financial statements have been prepared on a basis which assumes that the
Company will continue as a going concern and which contemplates the realization of assets
and the satisfaction of liabilities and commitments in the normal course of business. The
Company has a limited operating history, and has incurred losses of $3,914,260 from
operations since its inception. These circumstances raise substantial doubt about the
Companys ability to continue as a going concern. Managements plans with
regard to these matters include continued development, marketing and licensing of its
products as well as seeking additional financing arrangements. Although, management
continues to pursue these plans, there is no assurance that the Company will be
successful in obtaining sufficient revenues from its products or financing on terms
acceptable to the Company. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
the event that we do not generate revenues or raise sufficient additional funds by a
public offering or a private placement, we will consider alternative financing options,
if any, or be forced to scale down or perhaps even cease our operations.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Note 2  Summary of
Significant Accounting Policies

| | A. | Basis
of Presentation
| | -- | ---------------------

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

| | B. | 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, 2008, included in our
Annual Report on Form 10-K for the year ended December 31, 2008.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6

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

|Notes
to the Consolidated Financial Statements as of September 30, 2009
|-----------------------------------------------------------------------

---

# 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, 2008, 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. | Initial
Adoption of New Standards
| | -- | ---------------------------------

| | ASC
855 (SFAS 165)
| | ------------------

| | In
May 2009, the FASB issued ASC 855 (SFAS No. 165), Subsequent Events. ASC 855
establishes general standards of accounting for, and disclosure of, events that occur
after the balance sheet date but before financial statements are issued or are available
to be issued. In particular, this statement sets forth: (1) the period after the balance
sheet date during which management of a reporting entity should evaluate events or
transactions that may occur for potential recognition or disclosure in the financial
statements, (2) the circumstances under which an entity should recognize events or
transactions occurring after the balance sheet date in its financial statements and (3)
the disclosures that an entity should make about events or transactions that occurred
after the balance sheet date. ASC 855 is effective for the interim or annual financial
periods ending after June 15, 2009. The adoption of this standard did not have any impact
on the consolidated results of operations or financial position of the Company.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | F. | Recently
Issued Accounting Standards
| | -- | ------------------------------------

| | ASC
105 (SFAS 168)
| | ------------------

| | In
June 2009, the FASB issued ASC 105, The FASB Accounting Standards Codification and
the Hierarchy of Generally Accepted Accounting Principles. ASC 105 establishes the
FASB Accounting Standards Codification (Codification), and was
officially launched on July 1, 2009, for the purpose of serving as the source of
authoritative U.S. generally accepted accounting principles (GAAP) recognized
by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of
the Securities and Exchange Commission (SEC) under authority of federal
securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The
subsequent issuances of new standards will be in the form of Accounting Standards Updates
that will be included in the Codification. In general, the Codification is not expected
to change U.S. GAAP. All other accounting literature excluded from the Codification will
be considered non-authoritative. ASC 105 is effective for financial statements issued  for
interim and annual periods ending after September 15, 2009. Effective September 30, 2009,
all references made to GAAP in our consolidated financial statements include the new
Codification numbering system along with original references.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

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

|Notes
to the Consolidated Financial Statements as of September 30, 2009
|-----------------------------------------------------------------------

---

# Note 3  Property
and Equipment

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

| |                                 | Estimated
useful life
(years) | June 30
2009 | December 31
2008
| | ------------------------------- | ----------------------------- | ------------ | ----------------
|
|
|
|
| | Computer equipment              |                               |              |                 
| | Production equipment            |                               |              |                 
| | Furniture                       |                               |              |                 
| | Leasehold improvements          |                               |              |                 
| |                                 |                               |              |                 
| |                                 |                               |              |                 
| | Less - Accumulated depreciation |                               |              |                 
| |                                 |                               |              |                 
| |                                 |                               |              |                 
| |                                 |                               |              |                 

| | (*)
          over the lease term
| | ---------------------------------

| | Depreciation
expense for the three months and nine months periods ended September 30, 2009 and 2008,
and for the cumulative period from May 22, 2002 (date of inception), to September 30,
2009 were $11,778, $9,269, $34,772, $27,665, and $117,428 respectively.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Note 4  Intangible
Assets

| | In
March 2006, the Company purchased a patent from Prof. Ehud Keinan (Keinan), a
stockholder who holds 30.91% of the Companys shares of common stock, for $120,000.
The patent is being amortized over the life of the asset which is estimated at 10 years.
Amortization expense for each of the three months and nine months periods ended September
30, 2009 and 2008 and for the cumulative period from May 22, 2002 (date of inception) to
September 30, 2009 were $3,000, $3,000, $9,000, $9,000 and $42,493, respectively. The
expected annual amortization expenses for each of the next five years are $12,000.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Effective
as of January 1, 2009, the Company affected a transfer of all of its intellectual
property, including patents and technology, to its wholly owned subsidiary, Acrosec Ltd,
in consideration for an amount representing the value of the intellectual property as
will be determined by an independent third-party appraiser selected by the company and
Acrosec.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 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 nine months periods ended September 30, 2009, 2008 and for the
cumulative period from May 22, 2002 (date of inception) to September 30, 2009 the
consultants earned 33,332, 99,996 shares, 33,332, 99,996 shares and 1,231,075 shares
respectively. 133,328 shares that were earned during the last twelve month period, have
not been issued yet.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the three and nine months period ended September 30, 2009, 2008 and for the cumulative
period from May 22, 2002 (date of inception) to September 30, 2009, compensation expense
recorded in respect of the shares earned by the consultant amounted to $0, $1,000, $0,
5,000 and $1,006,207 respectively.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8

---

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

|Notes
to the Consolidated Financial Statements as of September 30, 2009
|-----------------------------------------------------------------------

---

# Note 5 
Stock-Based Compensation (Contd)

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

| | Under
the agreements with the consultants they are entitled to earn up to an additional 13,848
shares of common stock for future services to be performed.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
August 2006, the Company entered into an agreement with a director for his services as a
member of the Companys Board of Directors. As compensation, the director received a
signing bonus of $5,000, and a quarterly fee of $1,500 until October 2007, and $3,000 per
quarter thereafter. Starting from July 2008, the director agreed that the Company may
defer the payment of 100% of his quarterly fee until further notice. In addition,
following the adoption of a Stock Option Plan, on April 28, 2008, the Companys
board of directors approved the grant of an option to the director to purchase 215,232
shares of common stock of the Company at an exercise price per share that is equal to the
par value of the Companys common stock. All 215,232 options became vested as of
September 30, 2009
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
April 28, 2008, the companys board of directors approved the grant of options to
purchase 1,800,000 shares of common stock of the Company to the trustee in trust for the
companys executives, at an exercise price of $0.075 per share. 1,050,000 of the
options became vested as of September 30, 2009, and 150,000 of the options shall vest at
the end of each subsequent quarter, following September 30, 2009, for a period of 5
quarters.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | On
July 8, 2008, the companys board of directors approved the grant of options to
purchase 400,000 shares of common stock of the company to the trustee in trust for two of
the companys executives, at an exercise price of $0.06 per share. All 400,000 of
the options became vested as of September 30, 2009.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 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 which ended on February 1, 2009, at a monthly fee of $3,000.
Starting from July 2008, Prof. Keinan agreed that the Company may defer the payment of
100% of his monthly fee until further notice. The total amount of the deferred payment as
of September 30, 2009, is $19,500 and is included at accounts payable. During the three
months periods ended September 30, 2009 and 2008, the Company incurred $0 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 September 30, 2009 and 2008, the Company incurred an
expense of $31,461 and $35,991, 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 100% of his monthly fee until further notice. The total amount of
the deferred payment as of September 30, 2009 is $135,261 and is included at accounts
payable.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9

---

---



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

|Notes
to the Consolidated Financial Statements as of September 30, 2009
|-----------------------------------------------------------------------

---

Note
6  Related Party Transactions (Contd)

| | 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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
of September 30, 2009, the Company received an interest-free loan in the aggregate amount
of $113,274 in the form of a convertible promissory note from BioTech Knowledge LLC, to
be repaid on February 8, 2010, unless earlier converted into its shares common stock or
prepaid, pursuant to the terms of the note. The note is convertible into up to 14,159,250
shares of its common stock, at a price per share of $0.008. In addition, the Company
issued BioTech Knowledge LLC a warrant to purchase its shares of common stock,
exercisable within three years following the conversion of the note, at the price per
share of $0.016. The warrant is exercisable into amount of shares of common stock equal
to the number of shares of common stock issued to BioTech Knowledge LLC following the
conversion of the note.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Effective
as of January 1, 2009, the Company entered into an Intellectual Property Assignment and
Services Termination Agreement with its wholly owned subsidiary, Acrosec Ltd., pursuant
to which, among others, the Company effected a transfer of all of its intellectual
property, including patents and technology, to Acrosec, in consideration for an amount
representing the value of the intellectual property as will be determined by an
independent third-party appraiser selected by the company and Acrosec. The services
agreement between us and Acrosec, dated March 7, 2007, pursuant to which Acrosec provided
us certain research, development, manufacturing and management services was terminated.
The agreement effectively renders ACRO as a holding company.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Note 7  Commitments

| | On
October 28, 2007, the Companys technology agreement with LSRI  Life Science
Research Israel Ltd., a subsidiary of IIBR  Israel Institute for Biological
Research, became effective. Under the terms of the agreement, LSRI will license the
technology of IIBRs explosives testing kit (ETK) to the Company, for incorporation
into the Companys pen-like device, allowing the detection of commercial and
military explosives. The agreement is subject to minimum annual revenues to be achieved
by the Company 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.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
April, 2009, the Company signed a non-binding letter of intent (LOI) to
acquire Xurity in an all-stock transaction. Xurity develops advanced X-RAY 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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Note 8  Subsequent
Event

| | In
October 2009 the Company received additional amount of $10,000 as an interest-free loan
in the form of a convertible promissory note from BioTech Knowledge LLC, to be repaid
after one year ended October 2010, unless earlier converted into its shares common stock
or prepaid, according to terms of the note from February 2009.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10

---

---



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

You should read the following discussion
in conjunction with our consolidated financial statements and related notes thereto. In
addition to historical information, this discussion contains forward-looking statements
that involve risks, uncertainties and assumptions that could cause actual results to
differ materially from managements expectations. 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.

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.

Effective January 1, 2009, we entered
into an Intellectual Property Assignment and Services Termination Agreement with our
wholly owned subsidiary, Acrosec Ltd., pursuant to which, among others, we effected a
transfer of all of our intellectual property, including patents and technology, to
Acrosec, in consideration for an amount representing the value of the intellectual
property as will be determined by an independent third-party appraiser selected by us and
Acrosec. The services agreement between us and Acrosec, dated March 7, 2007, pursuant to
which Acrosec provided us certain research, development, manufacturing and management
services was terminated. The agreement effectively renders ACRO a holding company.

11

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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.

On February 22, 2009, we closed a
private placement for total gross proceeds of $93,274 in the form of a convertible
promissory note with BioTech Knowledge LLC, convertible to up to 11,659,250 shares of
common stock, at a price of $0.008 per share, with each share of common stock such
converted awarding a warrant to purchase one share of our common stock at the price per
share of $0.016 exercisable within three years. As of September 30, 2009, we increase the
gross proceeds for the private placement to total of $113,274, at the same terms and
conditions. In October 2009 we increase further the gross proceeds for the private
placement to total of $123,274 at the same terms and conditions.

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 September 30, 2009, we had not
realized any significant revenues from operations and experienced losses of $3,914,260.

Employees

As of May 15, 2009, we do not have
any employees. Our subsidiary, Acrosec Ltd., hired the services of Gadi Aner, who serves
as our Chairman and our Interim Chief Executive Officer and Gabby Klausner, who serves as
our Chief Financial Officer. Commencing September 2009, Ms. Klausner provides her
services, as a freelance consultant.

Cash Requirements

Our cash requirement through
September 30, 2010, is approximately $300,000 which we need for implementation of our plan
of operation and developing and commercializing our potential explosive detection device.
We estimate our operating expenses and working capital requirements beginning September
30, 2009, and through September 30, 2010, to be as follows:

|                                         | 
|---------------------------------------- | 
|
|
|
|
|Estimated Expenses through June 30, 2010 | 
|                                         | 
|Product Research and Development         | 
|                                         | 
|Sales and Marketing                      | 
|                                         | 
|General and Administrative               | 
|                                         | 
|Capital Expenditures                     | 
|                                         | 
|Tax Expenses                             | 
|                                         | 
|                                         | 
|Total                                    | 
|                                         | 

At September 30, 2009, we had a
deficit in working capital of $(229,959), out of which $167,000 are payable to directors,
which agreed to defer their fees until further notice. We are now operating under minimal
activity note, until we successfully raise additional funds or receive a significant order
to our products, according to this low volume of activity, we anticipate that we will
require additional funds of up to approximately $550,000 to keep activating our business
for the next twelve-month period. In such event that we do not generate sufficient
revenues or raise sufficient additional funds by a public offering or a private placement,
we will consider alternative financing options, if any, or be forced to cease our
operations

12

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Our Products

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

In addition, we 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 the USA, Europe and the Far-East.
However, we have not yet had any significant sales, although we succeeded to sell few
thousands of units until today

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 laboratories of 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 September 30, 2010, 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. We started to
use a new filling machine which will allow us much more effective production. Another main
business objective is to expand our technology base by purchasing additional technologies.

Furthermore,
we plan to continue to develop our headquarters as our main research and development base
in Israel, and to initiate international marketing and sales to reach a market worldwide.

On
October 28, 2007, our technology agreement with LSRI, a subsidiary of IIBR  Israel
Institute for Biological Research, became effective. Under the terms of the agreement,
LSRI licensed the long-proven technology of IIBRs explosives testing kit to Acro,
for incorporation into our pen-like device. This allows our pen-like device to detect
commercial and military explosives. The agreement is subject to minimum annual revenues to
be achieved by us and royalties to be paid to LSRI. The device complements the
ACRO-P.E.T., which detects peroxide-based explosives in improvised explosive devices.

Effective
January 1, 2009, we entered into an Intellectual Property Assignment and Services
Termination Agreement with our wholly owned subsidiary, Acrosec Ltd., pursuant to which,
among others, we effected a transfer of all of our intellectual property, including
patents and technology, to Acrosec, in consideration for an amount representing the value
of the intellectual property as will be determined by an independent third-party appraiser
selected by us and Acrosec.

13

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Financial Condition,
Liquidity and Capital Resources

During the three months ended
September 30, 2009, we incurred a loss of $79,117, compared to a net loss of $202,054 for
the comparative period in 2008. During the nine months ended September 30, 2009, we
incurred a loss of $288,628, compared to a net loss of $762,582 for the comparative period
in 2008. During the nine months ended September 30, 2009, we incurred $306,294 of
operating expenses, comprised of $49,334 for research and development costs, $16,464 for
stock-based compensation expenses, $21,892 for sales and marketing costs, $218,604 for
general and administrative cost.

During the nine months ended
September 30, 2008, we incurred $787,290 of operating expenses, comprised of $121,414 for
research and development costs, $45,265 for stock-based compensation expenses, $172,704
for sales and marketing costs, $447,907 for general and administrative cost.

As of September 30, 2009, we had
deficit in working capital of $(229,959) out of which $167,000 are payable to directors,
which agreed to defer their fees until further notice.

As of September 30, 2009, our Company
had total assets of $130,509, which consisted of cash and equivalents of $6,567, fixed
assets of $28,341, intangible assets of $77,507 and prepaid expenses and other current and
non-current assets of $18,094.

From January 1, 2009 to September 30,
2009, we had no significant sales.

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 September 30, 2009, we have incurred losses of $3,914,260.
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

As of September 30 2009, we received
an interest-free loan in the aggregate amount of $113,274 in the form of a convertible
promissory note from BioTech Knowledge LLC, to be repaid on February 8, 2010, unless
earlier converted into our shares common stock or prepaid, pursuant to the terms of the
note. The note is convertible into up to 14,159,250 shares of our common stock, at a price
per share of $0.008. In addition, we issued BioTech Knowledge LLC a warrant to purchase
our shares of common stock, exercisable within three years following the conversion of the
note, at the price per share of $0.016. The warrant is exercisable into amount of shares
of common stock equal to the number of shares of common stock issued to BioTech Knowledge
LLC following the conversion of the note. In October 2009, we received additional $10,000
as an increase of the interest-free loan, convertible to shares of our common stock.

14

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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.

# Initial Adoption of New
Standards
ASC 855 (SFAS 165)

In May 2009, the FASB issued ASC 855
(SFAS No. 165), Subsequent Events. ASC 855 establishes general standards of
accounting for, and disclosure of, events that occur after the balance sheet date but
before financial statements are issued or are available to be issued. In particular, this
statement sets forth: (1) the period after the balance sheet date during which management
of a reporting entity should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements, (2) the circumstances under which
an entity should recognize events or transactions occurring after the balance sheet date
in its financial statements and (3) the disclosures that an entity should make about
events or transactions that occurred after the balance sheet date. ASC 855 is effective
for the interim or annual financial periods ending after June 15, 2009. The adoption of
this standard did not have any impact on the consolidated results of operations or
financial position of the Company.

# Recently Issued
Accounting Standards
ASC 105 (SFAS 168)

In June 2009, the FASB issued ASC
105, The FASB Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles. ASC 105 establishes the FASB Accounting
Standards Codification (Codification), and was officially launched on
July 1, 2009, for the purpose of serving as the source of authoritative U.S. generally
accepted accounting principles (GAAP) recognized by the FASB to be applied by
nongovernmental entities. Rules and interpretive releases of the Securities and Exchange
Commission (SEC) under authority of federal securities laws are also sources
of authoritative U.S. GAAP for SEC registrants. The subsequent issuances of new standards
will be in the form of Accounting Standards Updates that will be included in the
Codification. In general, the Codification is not expected to change U.S. GAAP. All other
accounting literature excluded from the Codification will be considered non-authoritative.
ASC 105 is effective for financial statements issued for interim and annual periods ending
after September 15, 2009. Effective September 30, 2009, all references made to GAAP in our
consolidated financial statements include the new Codification numbering system along with
original references.

Item 3. Quantitative and
Qualitative Disclosures about Market Risk

Not applicable.

15

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Item 4T. Controls and
Procedures

As of the end of the period covered
by this report, being September 30, 2009, 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 September 30, 2009, that have materially affected, or are
reasonable likely to materially affect our internal control over financial reporting.

16

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# 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
toour 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& DirectorDate: November 23, 2009 | /s/ Gabby Klausner
Gabby KlausnerTreasurer andChief Financial
OfficerDate: November
         23, 2009
| | --------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------

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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.                                               
|           
|(10)        | Material Contracts                                  
|           
|10.1        | Convertible Promissory Note between the Registrant   | Incorporated by reference to Exhibit 10.1 to our   
|            | and BioTech Knowledge LLC, dated February 22, 2009.  | current report on Form 8-K filed February 23, 2009 
|           
|10.2        | Warrant between the Registrant and BioTech           | Incorporated by reference to Exhibit 10.10 to our  
|            | Knowledge LLC, dated February 22, 2009.              | annual report on Form 10-K filed March 30, 2009    
|           
|10.3        | Intellectual Property Assignment and Services        | Incorporated by reference to Exhibit 10.10 to our  
|            | Termination Agreement, dated March 29, 2009.         | annual report on Form 10-K filed March 30, 2009    
|           
|(31)        | Section 302 Certification                           
|           
|31.1        | Rule 13a-14(a) Certification of Principal Executive  | Filed herewith                                     
|            | Officer                                             
|           
|31.2        | Rule 13a-14(a) Certification of Principal Financial  | Filed herewith                                     
|            | Officer.                                            
|           
|(32)        | Section 906 Certification                           
|           
|32.1        | Certification of Principal Executive Officer and     | Filed herewith                                     
|            | Principal Financial Officer Pursuant to 18 U.S.C.   
|            | Section 1350, as Pursuant to Section 906 of the     
|            | Sarbanes-Oxley Act of 2002.                         

18

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