UNITED STATES
 SECURITIES AND EXCHANGE
COMMISSION
 Washington, DC
20549
  
  FORM 10-K









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

                  [Fee
      Required]For
      the fiscal year ended December 31, 2007ORo
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934

                  [No
      Fee Required]For
      the transition period from  ______________ to
      ______________
  Commission
file number: 1-14088




Acacia Automotive,
Inc.
 (Exact
name of registrant as specified in its charter)
   Texas
              75-2095676(State
      of incorporation)
              (IRS
      Employer Identification No.)
   The
      Gardner Building – Suite 104, 5414 Maryland Way, Brentwood,
      TN
              37027(Address
      of principal executive offices)
              (Zip
      Code)
  (352)
427-6848
 (Registrant's
telephone number, including area code)
  (Former
name, former address and former fiscal year, if changed since last
report)
  Table of Contents










Securities registered pursuant
      to Section 12(b) of the Act:Title
      of each class
            Name
      of each exchange on which registeredSecurities
      registered pursuant to Section 12(g) of the Act:Common
      StockTitle
      of each class






Indicate
by check and mark whether registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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 xNo o


Indicate
by check mark if there is no disclosure of delinquent filers in pursuant to Item
405 of Regulation S-K is not contained in this form, and will not be contained,
to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of Form 10-K or any amendment
to this Form 10-K.    Yes o     No x
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting
company.
   Large accelerated
      filer o
                Accelerated
      filer oNon-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 Act). Yes o    No  x
 
 APPLICABLE
ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
 PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
 
 Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes x     No o
  State
issuer’s revenues for its most recent fiscal
year.  $423,405
 
 State the
aggregate market value of the voting stock held by non-affiliates of the
registrant.  The aggregate market value shall be computed by reference
to the price at which the stock was sold, or the average bid and asked price, as
of a specified date within 60 days prior to the date of filing
$12,117,499  As of March 24, 2008.
 
 State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date: 11,997,524


Table of Contents










TABLEOF
CONTENTS


PAGEPART
      I.Item
      1.
            Description of
      Business
            4Item
      1A.
            Risk Factors
            7Item
      1B.
            Unresolved Staff Comments
            11Item
      2.
            Description of
      Property
            11Item
      3.
            Legal
      Proceedings
            11Item
      4.
            Submission of Matters to a Vote of
      Security Holders
            11PART
      II.Item
      5.
            Market for Common Equity and Related
      Stockholder Matters
            12Item
      6.
            Selected Financial
      Data
            13Item
      7.
            Management's Discussion and Analysis
      or Plan of Operations
            13Item
      7A.
            Quantitative and Qualitative Disclosures About Market
      Risk
            19Item
      8.
            Financial Statements and
      Supplementary Data
            19Item
      9.
            Changes in and Disagreements With
      Accountants on Accounting and Financial
    Disclosure
            19Item
      9A (T).
            Controls and
      Procedures
            19Item
      9B.
            Other Information
            21PART
      III.Item
      10.
            Directors, Executive Officers, and
      Corporate Governance
            21Item
      11.
            Executive
      Compensation
            24Item
      12.
            Security Ownership of Certain
      Beneficial Owners and Management and Related Stockholder
      Matters
            25Item
      13.
            Certain Relationships and Related
      Transactions
            26Item
      14.
            Principle Accountant Fees and
      Services
            26Item
      15.
            Exhibits, Financial Statement Schedule and Reports on Form
      8-K
            27SIGNATURES
            28





Table of Contents




Item 1.  Descriptionof Business
  Background
  Acacia
Automotive, Inc. was originally formed in 1984 and, when named Gibbs
Construction, Inc. grew to a full service, national commercial construction
company, completing an initial public offering of its Common Stock to the public
in January, 1996.  In April, 2000, Gibbs Construction, Inc. filed for
protection under Chapter 11 of the United States Bankruptcy Code following the
filing for similar protection of the Company’s largest client and which followed
the incursion of significant losses on several projects.
  Prior to
filing for protection under the United States Bankruptcy Code in April 2000,
Gibbs Construction, Inc. had 4,060,000 shares of Common Stock issued and
outstanding.  The bankruptcy reorganization proceeding placed the
existing assets of Gibbs Construction, Inc. in a liquidating trust, issued
501,000 shares of Common Stock to the trust, and agreed to issue 1,000,000
shares of preferred stock to a creditor.  Thacker Asset Management,
LLC (“TAM”) agreed to sell to the Company certain existing contracts, furniture,
fixtures and equipment in exchange for 4,000,000 shares of Common
Stock.  Following these transactions, there were 8,561,000 shares of
the Company’s Common Stock issued and outstanding.
  TAM’s
operations were not successful, and all operating activities ceased in
2002.  On June 26, 2006, the bankruptcy trustee requested and received
an Order for Final Decree.  On October 5, 2006, the 501,000 shares of
common stock issued to the Trust were abandoned, returned to the Company, and
thereupon cancelled leaving 8,060,000 shares issued and
outstanding.
  Post
Bankruptcy Restructuring
  On August
15, 2006, Steven L. Sample acquired for $50,000, 4,000,000 shares, or 46.7%, of
the 8,561,000 issued and outstanding shares of Common Stock of the registrant
from TAM and its associates.  Mr. Sample also paid several costs, of
the company such as the costs associated with completing the bankruptcy
proceedings and arranging for the Company’s SEC filings to be brought current
and costs associated with recapitalizing the company. These costs totaled
$138,862. In connection with the payment of these costs, the registrant agreed
to effect a one for eight reverse stock split, to issue to Mr. Sample an
additional 8,117,500 shares of Common Stock and 500,000 shares of preferred
stock.  For the assistance of Harry K. Myers, Jr., a principal of
Baker #1, Ltd., the entity owning Thacker Asset Management, LLC, the registrant
agreed to issue to him 25,000 shares of preferred stock and 450,000 shares of
Common Stock.
  To
fulfill its obligations under this agreement and further restructure the
Company, the registrant’s board of directors recommended that its stockholders
amend the corporate charter to effect a one for eight reverse stock split, to
increase the number of authorized shares of Common Stock to 150,000,000 and to
create and establish a series of preferred stock.  On February 1,
2007, the Company’s shareholders approved these actions and also approved
changing the Company’s name to Acacia Automotive, Inc.  These
amendments to the Company’s charter were effective February 20,
2007
  Immediately
following the approval of these amendments, the Company adopted a stock option
plan, which was ratified by the Company’s stockholders in November 2007,
reserving 1,000,000 shares thereunder.  In February 2007 the directors
granted pursuant to the plan 500,000 restricted shares to Mr. Moorby, the
Company’s president, and options to two officers of the Company for another
15,000 shares.  With these grants, the exercise of warrants to
purchase 250,000 shares of Common Stock, the exchange of the preferred stock
issued to a creditor in the bankruptcy proceeding for 100,000 shares of Common
Stock, and the payment of 10,000 shares of Common Stock to a consultant, there
were 11,997,524 shares of Common Stock issued and outstanding on March 31,
2008.
  Contemplated
Business
  The
Company’s prime objective is to acquire going and functioning profitable
automotive auctions with a trailing record of financial success, focusing on
whole vehicle automobiles and light trucks.  Whole vehicle refers to
vehicles that are generally in good repair, are roadworthy and operate under
their own power as opposed to salvage units, that is, damaged vehicles that are
considered total losses for insurance or business purposes.  In
addition, the Company believes that if the acquired auction or auctions do not
service the boat, recreational or motor home segments or the medium and heavy
duty truck and equipment segments, it will seek to add one or more of those
services to the auction’s activities, assuming the local market will support
such additional services.
  4
 Table of Contents
  The
Company considers its first acquisition of an automobile auction as indicative
of the basis of services rendered by the Company.  The Company will
have to raise cash to acquire additional automobile auctions, probably through
the sale of Common Stock.
  On July
10, 2007, the registrant completed the acquisition of all of the assets of
Augusta Auto Auction, Inc. which conducted its business under the name Augusta
Auto Auction and previously Hilltop Auto Auction.  The registrant
issued 500,000 shares of its Common Stock and a warrant to purchase 50,000
shares of Common Stock for the assets.  The warrant has a term of five
years and an exercise price of $1.00.  In addition, the registrant
issued to two individuals a warrant to purchase 75,000 shares of Common Stock in
consideration for entering into a non-compete agreement. Of the 75,000 warrants
issued to each of those individuals for non-compete agreements, they were given
the right to purchase 25,000 shares of Common stock each at $1.00, $2.00 and
$4.00 respectively for an average aggregate price of $2.33 per share within five
years of issuance.
  The
Company has signed a letter of Intent to acquire a profitable automobile auction
in the southeastern United States, but cannot disclose the nature or location of
that entity until final funding for the acquisition is complete and the
definitive agreement has been executed.
  History
of Augusta Auto Auction
  Augusta
Auto Auction, Inc. (the “Auction”) is an automotive auction located in North
Augusta, South Carolina, part of the Augusta, Georgia, metropolitan area, and is
located three miles from the center of that city. The auction was originally
formed and operated for many years in its present location as Hilltop Auto
Auction.  In 2002 the group from which the registrant purchased the
auction formed Augusta Auto Auction, Inc. after acquiring it from the owners of
Hilltop Auto Auction.
  Acacia
Automotive formed a new South Carolina corporate subsidiary in July of 2007
which acquired the assets of Augusta Auto Auction.  The new
corporation is named Acacia Augusta Vehicle Auction, Inc. d/b/a Augusta Auto
Auction, Inc.
  Business
of the Auction
  The
Auction sells whole car and salvage vehicles for automotive dealers and
commercial concerns. It also has the contract to sell vehicles and equipment for
the U.S. Marshals Service in the South Carolina area, primarily offering
confiscated vehicles and other units for them. Dealers and other qualified
buyers attend the weekly auctions and bid on offered units. The highest bidder
owns the vehicle, subject to any limiting reserve prices established by the
owner/seller of the unit(s). In most cases, the buyers and sellers of the units
pick up and deliver them to the Auction property, but the Auction does provide
some transport services, generally for a fee.
  The
Auction generates revenues from fees for its services, including buyer fees,
seller fees, transportation fees, title fees, draft and floor plan fees,
reconditioning fees, and more. Augusta Auto Auction relies upon the efforts of
its management for sales and marketing, but anticipates adding additional
personnel in the future to increase the scope of those operations.
  The
Auction markets its activities through its employees.
  Industry
  Automotive
auctions are the hub of a massive redistribution system for used vehicles and
equipment. These auctions enable commercial and institutional customers and
selling dealers to easily dispose of their used vehicles to franchised,
independent, and wholesale used vehicle and equipment dealers. The auction’s
responsibility is to maximize the selling price obtained for clients’ used
vehicles and equipment, efficiently transfer the physical and administrative
ownership of the units (including the preparation and transfer of certificates
of title and other evidence of ownership), and transfer funds resulting from the
buy/sell transactions as quickly as possible from the buyers to the
sellers.  The auction promotes its services to a large number of
dealers seeking to restock their inventories for resale opportunities. Auctions
are traditionally held weekly, if not more frequently, at the various locations
to accommodate the needs of buyers and sellers in diverse segments of the
industry. During the process, auctions do not generally take title to or
ownership of the vehicles consigned for sale, but instead facilitate the
transfer of vehicle ownership directly from seller to buyer, and in so doing
they generate fees from the buyer and from the seller. In addition to these
“buy/sell” fees, the auctions can generate substantial revenues by providing
other services to clients, including: vehicle appearance reconditioning
(detailing) services; paint and body repair; paintless dent repair (PDR); glass
repair and replacement; key replacement; upholstery repair; minor mechanical
repair; title services; sales of tires, batteries and accessories (TBA);
marshaling (controlled storage) and inspection services, inbound and outbound
transportation and delivery services, and more. In most instances, customers may
also purchase each of these value-added services separately and directly from
the auction in addition to having these services performed to units enrolled in
the normal vehicle auction process.
  5
 Table of Contents
  The total
number of vehicles offered for sale, and the total number of vehicles sold allow
for determination of the total and per unit costs incurred and fees generated by
the process. An important measure to the results of the used vehicle auction
process is the conversion percentage, which represents the number of vehicles
sold as a percentage of the vehicles offered for sale. In general, a high sales
volume and conversion percentage efficiency at an auction converts to increased
fees, lower costs, and greater profit opportunities. Auto auctions can also
provide additional services to their clients, often including: (1) in-house
services such as processing, advertising and marketing of the vehicles to be
offered for sale; registration of new dealers and clients; processing of sale
proceeds and other funds; handling arbitration disputes from the auction
sale/purchase process; preparation of and transmittal of vehicle condition
reports; security services for client inventories; creation and distribution of
sales and marketing reports; as well as the actual sale of vehicles by licensed
auctioneers; (2) internet-based solutions, including on-line bulletin board
auctions and on-line live auctions that are simulcast in real-time in
cooperation with the actual physical auctions; and, (3)  title
processing and other paperwork administration and ancillary
services.
  Competition
  The
Company anticipates competing principally by service.  Management of
the Company believes that service is one keystone upon which auto auctions are
routinely measured, and has identified and made the practical execution of a
high level of service to its clients an integral part of its business and
operating plans.
  The
industry served by the Company is highly competitive across the entire United
States and Canada. It is anticipated that any of our acquisition targets would
potentially compete with a variety of knowledgeable and experienced companies.
The main competitors the Company would expect to face throughout the United
States are: (1) Manheim Auto Auctions: Manheim, a subsidiary of Cox Enterprises,
has approximately 90 auto auctions throughout the United States and others in
Canada and elsewhere around the globe. Manheim owns several of the country’s
largest auction facilities, and our management considers them to be very
competitive and the leader in technological processes and Internet marketing
capabilities. (2) ADESA Auto Auctions: ADESA, traded on the NYSE under the
symbol KAR prior to being acquired by an investor group led by Kelso and Company
in April of 2007 and thereby being taken private, is the second-largest auto
auction company in North America with approximately 58 whole car auctions. They
operate some 44 auctions in the United States and 14 in Canada. Acacia’s
Management believes that ADESA’s technological processes and Internet marketing
capabilities, while lagging those of Manheim, are nonetheless formidable. (3)
Auction Broadcasting Company (ABC): ABC owns and operates approximately seven
auctions nationally. While not nearly so large in their technological processes
and Internet marketing capabilities as Manheim or ADESA, ABC has worked to
develop a diverse model from its competitors. Acacia’s management does not
believe that ABC is seeking to gain a substantially greater position in the
traditional auction arena marketplace than it presently holds, (4) independent
auto auctions: There are hundreds of independent auto auctions operating in the
United States.  Acacia actually sees these independent auctions as
targets for future acquisitions, and enjoys a friendly relationship in most
instances. (5) “mobile” auctions: There are several companies that operate
“mobile” auctions. Their plans primarily entail engaging larger dealerships to
host periodically “on-site” auctions that utilize these companies’ auctioneering
and administrative services. Management does not believe these smaller
independent mobile auctions are a substantial threat to our operations and will
not likely become so under their present business models.
  There are
at least eleven auto auctions in operation in Georgia, and there are another six
or more in South Carolina.  The two largest whole-car national
automobile auction companies, Mannheim Auto Auctions and ADESA, have a total of
three auctions in Georgia, all near Atlanta, Georgia.  While ADESA
does not have an auction in South Carolina, Mannheim has one auction in
Darlington, South Carolina.  Auction Broadcasting Corporation also has
an auction near Atlanta, Georgia but none in South Carolina. In addition to
those auction companies’ operations, there are several other independent auto
auctions operating in Georgia, some specializing in sales of damaged or
“salvage” units and perhaps one or more mobile auctions that will host on-site
auctions at dealerships.
  All our
competitors will be seeking the same or similar clients as those targeted by our
planned operations in every state in which we may seek to operate, many of which
presently have significantly greater financial, technical, marketing and other
resources than our Company. Our Company expects that it will face additional
competition from existing competitors and new market entrants in the future. The
principal competitive factors in our markets will emanate from the larger
national companies and will include: (i) brand name recognition of competitors;
(ii) larger, more modern, and better-equipped facilities; (in) superior Internet
system engineering and technological expertise; (iv) more extensive staffs of
experienced management and support personnel; (v) broader geographic presence;
(vi) greater financial resources; (vii) introductions of new and enhanced
services and products; and, (viii) greater variety of services
offered.  We will have no control over how successful our competitors
are in addressing these factors. Increased competition can result in price
reductions, reduced gross margins and loss of market share, any of which could
harm our net revenue and results of operations. The Company will rely upon its
ability to offer the same or similar services as the competition, but with a
higher level of service and customer satisfaction.
  The
prices to be charged by any auction the Company may acquire will generally be
reflective of the competitive pricing in its local marketplace.  Some
of these local markets may face competitive pressures from national automobile
auction chains such as ADESA and Manheim which have size, financial and market
strengths the Company lacks.
  6
 Table of Contents
  Employees
  The
company currently has two officer employees, Steven L. Sample, its Chairman and
Chief Executive Officer, and Tony Moorby, its President and Chief Operating
Officer. The Augusta auction employs eight full time and 17 part time
people.  The registrant plans to increase the number of employees,
both part time and full time, as it expands its operations.
  A given
automobile auction will employ both full and part-time personnel and the number
of employees may vary from as few as 10 to as many as 300 or
more.  The approximate size of our target auctions may more likely lie
within the range of 50 to 100 employees.
  The
parent company, upon any successful course of acquiring auctions, would need to
expand its staff to implement the controls necessary to manage a larger
organization. This would likely result in the need for a Chief Financial
Officer, as well other officers and managers and basic support personnel The
Company will undertake to operate with the smallest corporate management staff
possible so as to maintain the lowest overhead possible while still effecting
sufficient management processes to properly guide the company.
  Governmental
Regulation
  The
Company, as with most companies operating vehicle auctions, is subject to
various permits and licenses. These include vehicle dealer licenses, auctioneer
licenses, business permits and licenses, sales tax permits, and others. The
registrant’s auction has obtained all permits necessary to function under the
current South Carolina regulations
  Item 1A. RiskFactors
  Because
We Have Limited Operating History, it is Difficult to Evaluate Our
Business.
  The
Company acquired a shell corporation that had no assets or liabilities after
emerging in 2006 from six years in bankruptcy, and the Company began operating
in July 2007 with the acquisition of one automobile auction.  Because
of our limited operating history, you have very little operating and financial
data about us upon which to base an evaluation. You should consider our
prospects in light of the risks, expenses and difficulties we may encounter,
including those frequently encountered by new companies. If we are unable to
execute our plans and grow our business, either as a result of the risks
identified in this section or for any other reason, this failure would have a
material adverse effect on our business, prospects, financial condition and
results of operations.
  We plan
to grow through acquisitions, and investors have no current basis to evaluate
the possible merits or risks of the target businesses' operations or our ability
to identify and integrate acquired operations into our company. To the extent we
complete a business combination with a financially unstable company or an entity
in its development stage, we may be affected by numerous risks inherent in the
business operations of those entities. Although our management will endeavor to
evaluate the risks inherent in a particular target business, we cannot assure
you that we will properly ascertain or assess all of the significant risk
factors.
  The
purchase of our securities is a purchase of an interest in a high risk or in a
new or “start-up” venture with all the unforeseen costs, expenses, problems, and
difficulties to which such ventures are subject.
  7
 Table of Contents
  We
plan to grow through acquisitions
  Because
we intend to develop and expand our business through selective acquisitions of
automobile auctions and other complementary businesses, there are significant
risks that we may not be successful. We may not be able to identify, acquire or
profitably manage additional companies or assets or successfully integrate such
additional companies or assets without substantial costs, delays or other
problems. In addition, companies we may acquire may not be profitable at the
time of their acquisition or may not achieve levels of profitability that would
justify our investment. Acquisitions may involve a number of special risks,
including
  •
              adverse
      short-term effects on our reported operating
  results,
  •
              diversion
      of management's attention,
  •
              dependence
      on retaining, hiring and training key
personnel,
  •
              risks
      associated with unanticipated problems or legal
    liabilities,
  •
              amortization
      of acquired intangible assets, some or all of which could reflect poorly
      on our operating results and financial
reports,
  •
              implementation
      or remediation of controls, procedures and policies appropriate for a
      larger public company at companies that prior to the acquisition lacked
      these controls, procedures and policies;
and,
  •
              incursion
      of debt to make acquisitions or for other operating
  uses.
  We
will implement our acquisition strategy in what may be considered a mature
industry
  We
believe the vehicle redistribution industry through auctions may be considered a
mature industry in which single-digit or low double-digit growth may occur. Most
growth for our Company would, accordingly, occur largely through acquisitions.
To the extent that competitors are also seeking to grow through acquisitions, we
could encounter competition for those acquisitions or a generally increasing
price to acquire automobile auctions.
  A primary
part of the Company’s strategy is to establish revenue through the acquisition
of additional companies. There can be no assurance that the Company will be able
to identify, acquire or profitably manage additional companies or successfully
integrate the operations of additional companies into those of the Company
without encountering substantial costs, delays or other problems. In addition,
there can be no assurance that companies acquired in the future will achieve or
maintain profitability that justify liabilities that could materially adversely
affect the Company's results of operations or financial condition. The Company
may compete for acquisition and expansion opportunities with companies that have
greater resources than the Company. There can be no assurance that suitable
acquisition candidates will be available, that purchase terms or financing for
acquisitions will be obtainable on terms acceptable to the Company, that
acquisitions can be consummated or that acquired businesses can be integrated
successfully and profitability into the Company’s operations. Further, the
Company's results of operations in fiscal quarters immediately following a
material acquisition may be materially adversely affected while the Company
integrates the acquired business into its existing operations.
  The
Company will attempt to acquire profitable business entities that are going and
functioning concerns with a trailing history of profitability, but may acquire
certain businesses that have either been unprofitable, have had inconsistent
profitability prior to their acquisition, or that have had no operating history.
An inability of the Company to improve the profitability of these acquired
businesses could have a material adverse effect on the Company. Finally, the
Company's acquisition strategy places significant demands on the Company's
resources and there can be no assurance that the Company's management and
operational systems and structure can be expanded to effectively support the
Company's acquisition strategy. If the Company is unable to successfully
implement its acquisition strategy, this inability may have a material adverse
effect on the Company's business, results of operations, or financial condition.
The Company may face the opportunity to enhance shareholder value by being
acquired by another company. Upon any acquisition of the Company, the Company
would be subject to various risks, including the replacement of its management
by persons currently unknown. There can also be no assurance that, if acquired,
new management will be successfully integrated or can profitably manage the
Company. In addition, any acquisition of the Company may involve immediate
dilution to existing shareholders of the Company. In its present configuration,
the Company cannot be forcibly acquired in a hostile takeover, and therefore the
Company can review the ultimate impact on its shareholders prior to engaging in
any such activities. No assurances can be given that the Company will be able to
or desire to be acquired, or be able to acquire additional
companies.
  8
 Table of Contents
  Possible
Need for Additional Financing
  The
Company intends to fund its operations and other capital needs for the next six
months from private placements, but there can be no assurance that such funds
will be sufficient for the purposes of our business. The Company may require
additional amounts of capital for its future expansion and working capital. The
Company has made preliminary arrangements to obtain future additional financing,
if required, but there can be no assurance that such financing will be
available, or that such financing will be available on acceptable
terms.
  Dependence
on Tony Moorby and Steve Sample
  Our
future performance depends in significant part upon the continued service of our
President and Chief Operating Officer, Tony Moorby, and our Chief Executive
Officer, Steve “Junior” Sample. The loss of their services could have a material
adverse effect on our business, prospects, financial condition and results of
operations. The Company does not presently maintain key man life insurance on
Mr. Moorby and Mr. Sample, but may obtain such insurance at the discretion of
its board of directors for such term as it may deem suitable or desirable. Our
future success also depends on our ability to attract and retain highly
qualified technical, sales and managerial personnel. Although the Company feels
that there is a sufficient pool of talent available, the competition for such
personnel can be intense, and there can be no assurance that we can attract,
assimilate or retain highly qualified technical, sales and managerial personnel
for favorable compensations in the future.
  Technological
Change
  Technology,
particularly the ability to use the Internet to view vehicles, to conduct
Internet auctions, to allow customers to participate through the Internet in
on–site auctions, and to allow several management functions for buyers and
sellers for vehicle auctions is characterized by rapidly changing technology,
evolving industry standards, frequent new product and service announcements,
introductions and enhancements, and changing customer demands. Our future
success will to some degree depend on our ability to adapt to rapidly changing
technologies, our ability to adapt its solutions to meet evolving industry
standards and our ability to improve continually the performance, features and
reliability of its solutions. The failure of the Company to adapt successfully
to such changes in a timely manner could have a material adverse effect on the
Company's business, results of operations and financial condition. Furthermore,
there can be no assurance that the Company will not experience difficulties that
could delay or prevent the successful implementation of solutions, or that any
new solutions or enhancements to existing solutions will adequately meet the
requirements of its current and prospective customers and achieve any degree of
significant market acceptance. If the Company is unable, for technological or
other reasons, to develop and introduce new solutions or enhancements to
existing solutions in a timely manner or in response to changing market
conditions or customer requirements, or if its solutions or enhancements do not
achieve a significant degree of market acceptance, the Company's business,
results of operations and financial condition could be materially and adversely
affected.
  Competition
  The
industry served by the Company is highly competitive across the entire United
States and Canada. We currently or potentially compete with a variety of
companies. Our first acquisition, servicing the Augusta, Georgia, area, was
acquired July 10, 2007, and we anticipate that the Company’s other early
acquisitions will be in the eastern United States, but there is no assurance it
will be able do so. See “Item
1- Business – Competition.”
  Control
  The
Company is currently controlled by two of its officers and directors. Tony
Moorby, the Company’s President and COO, and Steven L. Sample, the Company’s
CEO, currently own 59.8% of the Company’s issued and outstanding common stock.
Mr. Sample and Mr. Moorby and will initially retain effective control over the
Company’s operations, including the election of a majority of its board of
directors, the issuance of additional shares of equity securities, and other
matters of corporate governance Based upon the Company's current business plan,
it is anticipated that Mr. Moorby and Mr. Sample will continue to have effective
but not ultimate control of the Company well into future, perhaps even after
some subsequent private offerings or a public offering.
  Management
of Growth
  The
Company has signed a Letter of Intent to acquire a profitable southeastern U.S.
auto auction, and is currently seeking to identify and acquire additional going
and functioning auto auctions. As a result, the Company must manage
relationships with a growing number of third parties as it seeks to accommodate
this goal. The Company's management, personnel, systems, procedures and controls
may not be adequate to support the Company’s future operations. The Company's
ability to manage its growth effectively will require it to continue to expand
its operating and financial procedures and controls, to replace or upgrade its
operational, financial and management information systems and to attract, train,
motivate, manage and retain key employees. If the Company's executives are
unable to manage growth effectively, the Company's business, results of
operations and financial condition could be materially adversely affected. If
successful in acquiring additional auto auctions, the Company expects to inherit
a substantial portion of the staff necessary to operate the new entities. We may
find that some of the personnel and management of any acquisition target(s) may
not be suitable for continued employment, while other suitable candidates may
elect to discontinue their employment or affiliation with the Company for
various reasons. This can create a burden on the Company’s management as it
seeks to fill key positions. Failure of the Company to do so in a timely manner
can result in disruption of auction operations, loss of revenues, and a
subsequent reduction in profits.
  9
 Table of Contents
  Risks
Associated with Expansion
  The
Company commenced auction operations first in one location and market, and plans
to subsequently expand into other locations and markets.  To date, the
Company does not have experience in developing services on a regional or
national scale. There can be no assurance that the Company will be able to
deploy successfully its services in these markets. There are certain risks
inherent in doing business in several diverse markets, such as; unexpected
changes in regulatory requirements, potentially adverse tax consequences, local
restrictions, controls relating to inter-company communications and technology,
difficulties in staffing and managing distant operations, fluctuations in
manpower availability, effects of local competition, weather and climactic
trends, and customer preferences, any of which could have a material adverse
effect on the success of the Company's operations and, consequently, on the
Company's business, results of operations, and financial condition.
  Product
and Service Offerings
  The
Company is primarily a service business.  It is important to our
future success to expand the breadth and depth of our service offerings to stay
abreast of the competition and to enhance our potentials for growth of revenues
and profits. Expansion of our service categories and service offerings in this
manner will require significant additional expenditures and could strain our
management, financial and operational resources. For example, we may find it
prudent to build, outfit, and operate a body and paint shop at an auction
facility that does not presently have one. We cannot be certain that we will be
able to do so in a cost-effective or timely manner or that we will be able to
offer certain services in demand by our customers, or to do so in a quality
manner. Furthermore, any new service offering that is not favorably received by
the Company’s clients could damage our reputation. The lack of market acceptance
of new services or our inability to generate satisfactory revenues from expanded
service offerings to offset their costs could harm our business. If we do not
successfully expand our sales and service operations, our revenues may fall
below expectations.  If we do not successfully expand our operations
on an ongoing basis to accommodate increases in demand, we will not be able to
fulfill our customers’ needs in a timely manner, which would harm our business.
Most of our service operations are anticipated to be handled at our facilities,
but some services may be performed at offsite locations or by approved vendors
or contractors. Any future expansion may cause disruptions in our business and
may be insufficient to meet our ongoing requirements.
  Government
Regulation and Legal Uncertainties
  Any new
legislation or regulation, or the application of laws or regulations from
jurisdictions whose laws do not currently apply to the Company's business could
have a material adverse effect on the Company's business, results of operations
and financial condition.
  Check,
Credit Card, and Other Fraud
  Our
business would be harmed if we experience significant check, credit card, or
other fraud. If we fail to adequately control fraudulent transactions, our
revenues and results of operations could be harmed. The Company’s auction
operations will subscribe to the services of Auction Insurance Agency as a
protection against risks similar to these, but while the Company’s exposure to
loss in this event is thought to be limited by the purchase of insurance, losses
could nonetheless occur. Any losses sustained as a result of fraud or fraudulent
activity would adversely affect the Company's business and results of
operations, and its financial condition could be materially adversely
affected.
  Development
of and Dependence on Key Personnel
  The
Company's success depends in significant part upon the hiring, development and
retention of key senior management personnel. Our anticipated future operations
will place a significant strain on our management systems and resources. Our
ability to implement successfully our business strategy requires an effective
planning and management process. Competition for such personnel is intense, and
the Company may not be able to attract and retain key personnel. The loss of the
services of one or more of the Company's key employees or the Company's failure
to attract additional qualified personnel could have a material adverse effect
on the Company's business, results of operations and financial condition. The
Company does not currently carry key man life insurance for any of its
employees, but is subject to do so at the direction of its Board of Directors.
Any cost of key man insurance would be borne by the Company.
  Liability
Claims
  The
Company may face costly liability claims by consumers. Any claim
of  liability by a client, employee, consumer or other entity against
us, regardless of merit, could be costly financially and could divert the
attention of our management. It could also create negative publicity, which
would harm our business. Although we maintain liability insurance, it may not be
sufficient to cover a claim if one is made.
  10
 Table of Contents
  Risks
of Low Priced Stocks
  Although
the Company is currently a public company, its trading is limited to the Pink
Sheets.  A trading market for the Company's Common Stock could develop
further, but there can be no assurance that it will do so. The Securities and
Exchange Commission (the “SEC” or “Commission”) has adopted regulations which
define a “penny stock” to be any equity security, such as those being offered by
the Company herein, that has a market price (as therein defined) of less than
$5.00 per share or an exercise price of less than $5.00 per share, subject to
certain exceptions. For any transaction involving a penny stock, unless exempt,
the rules require the delivery, prior to any transaction involving a penny stock
by a retail customer, of a disclosure schedule prepared by the Securities and
Exchange commission relating to the penny stock market. Disclosure is also
required to be made about commissions payable to both the broker/dealer and the
registered representative and current quotations for the securities.
Accordingly, market makers may be less inclined to participate in marketing the
Company’s securities which may have an adverse impact upon the liquidity of the
Company’s securities.
  No
Assurance of Payment of Dividends
  Should
the operations of the Company become profitable it is likely that the Company
would retain much or all of its earnings in order to finance future growth and
expansion. Therefore, the Company does not presently intend to pay dividends,
and it is not likely that any dividends will be paid in the foreseeable
future.
  Potential
Future Capital Needs
  The
Company may not be successful in generating sufficient cash from operations or
in raising capital in sufficient amounts on acceptable terms. The failure to
generate sufficient cash flows or to raise sufficient funds may require the
Company to delay or abandon some or all of its development and expansion plans
or otherwise forego market opportunities and may make it difficult for the
Company to respond to competitive pressures, any of which could have a material
adverse effect on the Company's business, results of operations, and financial
condition. There can be no assurance that the proceeds in this Offering will be
sufficient to permit the Company to implement its proposed business plan or that
any assumptions relating to the implementation of such plan will prove to be
accurate. The Company has executed a term sheet summarizing certain terms and
conditions it anticipates to be included in a real estate purchase credit
facility with a financial source, but has not yet executed the actual agreement
at the time as of the date of this offering.  To the extent that the
proceeds of this Offering are not sufficient to enable the Company to generate
meaningful revenues or achieve profitable operations, the inability to obtain
additional financing will have a material adverse effect on the Company. There
can be no assurance that any such financing will be available to the Company on
commercially reasonable terms, or at all.
  Item 1B. UnresolvedStaff Comments
  None and
Not applicable.
  Item 2. Descriptionof Property
  The
Company currently leases its principal offices in Brentwood, Tennessee, on a one
year lease, renewable, which expires on May 31, 2007, for a monthly lease
payment of $2,000.
  In July
2007, the Company entered into a twelve month lease on the location where the
Augusta Auto Auction has operated for several years.  The lease term
can be extended and currently has a monthly lease rate of $2,700.  The
facility consists of approximately five acres, houses two administrative
buildings and a two-lane auction arena, and provides parking for several hundred
vehicles.  The compound is fenced, and the registrant has recently
installed an electrified security fence system as well as security systems in
its buildings and auction arena.  In addition to the main auction
facility, the registrant also leases property which is used for additional
customer parking and allows for parking of approximately 200 customer vehicles
on sale days.  This property is located directly across the street
from the main facility and is leased on a month-to month basis for $100 per
week.
  Item 3. LegalProceedings
  On June
26, 2006, approximately six years after filing, the United States Bankruptcy
Court for the Northern District of Texas, Dallas Division closed the Gibbs
Construction, Inc. bankruptcy proceeding case following an application for Final
Decree.
  Item 4. Submissionof Matters to a Vote of Security
Holders
  Not
Applicable.
  11
 Table of Contents
  PART
II
  Item 5. Marketfor Common Equity and Related Stockholder
Matters
  There has
been sporadic trading in our stock for the last two fiscal years in the pink
sheets.  We are presently traded in the pink sheets under the symbol
ACCA.  The following table sets forth information as reported by the
National Association of Securities Dealers Composite Feed or Other Qualified
Interdealer Quotation Medium for the high and low bid and ask prices for each of
the eight quarters ending December 31, 2007, including the interim period in the
first quarter of 2007 prior to the registrant’s one for eight reverse stock
split.
  Closing
      Bid
                
                
                Closing
      AskHigh
                
                
                Low
                
                
                High
                
                
                LowQuarters
      ending in 2006March
      31
                
                
                0.005
                
                
                
                0.005
                
                
                
                0.01
                
                
                
                0.01June
      30
                
                
                0.005
                
                
                
                0.005
                
                
                
                0.01
                
                
                
                0.01September
      30
                
                
                0.02
                
                
                
                0.005
                
                
                
                0.05
                
                
                
                0.01December
      31
                
                
                0.02
                
                
                
                0.015
                
                
                
                0.05
                
                
                
                0.03Quarters
      ending in 2007Feb
      16 (one for eight split
                
                
                0.05
                
                
                
                0.15
                
                
                
                0.07
                
                
                
                0.03March
      31
                
                
                1.50
                
                
                
                0.30
                
                
                
                2.00
                
                
                
                0.75June
      30
                
                
                1.80
                
                
                
                0.54
                
                
                
                2.00
                
                
                
                0.58September
      30
                
                
                2.00
                
                
                
                0.60
                
                
                
                2.05
                
                
                
                0.85December
      31
                
                
                0.80
                
                
                
                0.08
                
                
                
                1.20
                
                
                
                0.75
  As of
March 31, 2008, the Company had approximately 110 stockholders of record. We
believe that we also have approximately 280 beneficial
shareholders.
  Holders
of common stock are entitled to receive dividends as may be declared by our
board of directors and, in the event of liquidation, to share pro rata in any
distribution of assets after payment of liabilities. The board of directors has
sole discretion to determine: (i) whether to declare a dividend; (ii) the
dividend rate, if any, on the shares of any class of series of our capital
stock, and if so, from which date or dates; and (iii) the relative rights of
priority of payment of dividends, if any, between the various classes and series
of our capital stock. We have not paid any dividends and do not have any current
plans to pay any dividends.
  12
 Table of Contents
  At its
meeting of directors on February 1, 2007, the Company’s board of directors
approved its 2007 Stock Option Plan which was approved by our stockholders on
November 2, 2007, reserving 1,000,000 shares to be issued
thereunder.  At that meeting, the directors granted restricted stock
to two individuals and options to two individuals, summarized as
follows:
  Summary
of Equity Compensation Plans
  Number
      of
                
                
                WeightedSecurities
      to be
                
                
                Average
                
                
                Number
      ofIssued
      Upon
                
                
                Exercise
      Price
                
                
                SecuritiesExercise
      of
                
                
                of
                
                
                RemainingOutstanding
                
                
                Outstanding
                
                
                Available
      forOptions
      and
                
                
                Options
      and
                
                
                FuturePlan Description
                
                Warrants
                
                
                Warrants
                
                
                IssuanceWarrants not approved by
      stockholders*
                
                
                -
                
                
                
                -
                
                
                
                -Grants
      Under Compensation PlansApproved
      by shareholders**
                
                
                155,000
                
                
                $
                0.59
                
                
                
                345,000Totals
                
                
                155,000
                
                
                $
                0.59
                
                
                
                345,000
                ***
 *
Excludes 1,425,000 warrants held by Mr. Sample issued in exchange for shares of
the Company’s Preferred stock and not for compensation. The average execution
price of the warrants is $2.33 per share, and 950,000 of them are tied to
specific future performance levels by the company over the next three fiscal
years. Also excludes warrants issued to Frank Lawrence, a director of the
Company, issued to him as part of the consideration for purchasing of the
Augusta Auto Auction. The average execution price of said warrants is $1.77 and
expire in July 2010.
  **
Excludes a stock grant of 500,000 shares under the Company’s 2007 Incentive
Stock Plan awarded Mr. Moorby.
  ***
Effective January 1, 2008, the number of shares available under the plan
increased by 479,900 shares.
  Item 6. SelectedFinancial Data
  Not
Applicable.
  Item 7. Management'sDiscussion and Analysis or Plan of
Operations
  Forward-Looking
Information
  The
Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of the Form 10-K contain forward-looking
information. The forward-looking information involves risks and uncertainties
that are based on current expectations, estimates, and projections about the
Company's business, management's beliefs and assumptions made by management.
Words such as "expects", "anticipates", "intends", "plans", "believes", "seeks",
"estimates", and variations of such words and similar expressions are intended
to identify such forward-looking information. Therefore, actual outcomes and
results may differ materially from what is expressed or forecasted in such
forward-looking information due to numerous factors, including, but not limited
to, availability of financing for operations, successful performance of internal
operations, impact of competition and other risks detailed below as well as
those discussed elsewhere in this Form 10-KSB and from time to time in the
Company's Securities and Exchange Commission filings and reports. In addition,
general economic and market conditions and growth rates could affect such
statements.
  13
 Table of Contents
  General
  Discussion
Regarding the Company’s First Acquired Operating Entity
  With the
acquisition of the Augusta Auto Auction on July 10, 2007, the Company commenced
operations, ceased being a shell company, and conducted its first weekly auction
on July 11th under Acacia’s management.  The Company’s only operations
in 2007 were those operations.
  In
looking to the future after acquiring the auction, the Company made substantial
investments and changes during Q4 2007 that initially had a far greater negative
impact on its immediate operations and profitability than originally
anticipated.  Those changes included a number of efforts that bore
significant costs in terms of cash outlays and operating hardships, including
but not limited to:
  1.  Improvements
to Physical Plant.  A significant effort was made to remodel, beautify
and increase security at the existing auction facility in North
Augusta.  The aging facility, while rented, was in serious need of
improvement.  The Company installed new signage and painted most work
areas including ceiling tiles, walls, auction lanes, and trim. It also remodeled
the restaurant area, had all equipment professionally cleaned, and installed
many new furnishings.  The administrative offices and lobby were
redesigned and new countertops were installed in affording a cleaner and more
efficient look and functionality.  Restroom areas were enlarged and
added as needed.  Desks and chairs were added as new and replacement
equipment, and a substantial amount of equipment and supplies were
added.  The Company installed a new electrified security fence around
the entire perimeter and installed security systems in both buildings and the
auction arena, all of which is professionally monitored.
  2.  Upgrades
to Technology Equipment and Operating Software.  The Company installed
a new HP Proliant Server where there had been none
before.  Additionally, it added a number of new Lenovo desktop and
laptop computers, all new HP laser printers, Troy MICR printers, portable
tablets and printers for lot operations, full-coverage LAN wireless systems
providing ample signal strength to the entire facility, and installed many new
CAT5 cable runs to accommodate additional workstations.  The Company
installed computers and printers in the auction lanes accommodating the
“paperless block” concept for the first time at that location, and will add
applications to capture audio and video from the actual auction
proceedings.  New Microsoft Server software was installed to enable
the new network, and other software has been or will be installed enabling MS
Exchange, security software, and various other applications. In addition, the
Company purchased licenses to greatly empowered financial software that will
support its growth well into the future, and has created a new and
greatly-expanded financial reporting environment that is scheduled for
implementation in Q2 of 2008.
  3.  Upgrades
to Technology Software – Auction Operating System.  The auction had
been operating on a common software platform that is in wide use throughout the
United States with independent auctions, but did not provide many of the
expanded capabilities desired by management. Shortly after acquiring Augusta
Auto Auction, the company entered into an agreement to purchase an auction
software operating system that is expected to set a new standard for independent
auctions in the industry, but which was not yet refined to meet the needs of the
whole car auction business.  In assuming a role akin to “partnering”
with a software developer/provider to assist in developing the new software for
the needs of the Company and the industry, the Company will enjoy certain
continuing and long-term benefits associated with its
investment.  While the Company fully anticipated some hardships
associated with the new installation, it initially suffered more substantial
difficulties with implementation of the programs than expected as the program
was being altered to fit our industry and our auction’s specific
needs.  The substantial changes required to make the software
compatible with the Company’s needs was underestimated, making the launch
premature. This situation caused operating setbacks, additional stress on the
auction’s small workforce of employees, and a measurable degree of customer
dissatisfaction, all of which resulted in decreased customer participation,
particularly as measured in vehicle unit entries and sales and revenues for the
auction during December of 2007 and Q1 of 2008.  Since that time, the
Company and its software supplier have successfully worked together to overcome
a significant number of the initial issues and have streamlined a joint program
to plan, oversee, track, and smoothly implement future modifications and
additions to the auction operating systems.
  14
 Table of Contents
  As a
result of our close coordination with and confidence in this software vendor, we
believe that the software and operating system objectives we sought will be
achieved, including, but not limited to  (a) providing an operating
environment in which the Company can monitor and/or combine the operating
results of any or all its auctions and other operations in real time as it grows
through planned acquisitions; (b) exporting all financial and operating data
relative to any one or more of its entities directly to our new financial
reporting software, thus greatly reducing the labor requirement, time to
reporting delays, and associated costs in the accounting area even as the
Company is given faster and broader access to its information and operating
statistics; (c) providing state-of-the-art access through web-based servers
utilizing Oracle database technologies and housed in high-security environments
at diverse geographical locations throughout the United States for both data
security and redundancy in the event of catastrophe.  This feature
also eliminates the need for individual local auction-specific servers to
support operations at each auction and is expected to reduce labor costs
associated with data entry.  An added benefit of a web-based system is
that the Company’s management can now directly access any auction or combination
of auctions at any time from any location, even from portable devices such as
laptop computers. It will also (d) provide a complete portal allowing the
Company’s auctions to engage in Internet selling through both static and
simulcast sales, giving it the additional exposure required to take its place in
the current sales technology environment; and (e) increase the ability of the
Company’s auctions to better compete in the salvage auction industry as a result
of having the current high level of technology demanded by larger salvage
industry sellers and which has not been previously available to the
Company.
  In a
recent announcement, the Company’s two active software vendors supplying its
auction operating systems (the original system which the auction continues to
maintain and the new system which is in current use and undergoing continuing
development) made public their intention to merge.  This is a very
positive development for the Company, since it will allow for smoother
integration of its old data to the new system, will provide additional markets
for Internet-based selling efforts through the combined resources of the two
vendors’ operations, and will provide the vendors with substantially greater
presence in the marketplace than either previously enjoyed.
  Operating
Results of the Auction
  As a
direct and proximate result of the foregoing negative effects associated with
the changes and improvements, together with changes in personnel and management,
adversities encountered with the Company’s first advance into the industry as a
holding company, and difficulties encountered with implementing its new
technology systems, the Auction incurred a loss of $184,527 for the 12 months
ended December 31, 2007, having actually only owned and operated the auction for
six months of that period   Of that loss, $95,916 represented
non-cash expenses for amortization and depreciation  and more than
$25,000 represented non-recurring cash expenses associated with the improvements
described above.
  We
believe that we incurred a total of approximately $142,171in expenses associated
with the remodeling, upgrade, and improvement of the facilities, software, and
equipment, of which approximately $117,171 was capitalized.
  The
following table sets forth certain information about the Augusta Auto Auction
regarding units entered, that is, the number of units brought to the auto
auction for sale, the units actually sold, and the conversion rate, that is, the
number of units actually sold as a percentage of the number of units brought to
the auction for sale, as well as changes in the Buy/Sell Fee Revenues comparing
the previous year’s results to 2007:
  Q3
                
                
                
                Q4
                
                
                Six
      MonthsUnits
      Entered vs. 2006
                
                
                +36.75
                %
                
                
                +55.86
                %
                
                
                +45.52
                %Units
      Sold vs. 2006
                
                
                +26.69
                %
                
                
                +15.65
                %
                
                
                +21.00
                %Conversion
      Rate 2007
                
                
                55.25
                %
                
                
                55.53
                %
                
                
                55.39
                %Conversion
      Rate 2006
                
                
                59.64
                %
                
                
                74.83
                %
                
                
                66.61
                %Change
      in Buy/Sell Fee Revenues
                
                
                +21.89
                %
                
                
                +22.42
                %
                
                
                +22.16
                %
 On
several occasions during Q3 and early Q4, the auction set several records for
the highest numbers of entries and sales in more than five years and reflects a
market that had not been previously developed, eventually leading us to greater
market penetration in Augusta.  The conversion rate, however, declined
from year to year, consistent with a national trend believed by management to be
related to a slowing economy in the United States. We do believe that the
current economic environment could inhibit our present growth based upon (i) the
negative influences of higher consumer automotive interest rates, tighter
credit, and higher gasoline prices on the automotive industry, (ii) the
unwillingness of consumers to spend as freely on major purchases in an uncertain
economy, and (iii) the other wide-ranging negative impacts of a troubled general
economy. In addition, it is not uncommon for conversion rates to decline as
volumes increase.  The number of units entered in those quarters of
2007 was up nearly 46%, potentially contributing to a reduction in the sale
percentage.
  15
 Table of Contents
  Based on
the results of the National Auto Auction Association (NAAA) 2007 Auction
Industry Survey, Augusta Auto Auction during Q3 and Q4 of 2007 achieved a
conversion rate of more than 5% above the national average, at 54.4% for dealer
consignment vehicles, and achieved a conversion rate 17% lower than the national
average for fleet/lease/repossessed units, at 57.8%.  Full year
results at our auction reflected conversion rates of 60.1% and 68.6%
respectively.  While our 2007 conversion rate continued to be
satisfactory to management, particularly in the dealer consignment segment that
accounted for most units sold, we believe that any decline in Augusta during Q4
2007 and Q1 2008 is directly related to certain events that resulted in a loss
of efficiencies and market share during the period.
  Preliminary
2008 Operating Results
  Preliminary
results of sales operations in Q1 of 2008 indicate a small increase in the
number of vehicles entered and moderate decreases in the number of units sold as
reflected by a lower conversion rate than in the same period of
2007.  As previously indicated, the Company anticipated this as a
result of generally-weakening economic conditions, reduced productivity at
automotive manufacturers, tightening credit and higher consumer interest rates,
and other negative pressures affecting trade in general. In addition, the
Company continued to face operating hardships associated with the initial
installation and personalization of the new operating software instituted in
December.  As program development has accelerated through Q1, those
pressures have eased and the projects have become much more manageable,
streamlined and friendly to our operations.  As such, the Company is
now redirecting its efforts to capturing lost market share, and anticipates it
can regain much of the momentum it lost at year’s end. The table below is
reflective of the Company’s performance in Q1 2008 versus the same period in
2007.
  Q1Units
      Entered vs. 2007
                
                
                +6.47
                %Units
      Sold vs. 2007
                
                
                -17.59
                %Conversion
      Rate 2008
                
                
                54.94
                %Conversion
      Rate 2007
                
                
                71.39
                %Change
      in Buy/Sell Fee Revenues
                
                
                -17.50
                %
 Discussion
Regarding the Parent Company’s Operating Results
  The
auction’s loss accounted for only a small part of the consolidated full-year
loss to the parent company of $3,850,881, of which $3,194,903 represented
non-cash expenses in connection with the issuance of Common stock as grants or
options for employee or outside director compensation, for warrants, for
conversion of all the Company’s outstanding Preferred shares to Common shares,
and $5,354 incurred as additional depreciation and amortization by the parent
company. The parent Company’s actual cash operating expenses represented
approximately $471,451 or approximately 12.24% of the Company’s overall loss,
reflecting an economy in operating the holding company at a time when revenues
have not yet risen to the level of self-sufficiency.  The Company
anticipates meeting that level upon closing of the next acquisition, which is
currently under a signed Letter of Intent, and continuing to be self-sufficient
thereafter.  No Preferred stock of the Company remains issued or
outstanding.
  Of the
total $4,277,251 in operating expenses incurred, $2,053,782 represented employee
compensation, the vast majority of which was non-cash stock or option
compensation issued to certain officers of the Company, its outside directors,
or contractors under the 2007 Stock Incentive Plan.  The Company’s
Chairman and CEO did not receive any options or other non-cash compensation
during the year. Further, the Company incurred certain significant non-recurring
expenses at the Augusta Auto Auction operation as described hereinbefore. The
auction also hired and trained additional employees in preparation for projected
growth in 2008, and paid a severance to one departed manager during the
reporting period.
  The
Company has experienced and expects to continue to experience fluctuations in
its quarterly results of operations due to a number of factors as those
indicated above and others, many of which are beyond the Company's control and
which are common to the auto auction industry. Generally, the volume of vehicles
sold at the Company's auctions is highest in the first and second calendar
quarters of each year and slightly lower in the third quarter. Fourth quarter
volume of vehicles sold is generally lower than all other quarters. This
seasonality is affected by several factors including weather, the timing of used
vehicles available for sale from selling customers, holidays, and the
seasonality of the retail market for used vehicles, which affect the demand side
of the auction industry. Used vehicle auction volumes tend to decline during
prolonged periods of winter weather conditions. Among the other factors that
have in the past and/or could in the future affect the Company's operating
results are: general business conditions; trends in new and used vehicle sales
and incentives, including wholesale used vehicle pricing; economic conditions
including fuel prices and interest rate fluctuations; trends in the vehicle
remarketing industry; the introduction of new competitors; competitive pricing
pressures; and costs associated with the acquisition of businesses or
technologies. As a result of the above factors, operations are subject to
significant variability and uncertainty from quarter to quarter, and revenues
and operating expenses related to volume will fluctuate accordingly on a
quarterly basis.
  The
Company's earnings therefore are generally expected to be highest in the first
or second calendar quarter, while the fourth calendar quarter typically will
provide the lowest earnings as a result of the lower auction volumes and
additional costs associated with the holidays and winter weather.
  16
 Table of Contents
 
 2007
Auction Industry Statistics
 
 The
recent 2007 Auction Industry Survey1 of the National Auto Auction
Association (NAAA) projects the gross value of units sold in 2007 at $88.8
billion, up from $86.9 billion a year earlier.  This saw the total
number of units entered and sold at auction in 2007 at 15,993,000 and 9,536,000,
respectively, indicating a decrease in entries, but a slight increase in units
sold from the 2006 levels of 16,292,000 and 9,506,000, reflecting an improvement
in the rate of conversion of sales to 60% from 58%.
 
 The NAAA
also recently released relevant information including the following tables and
statistics through February 2008:2
  AUCTIONS
      (NSA)
                
                Dec
      2007
                
                
                Jan
      2008
                
                
                Feb
      2008
                
                
                2008
      YTDUnit
      Volume
                
                
                -8.9
                
                
                
                1.8
                
                
                
                5.9
                
                
                
                3.8Passenger
      Cars
                
                
                -12.8
                
                
                
                -0.1
                
                
                
                2.3
                
                
                
                1.0Light
      Trucks
                
                
                -4.5
                
                
                
                3.7
                
                
                
                9.9
                
                
                
                6.7AUCTIONS (SAAR)
                
                Dec
      2007
                
                
                Jan
      2008
                
                
                Feb
      2008
                
                
                2008
      YTDUnit
      Volume (1,000’s)
                
                
                6,627
                
                
                
                6,743
                
                
                
                6,969
                
                
                
                6,819Price
      ($)
                
                
                9,905
                
                
                
                9,827
                
                
                
                9,714
                
                
                
                10,041
 NSA – Not
seasonally adjusted         SAAR –
Seasonally adjusted, annual rate
 
 ·
              On
      a seasonally adjusted basis, auction volumes have been moving up over the
      past few months and February's
      level was 150,000 units higher than last
  February.
  ·
              Based
      on AuctionNet data unit auction volumes have fared better than retail
      sales with year-over-year increases in January and February after a large
      drop in December.
  ·
              Light
      trucks (CUV, Pickup, SUV, Van) have led the gains with a year to date
      increase of 6.7% versus only 1.0% for passenger
  cars.
  ·
              Auction
      prices have been moving down with more of the declines concentrated in
      light trucks which have declined in price by
  4.7%.
  ·
              Used
      vehicle retail sales have also declined. However, according to CNW
      Research, used sales at franchised dealers are up, while sales at
      independent dealers and private sales are
down.
  ·
              March
      used vehicle sales drop sharply: Total -12.3%, Franchised -11.2%,
      Independent -13.4%, Private-12.2%.
  
 2007 Wholesale
Automotive Markets – Industry Performance3
 
 Average
wholesale used vehicle prices were up 1.2% in 2007.  After being a
major factor determining wholesale prices in 2006, the role of high fuel prices
diminished in 2007 and the role of supply (or lack thereof)
increased.  The key driver to wholesale prices in 2007 was the
shortage of off-rental program units.  This generally supported prices
despite soft retail demand.  After benefiting for much of the year
from the off-rental supply shortages, fleet/lease and dealer consignment prices
began to decline in late 2007.    While other segments
experienced price declines, significant price gains were registered in December
for mid-size cars sold by manufacturers (at wholesale
auctions).  These are popular rental units which were in particularly
short supply.  Commercial fleet sales were up
modestly.  Dealer consignment volumes were volatile and fell sharply
in December.  Industry dealer consignment volumes were down 3.2% for
the year, while fleet/lease volumes fell by 24.3%.  Declining volumes
are expected to reverse in 2008 as prices continue to soften in the first half
of the year.
  17
 Table of Contents
  Auction
conversion (sell-through) rates fell significantly in he fourth quarter of 2007,
an indication of market softness, with dealer consignment conversion rates
falling 6.9% and fleet/lease conversion rates off 4.7%.
  Vehicles
in operation in North America continued to increase in 2006, although used
vehicle sales experienced a decline in 2006. North America vehicles in operation
increased approximately 2 percent in 2006 to 263 million vehicles. Used vehicle
sales decreased approximately 3 percent to 45 million vehicles in 2006. The
number of vehicles auctioned has been relatively flat over the last five years.
Approximately 9.4 million vehicles were auctioned in 2001 compared with
approximately 9.5 million in 2006. The decline in retail used vehicle sales in
2006 impacted demand and used vehicle auction volumes.
  1National Auto Auction
Association Auction Industry Survey For Year Ended 12-31-2007
 2National Auto Auction
Association.Taken
from Economic and Industry Report – February 2008 (Publication
4/9/08), provided
by Ira A. Silver, Ph.D., NAAA Economist.  Auction data from
AuctionNet
 3 Taken from “The Pulse” (2007)
and “Global Vehicle Remarketing” (2005-2006), published by
ADESA Analytical
Services and available for review at:
 http://images.adesa.com/publicweb/AnalytServ/Pulse/Pulse_2007_Recap.pdf    and
 http://images.adesainc.com/publicweb/AnalytServ/GVR/2006/_GVR_all.pdf
  Liquidity
and Need for Additional Capital
  The
Company is currently engaged in its plan of seeking to grow through acquisitions
as well as through organic means.  To succeed in doing so, the Company
will require additional capital, anticipated to be through sale of Common
Stock.
  The
Company’s liquidity in 2007 was provided through the closing of a private
placement of $1,025,000 of common stock in the second quarter of 2007.
Presently, the Company’s liquidity is supplemented by a $300,000 line of credit
with Wachovia Bank, N.A.  Although the Company presently has a
certificate of deposit with the same bank of just over $155,000, this line of
credit is used to cover some instances in which payments to dealers selling
vehicles through the auction exceeds collected payments for those
vehicles.  The Company anticipates increasing the size of the
available line as its sales volume grows.  The bank charges an
interest rate on the line of credit equal to prime plus 1.5% on the outstanding
daily balance, if any.  The line of credit is secured by all of the
Company’s deposits at the bank.
  Also, the
Company will ultimately be forced to seek a larger operating facility for its
auction operations in the greater Augusta area, since the auction can not
accommodate the anticipated growth at its present location. The Company has
plans to utilize the current facility for other auction-related activities after
relocating the mainstream auction business to a new location.
  Financing
of Planned Expansions and Other Expenditures
  To assist
with providing strategic guidance and direction in the areas of financing,
mergers, acquisitions and more, the Company has retained the services of
Investment Banker 4G Group, LLC, of Dallas, Texas.  Mr.
Christopher A.F. Griffin, 4G’s CEO, works directly with Acacia Automotive’s
management in providing these services under the blanket of its investment
banking company.  On July 19, 2007, 4G Group acquired Security
Research Corporation, a 23 year-old New York-based NASD Member broker-dealer
firm that was formed in 1984.  The Company feels that 4G Group and its
employees have the experience and wherewithal to guide it through implementation
of its strategies.
  The
Company has signed a Letter of Intent to acquire a profitable automobile auction
in the southeastern United States, but for reasons of confidentiality cannot
disclose the nature or location of that entity until funding is in place and a
final agreement is effected and closed.  That acquisition is
anticipated to meet all the Company’s current consolidated operating expenses
and result in an ongoing profit from the inception. For that reason, the Company
considers this acquisition to be critical to its future success.
  18
 Table of Contents
  Simultaneously
with the closing of this planned acquisition, the Company also anticipates
making its entry into the wholesale vehicle inventory floor plan financing
segment of the industry by providing floor plan and “float” financing to its
automobile dealer clients.  Floor plan financing refers to
medium-length wholesale financing terms, usually to a maximum of 90 to 120 days.
“Float” financing refers to shorter-term wholesale vehicle financing-usually to
a maximum of 30 to 60 days, often related to promotional sales
activities.
  The
Company anticipates using the launch of those local financing activities as a
springboard to providing financing services to its clients on a regional and
ultimately a national basis.  The Company plans to establish a
stand-alone subsidiary to accommodate that business model, and to institute
those services in its present and future auction operations and potentially to
certain other selected well-qualified clients.  The Company
anticipates raising capital to accommodate the funding needs for these
operations through a combination of the sale of Common stock and the
establishment of credit facilities with banks or other lenders.
  Financial
Reporting and New Technologies
  As part
of its commitment to improve technologies that will improve our operating and
reporting efficiencies, we have engaged a part time senior accounting
professional, a certified public accountant, experienced in auto auction
management. We plan to eventually hire this individual on a full time basis
where we anticipate the completion of a new financial reporting system that
integrates tightly with our new software with automatic population of operating
data that affects financial reporting.
  Item 7A. Quantitativeand Qualitative Disclosures About Market
Risk
  Not
Applicable.
  Item 8. Financial Statementsand Supplementary Data
  The
response to this item is submitted as a separate section of this Form
10-K.  See “Item
13.  Exhibits, Financial Statements and Reports on Form
8-K.”
  Item 9. Changesin and Disagreements With Accountants on Accounting
and Financial Disclosure
  None.
  Item 9A(T).  Controls and Procedures
  Inherent
Limitations on the Effectiveness of Controls Over Financial
Reporting
  As is
typical with most smaller enterprises, our control processes are oriented toward
operations, and production of financial statements reflect an outgrowth of
operations and results of those operations. Internally, financial statements are
a management tool to evaluate the operations and not an end of those operations.
We closely monitor the daily results of our cash position and make certain that
our cash position is adequate for the foreseeable future. Our financial
statements are generated as part of the reporting on our operations, one metric
of our operations, and as part of our obligations as a public
entity.
  The goals
of our present extensive effort to upgrade the quality of our software are as
follows (a) providing an operating environment in which the Company can monitor
and/or combine the operating results of any or all its auctions and other
operations as it grows through planned acquisitions, (b) exporting all financial
and operating data relative to any one or more of its entities directly to our
new financial software, thus greatly reducing the labor requirement and
associated costs in the accounting area, (c) providing state-of-the-art access
through web-based servers housed in diverse geographical locations throughout
the United States for both data security and redundancy in the event of
catastrophe, and also eliminating local auction software servers in the process,
(d) providing the security of having its data stored and mirrored at two diverse
locations that will provide protection from loss in the event of any catastrophe
at either, (e) providing a complete portal allowing the Company’s auctions to
engage in Internet selling through both static and simulcast sales, and give it
the additional exposure required to take its place in the current sales
technology environment, (f) increasing the ability of the Company’s auctions to
compete in the salvage auction industry as a result of having the current
technology expected by salvage industry sellers, and which has not been
previously available to us, and (g) promoting increased security because the
main servers are located off-site in high-security environments in diverse
cities and different states.
  19
 Table of Contents
  Management,
including our Chief Executive Officer who acts as our Chief Financial Officer,
does not expect that our disclosure controls and procedures will prevent all
errors and fraud, and our present efforts are oriented on improving the
availability and thoroughness of information to management and its efficient
reduction to generate financial statements.  In designing and
evaluating the disclosure controls and procedures, management recognizes that
any controls and procedures, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance of achieving the desired
control objectives.  Further, the design of a control system must
reflect the fact that there are resource constraints, and management necessarily
was required to apply its judgment in evaluating the cost-benefit relationship
of possible controls and procedures.  Because of the inherent
limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any,
within the Company have been detected.  These inherent limitations
include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or
mistake.  Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management’s
override of the control.  The design of any system of controls also is
based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions.  Over time,
controls may become inadequate because of changes in conditions, or the degree
of compliance with the policies or procedures may
deteriorate.  Because of the inherent limitations in a cost-effective
control system, misstatements due to error or fraud may occur and not be
detected.
  Disclosure
Controls and Procedures
  We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Exchange Act reports, such as this
report on Form 10-K, is recorded, processed, summarized and reported within the
time periods specified in the SEC’s rules and forms, and that such information
is accumulated and communicated to our management, particularly our Chief
Executive Officer, to allow timely decisions regarding operations and required
disclosure.
  The
Company carried out an evaluation, under the supervision and with the
participation of the Company’s management, including the Company’s Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company’s disclosure controls and procedures to
provide reasonable assurance of achieving their objective pursuant to Exchange
Act Rule 13a-14.  Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that the Company’s disclosure
controls and procedures are effective, as of December 31, 2007.
  Management’s
Annual Report on Internal Control over Financial Reporting
  Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rule
13a-15(f).  Under the supervision and with the participation of our
management, particularly our chief executive officer, we conducted an evaluation
of the effectiveness of our internal control over financial reporting based on
the framework set forth in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
  Based on
our evaluation, management has concluded that its internal control over
financial reporting was effective as of December 31, 2007. Nonetheless, our
registered public accounting firm has notified us of certain matters that they
deem material weaknesses, which are discussed below.
  This
Annual Report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Company to provide only management’s report
in this Annual Report on Form 10-K.
  20
 Table of Contents
  Changes
in Internal Control over Financial Reporting
  In the
course of conducting our audit for the fiscal year 2007, our auditor, Killman,
Murrell & Company, P.C. identified to us material weaknesses involving
internal control, although it did not identify to us any report that
necessitated restatement. These material weaknesses related to our accounting
personnel, accounting for cash, documentation with respect to options and
warrants as well as the issuance of common stock.
  We
believe that two factors most affect these reported material weaknesses, namely,
the lack of accounting personnel and the lack of integration of software that
manages our operations and our accounting software. Our lack of senior
accounting personnel affected the adequacy our general systems and practices.
While the failure of the processes and systems affected our documentation of
options and warrants as well as one issuance of common stock, all matters of
which have been rectified, its most critical manifestation was in the software
integration referred to above. We have identified and largely rectified matters
regarding the issuance and reporting of checks, although we are yet making
certain that our actions will be adequate in that area. Further, we are working
with our software vendor to rectify errors in accounting entries, particularly
as they relate to problems caused by having to enter several transactions into
two systems by making certain that entries into one system automatically
populate the other, all elaborated upon above.
  All of
these issues, we believe, relate most to the lack of accounting personnel,
particularly senior accounting personnel. In that regard, we have identified a
certified public accountant who is helping us on a part time basis and who has
extensive experience in automobile auctions, both in accounting and finance. We
plan to hire this individual full time upon funding of our acquisition discussed
above.
  Item 9B.  OtherInformation
  Not
applicable.
 
  PART
III
  Item 10.  Directors, Executive Officers, and Corporate
Governance
  Executive
Officers and Directors
  The
directors and executive officers of the Company, and their respective ages, as
of March 31, 2008, and positions held with the Company, are as
follows:
  Name
                
                Age
                
                PositionSteven
      L. Sample
                
                
                60
                
                Director,
      Chairman of the Board, and Chief Executive OfficerTony
      Moorby
                
                
                59
                
                Director,
      President and Chief Operating OfficerPatricia
      Ann Arnold
                
                
                51
                
                SecretaryDanny
      Gibbs
                
                
                51
                
                DirectorJames
      C. Hunter, MD
                
                
                50
                
                DirectorV.
      Weldon Hewitt
                
                
                69
                
                DirectorDavid
      Bynum
                
                
                60
                
                DirectorFrank
      Lawrence
                
                
                66
                
                Director
 21
 Table of Contents
  Mr.
Sample became a director and officer of the Company in August 2006 when he was
named as a Director and Chief Executive Officer.  From January 2004
through December 2005, he served as Executive Director of Sales for ADESA
Corporation, a firm that operates automobile auctions throughout the United
States and Canada.  From January 2002 through December 2003, he was
the General Sales Manager of ADESA’s Ocala Florida Auto Auction.  From
September 1990 through December 2001, he was employed by Mid-America Auto
Auction, an ADT Automotive Auction acquired by Manheim Auctions in 2000, with
Mr. Sample serving as General Sales Manager.
  Mr.
Moorby joined the Company in October 2006 when he was named as a director and as
President and Chief Operating Officer.  Beginning in February 2006 he
was a Principal of Tony Moorby & Associates, an automotive consultant firm
and in June 2006 became a member of Board of Trustees, National Independent
Automobile Dealers’ Association (NIADA).  From February 2002 through
February 2006, he was Managing Partner of Flying Lion Dealer Services, a dealer
services business, and from October 2000 through October 2002 he was Executive
Vice President of ADESA Corp where he was responsible for corporate
development.  From January 1997 through October 2000 he was President
and Chief Executive Officer of ADT Automotive Auction, an automobile auction
company with 28 outlets which was sold to Manheim Auctions in October
2000.  Prior to 1997 and commencing in 1982, Mr. Moorby was employed
by ADT Automotive Auction for the majority of the time.
  Patricia
Ann Arnold was named Secretary of the Company on February 1,
2007.  Since January of 2008, Ms. Arnold has served as Executive
Assistant to the President of Actus Lend Lease, a division of Bovis Lend Lease.
From 2002 through 2007, Ms. Arnold served as a Labor Employment Paralegal with
the law firm of Baker, Donelson, Bearman & Caldwell and as a Litigation
Paralegal with the law firm of Stewart Estes and Donel from 1997 to 2002, both
in Nashville, Tennessee. Prior to that Ms. Arnold was employed in similar
positions with law firms in Nashville, Tennessee, and Louisville, Kentucky,
since 1984
  Mr.
Gibbs, a co-founder of Gibbs Construction, Inc. served as its president, general
manager, director, and chief financial officer until November 2000 when the
Company’s assets and liabilities were transferred to a receiver in
bankruptcy.  The Company’s bankruptcy also resulted in Mr. Gibbs’s
personal bankruptcy.  From January 2000 through December 2003, Mr.
Gibbs was a Senior Project Manager for Thacker Operating Company responsible for
estimating costs of construction projects, managing and overseeing
them.  Beginning in January 2004 he became a Senior Project Manager
for Dimensional Construction, Inc. with similar responsibilities.
  Dr.
Hunter was appointed to the board of directors on February 1,
2007.  In April 2008 he was named Chief Medical Officer for the
Carolinas Medical Center in Charlotte, North Caroline, where he is responsible
for physician credentialing and relations with oversight for all quality
efforts. In 2005 and prior to April 2008, he was named Chief Medical Officer,
Cape Fear Valley Health System in Fayetteville, North Carolina where he also had
similar responsibilities. From 1998 to 2005 he was Senior Vice President of
Medical Affairs and Chief Quality Officer of Munroe Regional Health System in
Ocala, Florida where he had similar responsibilities. During that time, Dr.
Hunter earned his MBA degree. From 1995 to 1998 he served as Director of
Inpatient Clinical Affairs, Inpatient Internal Medicine, and Emergency Medicine
for two healthcare organizations in Myrtle Beach, South Carolina. Prior to 1995
Dr. Hunter was an Emergency Physician.
  Mr.
Hewitt was appointed to the board of directors on February 1,
2007.  Since 1985 he has been the owner and Chief Executive Officer of
Hewitt Marketing, Inc., which provides original equipment manufacture radios and
other media devices and electronics, mobile cellular telephones, power-actuated
equipment and accessories to many major vehicle manufacturers.  Prior
to 1985, Mr. Hewitt founded and served as Chief Executive officer of an original
equipment manufacturer that attained as high as $20,000,000 in annual revenues
providing audio systems for luxury cars.
  On May
16, 2007, the registrant named David Bynum to its board of directors. Since 2006
Mr. Bynum has been a manager of Bynum Properties which is involved in
residential and commercial leasing and custom home construction. From October
2000 through April 2006, Mr. Bynum was employed by ADESA Corporation, a publicly
held national automobile auction company. Initially Mr. Bynum was a Regional
Vice President of Operations and in January 2004 was named National Director of
Heavy Truck and Equipment Sales. For the twelve years prior to 2000, Mr. Bynum
served as General Manager of Southern States Vehicle Auction in Atlanta, Georgia
under the ownership of ADT Automotive (previously Anglo-American Auto Auctions)
before it was sold to Manheim Auctions.
  The
Company’s Board of Directors named Frank Lawrence to serve as one its directors
on November 3, 2007.  Mr. Lawrence was the previous majority owner of
the automobile auction located in the Augusta, Georgia area which the Company
acquired in July of this year.  Mr. Lawrence is the owner of Bobby
Jones Ford-Lincoln-Mercury in Augusta, Georgia, a dealership he has owned since
1991.
  22
 Table of Contents
  Committees
of the Board of Directors
  At the
Annual Meeting of the Board of Directors on November 3, 2007, the board
appointed Danny Gibbs, Dr. James C. Hunter, and David Bynum to serve as the
Corporation’s Audit Committee, with Danny Gibbs being designated as the
financial expert thereof, Mr. Gibbs being independent by virtue of the standards
set forth by the American Stock Exchange and by virtue of his experience in the
supervision of a principal financial officer and acting in that capacity in a
public company.  The duties of the Audit Committee will be to
recommend to the entire Board of Directors the selection of independent
certified public accountants to perform an audit of the financial statements of
the Company, to review the activities and report of the independent certified
public accountants, and to report the results of such review to the entire Board
of Directors.  The Audit Committee will also monitor the internal
controls of the Company.
  At that
same meeting, the board of directors appointed V. Weldon Hewitt, Dr. James C.
Hunter, and David Bynum to serve as the Corporation’s Compensation Committee.
The duties of the Compensation Committee will be to provide a general review of
the Company's compensation and benefit plans to ensure that they meet corporate
objectives and to administer or oversee the Company's Stock Option Plan and
other benefit plans.  In addition, the Compensation Committee will
review the compensation of officers of the Company and the recommendations of
the Chief Executive Officer on (i) compensation of all employees of the Company
and (ii) adopting and changing major Company compensation policies and
practices.  Except with respect to the administration of the Stock
Option Plan, the Compensation Committee will report its recommendations to the
entire Board of Directors for approval.
  The board
of directors at that meeting also appointed Steven L. Sample and Danny Gibbs to
serve as the Primary Committee for the Corporation’s 2007 Stock Incentive Plan.
The duties of this Primary Committee will be to review, approve, and authorize
the issuance of stock and options under the provisions of the Corporation’s 2007
Stock Incentive Plan, whether automatic or otherwise,
  Each
director will hold office until the next Annual Meeting of Shareholders and
until such time as his successor is elected and qualified, subject to prior
removal by the shareholders of the Company in accordance with the Bylaws of the
Company.  The officers of the Company serve at the discretion of the
Board of Directors of the Company.
  Code
of Ethics
  Given
that the Company has not had operations for the last several years, the Company
has not adopted a Code of Ethics for the principal executive officer, principal
financial officer, or principal accounting officer or controller.
  Section
16(a) Beneficial Ownership Reporting Compliance
  Mr.
Sample became an officer, director and 10% owner of the Company on August 15,
2006, and filed the initial report on Form 3 on January 10, 2007, filed a report
on Form 3 indicating that status. On February 1, 2007, Mr. Sample received
8,117,500 shares of common stock and 500,000 shares of preferred stock
convertible into common stock and on March 23, 2007, April 18, 2007, and April
24, 2007 he made gifts of 228,700 shares 70,000 shares 318,800 shares, 1,500,000
shares, respectively. On June 7, 2007 he converted 500,000 shares into common
stock and received warrants for 1,425,000 shares of common stock, all of such
transactions being reported on a Form 4 on June 14, 2007. On August 7, 2007,
October 29, 2007, and November 9, 2007, Mr. Sample made additional gifts of
9,500 shares, 15,000 shares and 11,000 shares, respectively, which were reported
on Form 4 on November 15, 2007.
  Gwendolyn
Sample, the spouse of Steve Sample, was the recipient of gifts of common stock
from Steve Sample and on April 24, 2007 became a 10% owner in the Company, such
transactions being reported on Form 4 on June 15, 2007.
  On June
15, 2007, Tony Moorby, reported on Form 3 a restricted stock grant of 500,000
shares awarded to him on February 1, 2007. He was named an officer and director
on October 10, 2006.
  On June
15, 2007, Danny R. Gibbs, V. Weldon Hewitt and James C. Hunter filed Form 3’s
reflecting each’s appointment to the board of directors on February 1,
2007.
  Messrs.
Bynum and Lawrence have not filed Form 3’s reflecting each’s appointment to the
board of directors on November 2, 2008, and option awards under the Company 2007
Stock Incentive Plan, nor have Messrs. Gibbs, Hewitt and Hunter filed Form 4’s
reflecting outside director’s automatic stock option grants for 15,000 shares
granted on the same date.
  23
 Table of Contents
  Item 11.  Executive Compensation
  For the
fiscal years ended December 31, 2003, 2004 and 2005, the Company did not pay any
of its executive officers.  Since January 1, 2006, Mr. Sample has been
paid an annual salary of $150,000, and Mr. Moorby’s compensation is an annual
salary of $201,000, which began October 1, 2006.  On February 1, 2007,
the Company granted 500,000 shares of restricted Common stock to Mr. Moorby
under the 2007 Stock Incentive Plan, valued at the time of grant of $5,000. Ms.
Arnold’s compensation is limited to a grant of options to acquire for
$0.01.
  Option
Tables
  The
following table sets forth certain information concerning grants of options to
purchase shares of Common Stock of the Company made during the last completed
fiscal year to the executive officers named in the Summary Compensation
Table.
 EXECUTIVE
      STOCK OPTION GRANTS(YEAR
      ENDED DECEMBER 31, 2007)Number
      of
                  
                  
                  Percent
      of Total
                  
                  WeightedSecurities
                  
                  
                  Options
      Granted To
                  
                  AverageUnderlying
                  
                  
                  Employees
      In
                  
                  Per
      Share
                  
                  ExpirationName
                  
                  Options
      Granted
                  
                  
                  Fiscal
      Year (1)
                  
                  Exercise
      Price
                  
                  DatesSteven
      L. Sample(1)
                  
                  
                  0
                  
                  
                  
                  0%
                  
                  n.a.
                  
                  n.aTony
      Moorby
                  
                  
                  0
                  
                  
                  
                  0
                  
                  n.a.
                  
                  n.a.Patricia
      Arnold(2)
                  
                  
                  10,000
                  
                  
                  
                  40
                  
                  $0.01
                  
                  2/1/17
 (1)
              Excludes
      1,425,000 warrants are held by Mr. Sample issued in exchange for shares of
      the Company’s Preferred Stock and not for compensation. The average
      execution price of the warrants is $2.33 per share, and 1,000,000 of them
      are tied to specific future performance levels by the company over the
      next three fiscal years. See “Change of
      “Control”.
  (2)
              During
      the fiscal year ended December 31, 2007, the Company granted a total of
      25,000 options to purchase common stock to its employees, executive
      officers and directors.  Ms. Arnold was awarded the indicated
      option on February 1, 2007.
  Director
Compensation
  Directors
of the Company presently serve without compensation except under the plan
adopted on February 1, 2007 for which each non-employee director of the Company
was granted an option to acquire an initial 10,000 shares of Common Stock for
$0.01 per share and 15,000 additional options upon election to a full
term.
  Benefit
Plans
  As part
of the reorganization proceeding in bankruptcy, all stock option plans and
warrants were cancelled.  At the board of directors meeting held on
February 1, 2007, the Company adopted a new stock incentive
plan.  With respect to awards made thereunder, including a grant of
500,000 shares of restricted stock to Mr. Moorby, see Item 5 and Note 4 to the
Notes to Financial Statements herein.  In addition, the Company
granted Ms. Arnold an option to acquire 10,000 shares of Common Stock under the
plan at the same meeting.  These awards constituted in excess of 99%
of the awards made to date under the plan.
  24
 Table of Contents
  Item 12.  SecurityOwnership of Certain Beneficial Owners and
Management and Related Stockholder Matters
  The
following table sets forth as of March 31, 2008, the ownership of Common Stock
by (i) each person known by the Company to be the beneficial owner of more than
five percent of the Company's Common Stock, (ii) each director of the Company,
and (iii) all directors and officers as a group.  Except as otherwise
indicated, each stockholder identified in the table possesses sole dispositive
voting and investment power with respect to its or his shares.
  Shares
      OwnedName
      and Address ofBeneficial Owner
                  
                  No.
      ofShares
                  
                  
                  PercentSteven
      L. Sample (1)
                  
                  
                  6,679,500
                  
                  
                  
                  55.7
                  %Danny
      Gibbs (2)
                  
                  
                  62,500
                  
                  
                  
                  0.5
                  %Tony
      Moorby
                  
                  
                  500,000
                  
                  
                  
                  4.2
                  %Patricia
      Ann Arnold (3)
                  
                  
                  -
                  
                  
                  
                  -James
      C. Hunter (2)
                  
                  
                  -
                  
                  
                  
                  -V.
      Weldon Hewitt (2)
                  
                  
                  -
                  
                  
                  
                  -David
      Bynum(4)
                  
                  
                  -
                  
                  
                  
                  -Frank
      Lawrence(5)
                  
                  
                  475,000
                  
                  
                  
                  4.0
                  %Gwendolyn
      Sample
                  
                  
                  1,707,000
                  
                  
                  
                  14.2
                  %All
      directors and officers as
      a group (eight persons)
                  
                  
                  7,692,000
                  
                  
                  
                  64.2
                  %
 (1)
Excludes 1,425,000 warrants are held by Mr. Sample issued in exchange for shares
of the Company’s Preferred stock and not for compensation. The average execution
price of the warrants is $2.33 per share, and 1,000,000 of them are tied to
specific future performance levels by the company over the next three fiscal
years.  See “Change
of Control.”
  (2)
Excludes options to purchase 25,000 shares of common stock at a weighted average
exercise price of $0.48 per share.
  (3)
Excludes options to acquire 10,000 shares of Common Stock for $0.01 per
share.
  (4)
Excludes options to acquire 25,000 shares of Common Stock at a weighted average
exercise price of $0.83 per share.
  (5)
Excludes 42,500 warrants issued to Frank Lawrence as part of the consideration
for purchasing the assets of the Augusta Auto Auction, 75,000 warrants issued in
conjunction with a non-compete agreement, and 12,500 warrants issued in
conjunction with a private placement offering that closed in June of
2007.  The average execution price of said warrants is $1.77 and
expire in July 2012. Also excludes options to purchase 10,000 shares of common
stock for $0.80 per share as a director.
  Unless
otherwise indicated, the address for each of the above named individuals is The
Gardner Building, Suite 104, 5414 Maryland Way, Brentwood, TN
37027.
  Change
of Control
  On August
15, 2006, Steven L. Sample acquired for $50,000, 4,000,000 shares, or 46.7%, of
the 8,561,000 issued and outstanding shares of Common Stock of the registrant
from TAM and its associates.  In addition Mr. Sample paid expenses
totaling $138,862, such expenses including the costs associated with completing
the bankruptcy proceedings and costs such as arranging for the Company’s SEC
filings to be brought current, after which the registrant agreed to effect a one
for eight reverse stock split, to issue to Mr. Sample an additional 8,117,500
shares of Common Stock and 500,000 shares of preferred stock.  For the
assistance of Harry K. Myers, Jr., a principal of Baker #1, Ltd., the entity
owning Thacker Asset Management, LLC, the registrant agreed to issue to him
25,000 shares of preferred stock and 450,000 shares of Common
Stock.
  25
 Table of Contents
  To
fulfill its obligations under this agreement, the registrant’s board of
directors recommended that its stockholders amend its corporate charter to
effect a one for eight reverse stock split, to increase the number of authorized
shares of Common Stock to 150,000,000 and to create and establish a series of
preferred stock.  The distinguishing feature of the Preferred stock
was that each share had 50 votes, but if Mr. Sample or the other recipient
transfers the shares to any other entity other than for estate planning
purposes, the shares automatically converted on a share for share basis to
Common Stock and, in any event, automatically convert to Common Stock upon the
death of either recipient.
  On May
29, 2007, and June 19, 2007, the Corporation’s board of directors issued Common
stock and warrants to purchase Common stock in exchange for conversion of all
issued and outstanding Preferred shares of the Company.  In exchange
for conversion of all the issued and outstanding 525,000 Preferred shares of the
Company, the board of directors approved issuance of 525,000 shares of Common
stock, of which 95% were issued to Steven L. Sample, its CEO, and 5% were issued
to Harry K. Myers, Jr., an affiliate of the Company prior to the acquisition of
the majority of the Company's Stock by Steven L. Sample, In addition, the
Company issued 1,500,000 warrants, of which 95% were issued to Mr. Sample, and
5% were issued to Mr. Myers, with various exercise prices and certain
stipulations attendant to their exercise.  500,000 of those warrants
are exercisable immediately with an exercise price of $1.00 with no
stipulations. The difference between the $1.00 exercise price and the $2.00
selling price of the common stock at the time of the award was recognized as a
beneficial conversion expense to the Company of $500,000 at June 30, 2007. The
remaining 1,000,000 warrants are exercisable in the same relative percentages
during the vesting periods shown and at the prices indicated in the following
table:
  Vesting
      Year
                  
                  Price
                  
                  
                  Number2008
                  
                  $
                  2.00
                  
                  
                  
                  333,0002009
                  
                  $
                  3.00
                  
                  
                  
                  333,0002010
                  
                  $
                  4.00
                  
                  
                  
                  334,000
 Item 13. CertainRelationships and Related
Transactions
  With
respect to certain transactions regarding the restructuring of the Company’s
corporate charter and transactions with Mr. Sample, see Item 11. – Change of
Control.
  In 2006
the board of directors named Gwendolyn Sample as the Company’s assistant
secretary and granted her an option to acquire 5,000 shares of Common Stock for
$0.01 per share.  Ms. Sample is the spouse of Steven L.
Sample.  In addition, the board of directors paid L. Palmer Sample
10,000 shares of Common Stock for work performed on the company’s e-mail system
and web site and hosting thereof.  L. Palmer Sample is the son of
Steven L. Sample. Mr. Sample’s spouse and his son disclaim any beneficial
ownership by Mr. Sample of any shares or options they own, and they disclaim any
beneficial ownership of any shares or warrants he owns.
  The
Company provides an automobile for the use of Mr. Sample.
  Item 14. PrincipleAccountant Fees and Services
  The
following is a summary of the aggregate fees billed to us for fiscal 2007 by
Killman, Murrell & Company, P.C.:
  Audit
Fees
  Fees for
audit services totaled approximately $39,260 in 2007, including fees for
professional services for the audit of our annual financial statements and for
the reviews of the financial statements included in each of our quarterly
reports on Form 10-QSB or Form 8-K.
  26
 Table of Contents
  Item 15. Exhibits, Financial Statement Schedule and Reports on Form
8-K
  (a)
Financial Statements
  The following financial statements
are included herewith:
  PageReport
      of Independent Certified Public Accountants
                F-1Consolidated
      Balance Sheets
                F-2Consolidated
      Statements of Operations
                F-3Consolidated
      Statements of Stockholders’ Deficit
                F-4
      - F-5Consolidated
      Statements of Cash Flows
                F-6Notes
      to Consolidated Financial Statements
                F-7
      - F-18
 (b)
Reports on Form 8-K
  None
  (c)
Exhibits
  3.1*
              Restated
      Articles of Incorporation, as amended (incorporated by reference from a
      similarly numbered exhibit filed with the Company’s Registration Statement
      No. 33-97308-D)
  3.2*
              Bylaws
      (incorporated by reference from a similarly numbered exhibit filed with
      the Company’s Registration Statement No.
  33-97308-D)
  3.3*
              Amendments
      to Bylaws
  4.1*
              Form
      of Warrant Agreement Covering Redeemable Common Stock Purchase Warrants
      (incorporated by reference from a similarly numbered exhibit filed with
      the Company’s Registration Statement No.
  33-97308-D)
  10.1*
              Revised
      form of Representative’s Warrant and Registration Rights Agreement
      (incorporated by reference from a similarly numbered exhibit filed with
      the Company’s Registration Statement No.
  33-97308-D)
  10.2*
              Copy
      of 1995 Incentive Stock Option Plan (incorporated by reference from a
      similarly numbered exhibit filed with the Company’s Registration Statement
      No. 33-97308-D)
  10.3*
              Copy
      of Outside Director Stock Option Plan (incorporated by reference from a
      similarly numbered exhibit filed with the Company’s Registration Statement
      No. 33-97308-D)
  10.4*
              Copy
      of Warrant Agreement between the Company and Can Am Capital (incorporated
      by reference from a similarly numbered exhibit filed with the Company’s
      Registration Statement No.
33-97308-D)
  10.5*
              Copy
      of Note and Security Agreement between the Company and Bronco Bowl
      Holding, Inc. (incorporated by reference from a similarly numbered exhibit
      filed with the Company’s Registration Statement No.
      33-97308-D)
  10.6*
              diversified
      Employee Leasing, Inc. Client Service Agreement (incorporated by reference
      from a similarly numbered exhibit filed with the Company’s Registration
      Statement No. 33-97308-D)
  10.7*
              Stock
      Purchase and Subscription Agreement
  10.8*
              Letter
      of Agreement concerning transfer of shares, payment and delivery thereof,
      Lien Release, Power of Attorney, Irrevocable Voting Proxy,
      acknowledgements, et al
  10.9*
              Letter
      of Agreement concerning transfer of
shares
  *           Previously
filed
  
 27
 Table of Contents
   TABLE
OF CONTENTS
 
 
 PAGEREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
      FIRM
                F-1FINANCIAL
      STATEMENTS:Consolidated Balance Sheets
                F-2Consolidated Statements of Operations
                F-3Consolidated Statements of Stockholders’
      Deficit
                F-4
      – F-5Consolidated Statements of Cash Flows
                F-6NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
                F-7
      – F-19
 
 
 Table of Contents
 
 
 Killman,
Murrell &
Company, P.C.
 Certified Public
Accountants
 
 1931
      E. 37th
      Street, Suite 7
              3300
      N. A Street, Bldg. 4, Suite 200
              2626
      Royal CircleOdessa,
      Texas 79762
              Midland,
      Texas 79705
              Kingwood,
      Texas 77339(432)
      363-0067
              (432)
      686-9381
              (281)
      359-7224Fax
      (432) 363-0376
              Fax
      (432) 684-6722
              Fax
      (281) 359-7112
 
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
 
 
 Board of
Directors
 Acacia
Automotive, Inc. and Subsidiary
 Brentwood,
Tennessee
 
 We have
audited the accompanying consolidated balance sheets of Acacia Automotive, Inc.
as of December 31, 2007 and 2006, and the related consolidated statements of
operations, stockholders' equity (deficit), and cash flows for the years then
ended.  These consolidated financial statements are the responsibility
of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Acacia Automotive, Inc. as
of December 31, 2007, and 2006, and the results of its operations and its cash
flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  As discussed in Note 12 to the
financial statements, the Company has suffered recurring losses from operations
and its limited capital resources raise substantial doubt about its ability to
continue as a going concern.   Management’s plans in regard to
these matters are described in Note 12.  The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
 
 
 
 /s/Killman, Murrell &
Company, P.C.
 Killman,
Murrell & Company, P.C.
 Odessa,
Texas
 
 March 30,
2008
 
 
 F-1
 Table of Contents
 
 ACACIA AUTOMOTIVE, INC.
 CONSOLIDATED
BALANCE SHEETS
 DECEMBER
31, 2007 AND 2006
  2006
                
                
                2005ASSETSCURRENT
      ASSETSCash
                
                $
                203,077
                
                
                $
                1,432Accounts
      receivable
                
                
                210,130
                
                
                
                -Employee
      receivables
                
                
                294
                
                
                
                -Deposits
      and prepaid expenses
                
                
                33,562
                
                
                
                469Total
      Current Assets
                
                
                447,063
                
                
                
                1,901PROPERTY
      AND EQUIPMENT, net of accumulated depreciationof
      $13,707 and $2,869 in 2007 and 2006, respectively
                
                
                203,142
                
                
                
                28,205OTHER
      ASSETSGoodwill
                
                
                427,929
                
                
                
                -Customer
      list and Non-Compete Agreement, net of amortizationof
      $85,283
                
                
                555,850
                
                
                
                -Total
      Other Assets
                
                
                983,779
                
                
                
                -TOTAL
      ASSETS
                
                $
                1,633,984
                
                
                $
                30,106LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)CURRENT
      LIABILITIESAccounts
      payable
                
                $
                224,928
                
                
                $
                54,363Accrued
      liabilities
                
                
                87,238
                
                
                
                239,395Line
      of credit
                
                
                139,900
                
                
                
                -Capital
      lease obligations, current portion
                
                
                11,706
                
                
                
                -Shareholder
      payables
                
                
                47,104
                
                
                
                10,765Total
      Current Liabilities
                
                
                510,875
                
                
                
                304,523NONCURRENT
      LIABILTIESCapital
      lease obligations, less current portion
                
                
                32,078
                
                
                
                -TOTAL
      LIABILITIES
                
                
                542,953
                
                
                
                304,523STOCKHOLDERS'
      EQUITY (DEFICIT)Series
      A Preferred Stock, $0.001 par value,525,000
      shares authorized, issued and outstanding
                
                
                -
                
                
                
                525Common
      stock, $0.001 par value, 150,000,000 shares authorized;11,997,524
      and 9,935,023 shares issues and outstanding,respectively
                
                
                11,997
                
                
                
                9,935Additional
      paid-in capital
                
                
                10,918,722
                
                
                
                5,703,930Retained
      deficit
                
                
                (9,839,688
                )
                
                
                (5,988,807
                )TOTAL
      STOCKHOLDERS' EQUITY (DEFICIT)
                
                
                1,091,031
                
                
                
                (274,417
                )TOTAL
      STOCKHOLDERS' EQUITY (DEFICIT)AND
      LIABILITES
                
                $
                1,633,984
                
                
                $
                30,106
  The
accompanying notes are an integral part of these financial
statements.
 F-2
 Table of Contents


ACACIAAUTOMOTIVE, INC.
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 YEARS
ENDED DECEMBER 31, 2007 AND 2006
  2007
                  
                  
                  2006REVENUESBuyers
      fees
                  
                  $
                  159,288
                  
                  
                  $
                  -Sellers
      fees
                  
                  
                  225,876
                  
                  
                  
                  -Other
      revenue
                  
                  
                  38,240
                  
                  
                  
                  -Total
      Revenues
                  
                  
                  423,404
                  
                  
                  
                  -OPERATING
      EXPENSESCost
      of fees earned
                  
                  
                  100,937
                  
                  
                  
                  -Paid
      in common stock
                  
                  
                  -
                  
                  
                  
                  31,400Employee
      compensation
                  
                  
                  2,076,538
                  
                  
                  
                  215,570General
      and administrative
                  
                  
                  1,498,506
                  
                  
                  
                  197,340Depreciation
      and amortization
                  
                  
                  101,270
                  
                  
                  
                  2,869Beneficial
      conversion of preferred stock
                  
                  
                  500,000
                  
                  
                  
                  -Total
      Operating Expenses
                  
                  
                  4,277,251
                  
                  
                  
                  447,179Operating
      loss before other income (expense)and
      income taxes
                  
                  
                  (3,853,847
                  )
                  
                  
                  (447,179
                  )OTHER
      INCOME (EXPENSE)Interest
      Income
                  
                  
                  8,223
                  
                  
                  
                  -Interest
      Expense
                  
                  
                  (2,890
                  )
                  
                  
                  (497,794
                  )Loss
      on sale of assets
                  
                  
                  (2,367
                  )
                  
                  
                  -Total
      Other Income (Expense)
                  
                  
                  2,966
                  
                  
                  
                  (497,794
                  )Income
      Tax
                  
                  
                  -
                  
                  
                  
                  -Net
      loss
                  
                  $
                  (3,850,881
                  )
                  
                  $
                  (944,973
                  )BASIC
      AND DILUTED LOSS PER SHAREWeighted
      average shares outstanding
                  
                  
                  10,997,523
                  
                  
                  
                  4,423,000Loss
      per share
                  
                  $
                  (0.35
                  )
                  
                  $
                  (0.21
                  )
  The
accompanying notes are an integral part of these financial
statements.
 F-3
 Table of Contents
 
 ACACIA AUTOMOTIVE, INC.
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
 YEARS
ENDED DECEMBER 31, 2007 AND 2006
  Preferred
      Stock$0.001
      Par Value
                
                
                Common
      Stock
                
                
                RetainedShares
                
                
                Amount
                
                
                Shares
                
                
                Amount
                
                
                Paid in Capital
                
                
                Deficit
                
                
                TotalRestated
      BalanceDecember
      31, 2005
                
                
                -
                
                
                $
                -
                
                
                
                1,107,524
                
                
                $
                1,107
                
                
                $
                5,042,727
                
                
                $
                (5,043,834
                )
                
                $
                -August
      15, 2006Stock
      Issued for Services
                
                
                25,000
                
                
                
                25
                
                
                
                450,000
                
                
                
                450
                
                
                
                10,925
                
                
                
                -
                
                
                
                11,400Stock
      Issued for Payment ofExpenses
      and Equipment
                
                
                500,000
                
                
                
                500
                
                
                
                8,117,500
                
                
                
                8,118
                
                
                
                130,244
                
                
                
                -
                
                
                
                138,862December
      31, 2006Fair
      Value of Stock PurchaseWarrants
      Issued for Interest
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                497,794
                
                
                
                -
                
                
                
                497,794Exercise
      of Stock PurchaseWarrants
                
                
                -
                
                
                
                -
                
                
                
                250,000
                
                
                
                250
                
                
                
                2,250
                
                
                
                -
                
                
                
                2,500Stock
      Issued for Services
                
                
                -
                
                
                
                -
                
                
                
                10,000
                
                
                
                10
                
                
                
                19,990
                
                
                
                -
                
                
                
                20,000Net
      Loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (944,973
                )
                
                
                (944,973
                )BalanceDecember
      31, 2006
                
                
                525,000
                
                
                
                525
                
                
                
                9,935,024
                
                
                
                9,935
                
                
                
                5,703,930
                
                
                
                (5,988,807
                )
                
                
                (274,417
                )February
      1, 2007Warrants
      Issued
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                497,930
                
                
                
                -
                
                
                
                497,930Stock
      Options Issued
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                15,060
                
                
                
                -
                
                
                
                15,060May
      16, 2007Stock
      Options Issued
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                2,277
                
                
                
                -
                
                
                
                2,277May
      29, 2007Warrants
      Issued
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                605,348
                
                
                
                -
                
                
                
                605,348
  
 The
accompanying notes are an integral part of these financial
statements.
 F-4
 Table of Contents
  ACACIA
AUTOMOTIVE, INC.
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
 YEARS
ENDED DECEMBER 31, 2007 AND 2006
    Preferred
      Stock$0.001
      Par Value
                
                
                
                
                
                Common
      Stock
                
                
                
                
                
                RetainedShares
                
                
                Amount
                
                
                Shares
                
                
                Amount
                
                
                Paid in Capital
                
                
                Deficit
                
                
                TotalJune
      22, 2007Conversion
      of $525,000shares
      of Preferred Stockto
      Common Stock
                
                
                (525,000
                )
                
                
                (525
                )
                
                
                525,000
                
                
                
                525
                
                
                
                500,000
                
                
                
                -
                
                
                
                500,000Sale
      of Common Stock
                
                
                -
                
                
                
                -
                
                
                
                512,500
                
                
                
                512
                
                
                
                1,024,488
                
                
                
                -
                
                
                
                1,025,000Stock
      Warrants Issued
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                430,300
                
                
                
                -
                
                
                
                430,300Stock
      Issued for Services
                
                
                -
                
                
                
                -
                
                
                
                500,000
                
                
                
                500
                
                
                
                999,500
                
                
                
                -
                
                
                
                1,000,000July
      10, 2007Stock
      Issued in Acquisition
                
                
                -
                
                
                
                -
                
                
                
                500,000
                
                
                
                500
                
                
                
                791,077
                
                
                
                -
                
                
                
                791,577Issue
      of Non-Compete Agreement
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                266,134
                
                
                
                -
                
                
                
                266,134Warrants
      Issued in Acquisition
                
                
                -
                
                
                
                -
                
                
                
                39,983
                
                
                
                -
                
                
                
                39,983November
      2, 2007Stock
      Options Issued
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                22,720
                
                
                
                -
                
                
                
                22,720November
      3, 2007Stock
      Issued for Services
                
                
                -
                
                
                
                -
                
                
                
                25,000
                
                
                
                25
                
                
                
                19,975
                
                
                
                -
                
                
                
                20,000Net
      Loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (3,850,881
                )
                
                
                (3,850,881
                )BalanceDecember
      31, 2007
                
                
                -
                
                
                $
                -
                
                
                
                11,997,524
                
                
                $
                11,997
                
                
                $
                10,918,722
                
                
                $
                (9,839,688
                )
                
                $
                1,091,031
 The
accompanying notes are an integral part of these financial
statements.
 F-5
 Table of Contents
  ACACIAAUTOMOTIVE, INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 YEARS
ENDED DECEMBER 31, 2007 AND 2006
  2007
                
                
                2006Cash
      flows from operating activitiesNet
      loss
                
                $
                (3,850,881
                )
                
                $
                (944,973
                )Adjustments
      to reconcile net loss to net cashused
      in operating activities:Depreciation
      and amortization
                
                
                101,270
                
                
                
                2,869Common
      stock issued for services
                
                
                1,020,000
                
                
                
                31,400Stock
      options and warrants issued for services
                
                
                1,573,633
                
                
                
                -Stock
      purchase warrant issued for interest
                
                
                -
                
                
                
                497,794Beneficial
      conversion
                
                
                500,000
                
                
                
                -Loss
      on disposal of assets
                
                
                2,367
                
                
                
                -Changes
      in operating assets and liabilitiesAccounts
      receivable
                
                
                (210,130
                )
                
                
                -Employee
      receivables
                
                
                (294
                )
                
                
                -Deposits
      and prepaid expenses
                
                
                (33,093
                )
                
                
                -Accounts
      payable
                
                
                164,392
                
                
                
                54,362Accrued
      liabilities
                
                
                (152,160
                )
                
                
                215,570Net
      cash used in operating activities
                
                
                (884,896
                )
                
                
                (142,978
                )Cash
      flows from investing activitiesProceeds
      from sale of assets
                
                
                22,061
                
                
                
                -Purchase
      of property and equipment
                
                
                (136,759
                )
                
                
                -Net
      cash used in investing activities
                
                
                (114,698
                )
                
                
                -Cash
      flows from financing activitiesBorrowings
      from line of credit
                
                
                667,900
                
                
                
                -Repayments
      on line of credit
                
                
                (528,000
                )
                
                
                -Sale
      of common stock
                
                
                1,025,000
                
                
                
                -Shareholder
      payables
                
                
                36,339
                
                
                
                144,410Net
      cash provided by financing activities
                
                
                1,201,239
                
                
                
                144,410Net
      increase in cash and cash equivalents
                
                
                201,645
                
                
                
                1,432Cash,
      beginning of year
                
                
                1,432
                
                
                
                -Cash,
      end of year
                
                $
                203,077
                
                
                $
                1,432
 The
accompanying notes are an integral part of these financial
statements.
 F-6
 Table of Contents
  ACACIAAUTOMOTIE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
  NOTE 1 - THE
COMPANY
 
 Acacia
Automotive, Inc. (“Acacia” or the “Company”) is engaged in acquiring and
operating automotive auctions, including automobile, truck, equipment, boat,
motor home, RV, and other related vehicles.  Following is a history of
the Company.
 
 Gibbs
Construction, Inc. (“Gibbs”) was a full service, national commercial
construction company located in Garland, Texas.  During 1999, Gibbs
experienced significant losses associated with certain construction projects,
which were bonded by Gibbs’ primary bonding surety.  In the fourth
quarter of 1999, Gibbs’ bonding surety notified Gibbs that it would no longer
provide completion and payment bonds for Gibbs’ construction
projects.  Given these events, Gibbs began a series of negotiations
with its bonding surety in December of 1999, which resulted in a written
agreement in January of 2000, whereby the bonding surety would provide funds to
finish certain projects and required Gibbs to terminate construction on other
projects.  These events led to Gibbs inability to satisfy its debts in
the ordinary course of business and on April 20, 2000, Gibbs filed a Petition
pursuant to Chapter 11 of the United States Bankruptcy Code.
 
 On July
28, 2000, Gibbs received permission from its Court of Jurisdiction to solicit
approval of its Plan of Reorganization.  Gibbs continued to operate on
a limited basis pending approval of its Plan of Reorganization.  On
November 10, 2000, Gibbs completed its Plan of Reorganization pursuant to an
order of the court as follows:
 
 a)
              Gibbs
      transferred all of its assets and liabilities to the Gibbs Construction,
      Inc. Creditor Trust (“Trust”).
 
 b)
              Gibbs
      issued 501,000 shares of its authorized but previously unissued common
      stock to the Trust in settlement of unsecured creditor
    claims.
 
 c)
              Gibbs
      approved issuance of 1,000,000 shares of a newly created preferred stock,
      with an aggregate liquidation preference value of $200,000 and a six
      percent (6%) non-cumulative dividend, to the bonding
    surety.
 
 d)
              Gibbs
      issued 4,000,000 shares of its authorized but previously unissued common
      stock to Thacker Asset Management, LLC (TAM), a Texas limited liability
      company, in exchange for certain operating assets and the obligation to
      complete certain construction projects of
TAM.
 
 Gibbs did
not obtain a court ordered final decree from the bankruptcy court due to the
difficulties encountered with the implementation of the reorganization
plan.  All operating activities ceased in 2002.  On June 26,
2006, the bankruptcy trustee requested and received an Order for Final
Decree.  The 501,000 shares of common stock issued to the Trust
were abandoned and returned to the Company on October 5, 2006.  These
shares have been cancelled.
 
 (Continued)
   F-7
 Table of Contents
  ACACIA
AUTOMOTIE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
  NOTE 1 - THE COMPANY
(continued)
 
 On July
25, 2006, the Board of Directors of the Company met and approved the following
actions:
 
 ·
              Changed
      the Company’s name to Acacia Automotive,
Inc.
 
 ·
              Authorized
      2,000,000 shares of $0.001 par value preferred stock and authorized the
      Board of Directors to:
 
 a.)
              set
      the number of shares constituting each series of preferred
      stock
 
 b.)
              establish
      voting rights, powers, preferences and conversion
  rights
 
 ·
              Increased
      the authorized number of common shares to 150,000,000 and decreased the
      par value to $0.001.
 
 ·
              Authorized
      a one-for-eight reverse stock split of the Company’s common
      stock.
 
 ·
              Designated
      525,000 shares of preferred stock as Series A Preferred Stock, with the
      following rights:
 
 a.)
              Dividends
      can be paid when declared by the Board of Directors but must be also
      simultaneously declared on the common
stock.
 
 b.)
              Series
      A Preferred Stock may not be
redeemed.
 
 c.)
              Each
      share of Series A Preferred Stock is convertible into one share of common
      stock at the option of the holders.
 
 d.)
              The
      holders of Series A Preferred Shares are certified to 50 votes on all
      matters to be voted on by the shareholders of the Company for each share
      of Series A Preferred Stock held.
 
 ·
              Authorized
      the issuance of common stock and Series A Preferred Stock for services
      rendered and payments of organization expenses on behalf of the
      Company:
 
 a)
              8,567,500
      shares of common stock
 b)
              525,000
      shares of Series A Preferred Stock
 c)
              Aggregated
      issuance fair value was $150,262
 
 Certain
of the actions approved by the Board of Directors on July 25, 2006, require the
approval of the shareholders of the Company, which was gained in a Special
Meeting of Shareholders on February 1, 2007, and are reflected in the
accompanying financial statements.
 
 F-8
 Table of Contents
  ACACIA
AUTOMOTIE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
 NOTE 2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
 
 BASIS OF
PRESENTATION - The Company has elected to prepare its financial statements in
accordance with generally accepted accounting principles (United States) with
December 31, as its year end.  The financial statements and notes are
representations of the Company’s management who are responsible for their
integrity and objectivity.
 
 CONSOLIDATION
- The Company owns 100% of the voting stock of Acacia Augusta Vehicle Auction,
Inc.  The consolidated financial statements include the accounts of
the Company and Acacia Augusta Vehicle Auction, Inc.  All significant
intercompany accounts and transactions are eliminated in
consolidation.
 
 USE OF
ESTIMATES - Preparing the Company’s financial statements in conformity with
accounting principles generally accepted in the United States (“GAAP”) requires
management to make estimates and assumptions that affect reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and reported amounts of revenues and
expenses during the reporting period.  Actual results could differ
from these estimates.
 
 CASH AND
CASH EQUIVALENTS - The Company considers all short-term investments purchased
with a maturity of three months or less to be cash equivalents.
 
 PROPERTY,
PLANT AND EQUIPMENT - Property, plant and equipment are stated at cost less
accumulated depreciation.  Major renewals and improvements are
capitalized, while minor replacements, maintenance and repairs are charged to
current operations.  Depreciation is computed by applying the
straight-line method over the estimated useful lives which are generally three
to fifteen years.  Depreciation expense for the years ended December
31, 2007 and 2006 totaled $13,707 and $2,869, respectively.
 
 CONCENTRATION
OF CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company maintains
cash balances at financial institutions, which at times, exceed federally
insured amounts. The Company has not experienced any material losses in such
accounts.
 
 The
carrying amounts of cash and cash equivalents, accounts payable and accrued
liabilities approximate fair value due to the short-term nature of these
instruments.
 
 RECLASSIFICATIONS
– Certain reclassifications have been made to previously reported amounts, so
that the prior year’s presentation is comparative with the current year’s
presentation.
 
 (Continued)
  F-9
 Table of Contents
 
 ACACIA
AUTOMOTIE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
 
 NOTE 2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 INCOME
TAXES - The Company recognizes the amount of taxes payable or refundable for the
current year and recognizes deferred tax liabilities and assets or the expected
future tax consequences of events and transactions that have been recognized in
the Company’s financial statements or tax returns. The Company currently has
substantial net operating loss carryforwards.  The Company has
recorded a valuation allowance equal to the net deferred tax assets due to the
uncertainty of the ultimate realization of the deferred tax assets.
 
 ADVERTISING
COSTS - Advertising costs are expensed as incurred.  Advertising
expense for the years ended December 31, 2007 and 2006 amounted to $17,739 and
$4,668, respectively.
 
 CONTINGENCIES
- Certain conditions may exist as of the date the financial statements are
issued, which may result in a loss to the Company but which will only be
resolved when one or more future events occur or fail to occur.  The
Company’s management and its legal counsel assess such contingent liabilities,
and such assessment inherently involves an exercise of judgment.  In
assessing loss contingencies related to legal proceedings that are pending
against the Company or unasserted claims that may result in such proceedings,
the Company’s legal counsel evaluates the perceived merits of any legal
proceedings or unasserted claims as well as the perceived merits of the amount
of relief sought or expected to be sought therein.
 
 If the
assessment of a contingency indicates that it is possible that a material loss
has been incurred and the amount of the liability can be estimated, the
estimated liability would be accrued in the Company’s financial
statements.  If the assessment indicates that a potentially material
loss contingency is not probable but is reasonably possible, or is probable but
cannot be estimated, then the nature of the contingent liability, together with
an estimate of range of possible loss if determinable and material, would be
disclosed.
 
 Loss
contingencies considered remote are generally not disclosed unless they involve
guarantees, in which case the guarantees would be disclosed.
 
 STOCK
BASED COMPENSATION - As of January 1, 2006, the Company adopted SFAS No. 123
“Accounting for Stock-Based Compensation”, as amended by SFAS 14B, “Accounting
for Stock-Based Compensation-Transaction and Disclosure”, which established
accounting and disclosure requirements using a fair value based method of
accounting for stock-based employee compensation.  During the year
ended December 31, 2007, the Company issued stock awards to employees in the
amount of $1,020,000. For the year ended December 31, 2006, no stock awards were
issued to employees.
 
 COMMON
STOCK PURCHASE WARRANTS - The Company has issued common stock purchase warrants
as payments to individuals for providing services or financial resources to the
Company.  The Company’s management selected the Black-Scholes
valuation method to calculate the fair value of the common stock purchase
warrants.
 
 (Continued)
  F-10
 Table of Contents
 ACACIA
AUTOMOTIE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
 NOTE 2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES  (continued)
 
 COMMON
STOCK PURCHASE WARRANTS - On February 1, 2007, the Company issued stock purchase
warrants to purchase 250,000 shares of the Company’s common stock for $0.01,
with a life of five (5) years. The aggregate value of these stock purchase
warrants was $497,930 which was recognized as interest expense at December 31,
2006. The Black Sholes model assumptions were:
 
 Estimate
      fair value
              
              $
              1.99Expected
      life (years)
              
              
              2.5Risk
      free interest rate
              
              
              4.96
              %Volatility
              
              
              212
              %Dividend
      yield
              
              
              -
 
 These
shares were exercised on February 1, 2007.
 
 On May
29, 2007, the Company issued stock purchase warrants to purchase 1,500,000
shares of the Company’s common stock for $1.00 to $4.00, with a life of five (5)
years in connection with the conversion of the preferred stock. The aggregate
value of these stock purchase warrants was $605,348. 1,000,000 of these warrants
can only be exercised upon the meeting of a qualifying event or at the
discretion of the Board of Directors. The Black Sholes model assumptions
were:
 
 Estimate
      fair value
              
              $
              0.92Expected
      life (years)
              
              
              2.5Risk
      free interest rate
              
              
              4.88
              %Volatility
              
              
              212
              %Dividend
      yield
              
              
              -
 
 On June
22, 2007, the Company issued stock purchase warrants to purchase 256,250 shares
of the Company’s common stock for $1.00, with a life of five (5)
years.  The aggregate value of these stock purchase warrants was
$430,300 which was a part of the stock subscription and recognized as wages,
consulting and directors’ fees. The Black Sholes model assumptions
were:
 
 Estimate
      fair value
              
              $
              1.30Expected
      life (years)
              
              
              2.5Risk
      free interest rate
              
              
              4.92
              %Volatility
              
              
              212
              %Dividend
      yield
              
              
              -
 
 
 
 (Continued)
  F-11
 Table of Contents
 ACACIA
AUTOMOTIE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
 NOTE 2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 On July
10, 2007, the Company issued stock purchase warrants to purchase 50,000 shares
of the Company’s common stock for $1.00, with a life of five (5) years. The
aggregate value of these stock purchase warrants was $39,983 and was included in
the purchase price of certain assets and liabilities of Augusta Auto Auction,
Inc. The Black Sholes model assumptions were:
 
 Estimate
      fair value
              
              $
              0.80Expected
      life (years)
              
              
              2.5Risk
      free interest rate
              
              
              4.92
              %Volatility
              
              
              212
              %Dividend
      yield
              
              
              -
 
 In
conjunction with the purchase of Augusta Auto Auction, Inc. stock purchase
warrants to purchase the Company’s common stock for $1.00 to $4.00 with a life
of five (5) years were issued pursuant to a two-year non-compete agreement with
two of the previous owners of the auction. The aggregate value of these stock
purchase warrants was $266,134.  The Black Sholes model assumptions
were:
 
 Estimate
      fair value
              
              $
              1.95Expected
      life (years)
              
              
              2.5Risk
      free interest rate
              
              
              4.92
              %Volatility
              
              
              212
              %Dividend
      yield
              
              
              -
 
 RECENT
ACCOUNTING PRONOUNCEMENTS - Statement No. 158,”Employers’ Accounting for Defined
Benefit Pension and Other Post Retirement Plans” – an amendment of FASB
Statements No. 87, 88, 016, and 132(R). This Statement improves financial
reporting by requiring an employer to recognize the over funded or under funded
status of a defined benefit postretirement plan (other than a multiemployer
plan)  as an asset or liability in its statement of financial position
and to recognize changes in that funded status in the year in which the changes
occur through comprehensive income of a business entity or changes in
unrestricted net assets of a not-for –profit organization.
 
 Statement
No. 157, “Fair Value Measurements” - This Statement defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles (GAAP), and expands disclosures about fair value
measurements. This Statement applies under other accounting pronouncements that
require or permit fair value measurements.
 
 Statement
No. 156, “Accounting for Servicing of Financial Assets” - an amendment of FASB
Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities”, and No. 140, “Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities”.
 
 In the
opinion of management, these Statements will have no material effect on the
December 31, 2007 and 2006 financial statements of the Company.
  F-12
 Table of Contents
 ACACIA
AUTOMOTIE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
 NOTE 3 - RELATED PARTY
TRANSACTIONS
 
 The
Company’s Chief Executive Officer (“CEO”) and majority stockholder have provided
monies to pay substantially all operating expenses since business activities
resumed in July 2006.  The following summarizes the activity and
balance due the stockholder:
 
 2007
              
              
              2006Description
              
              Amount
              
              
              AmountPayments
      made by stockholderOpening
      expenses
              
              $
              165,218
              
              
              $
              144,410Operating
      expenses
              
              
              47,104
              
              
              
              -Equipment
              
              
              7,248
              
              
              
              7,248Prepaid
              
              
              469
              
              
              
              469220,039
              
              
              
              152,127Less:Purchase
      of Common Stock
              
              
              (138,862
              )
              
              
              (138,862
              )Stock
      Purchase Warrant Exercise
              
              
              (2,500
              )
              
              
              (2,500
              )Payment
              
              
              (31,573
              )
              
              
              -Due
      to Stockholder, December 31
              
              $
              47,104
              
              
              $
              10,765
 
 The
Company granted 10,000 shares of common stock options to each of its three
outside directors on February 1, 2007 upon their appointment in accordance to
the Stock Incentive Plan for 2007, and to one outside director on May 16, 2007
upon their appointment in accordance to the Stock Incentive Plan for
2007.
 
 Additionally,
upon each annual stockholders meeting 15,000 shares of common stock options will
be granted to each eligible director.  The Company also granted 10,000
shares of Common stock options to its newly-appointed Secretary and 5,000
options to its Assistant Secretary.  In addition, the Company granted
500,000 shares of its Common stock to its President and COO in accordance with
the Stock Incentive Plan.
  F-13
 Table of Contents
  ACACIA
AUTOMOTIE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
  NOTE 4 - PROPERTY AND
EQUIPMENT
 
 Property
and equipment consisted of the following at December 31, 2007 and
2006:
 
 2007
              
              
              2006Leasehold
      improvements
              
              $
              40,987
              
              
              $
              -Vehicles
              
              
              31,860
              
              
              
              31,074Capital
      Leases
              
              
              43,785
              
              
              
              -Furniture
      & fixtures
              
              
              2,403
              
              
              
              -Computers
      & Equipment
              
              
              97,814
              
              
              
              -216,849
              
              
              
              31,074Less
      accumulated depreciation
              
              
              (13,707
              )
              
              
              (2,869
              )$
              203,142
              
              
              $
              28,205
 
 NOTE 5 - INCOME
TAXES
 
 At
December 31, 2007, the Company had a net operating loss carryforward of
approximately $11,424,000 which will expire beginning in 2017.  A
valuation allowance has been provided for the deferred tax asset as it is
uncertain whether the Company will have future taxable income. A reconciliation
of the benefit for income taxes with amounts determined by applying the
statutory federal income rate of (34%) to the loss before income taxes is as
follows:
 
 2007
              
              
              2006Benefit
      for Income Taxes Computed
                using
      the statutory rate of 34%
              
              $
              1,301,562
              
              
              $
              321,291Non-Deductible
      Expense
              
              
              (1,043,549
              )
              
              
              (181,578
              )Change
      in Valuation Allowance
              
              
              (258,013
              )
              
              
              (139,713
              )Provision
      for Income Taxes
              
              $
              -
              
              
              $
              -
 
 Significant
components of the Company’s deferred tax liabilities and assets were as follows
at December 31, 2007 and 2006.
 
 2007
              
              
              2006Deferred
      Tax LiabilitiesDeferred
      Tax AssetsTax
      Operating Loss Carryforward
              
              $
              3,884,429
              
              
              $
              3,626,451Employee
      Compensation
              
              
              -
              
              
              
              73,294Contributions
              
              
              34
              
              
              
              413,884,463
              
              
              
              3,699,786Valuation
      Allowance
              
              
              (3,884,463
              )
              
              
              (3,699,786
              )$
              -
              
              
              $
              -
  F-14
 Table of Contents
  ACACIA
AUTOMOTIE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
  NOTE 6 - STOCKHOLDERS’
EQUITY
 
 Preferred
Stock
  In 2000,
the bankruptcy court authorized the issuance of 1,000,000 shares of no par value
preferred stock to the Company’s bonding surety. These preferred shares have a
liquidation preference value of $0.20 per share and have a six percent (6%)
non-cumulative dividend rate.  On October 27, 2006, the bonding surety
agreed to exchange the 1,000,000 shares of no par value preferred stock for
100,000 shares of the Company’s $0.001 par value common stock.
 
 In July
2006, the Company’s Board of Directors authorized a 2,000,000 share series of
preferred stock and the Board of Directors were authorized to fix:
 
 ·
              The
      number of share constituting each series of preferred
  stock
 ·
              Voting
      rights, powers, preferences, and conversion
  rights
 
 At
December 31, 2006, 525,000 shares of Series A Preferred Stock were
outstanding.  In the second quarter of 2007 the 525,000 outstanding
shares of $0.001 par value Series A Preferred Stock were converted to 525,000
shares of $0.001 par value common stock. The Company issued 500,000 warrants to
an officer and a related party exercisable immediately with an exercise price of
$1.00.  The difference between the exercise price and the $2.00
current selling price of the common stock was recognized as a beneficial
conversion expense of $500,000.
 
 These
same individuals were issued the following warrants:
 
 Vesting
      Year
              
              Price
              
              
              Number2008
              
              $
              2.00
              
              
              
              333,0002009
              
              $
              3.00
              
              
              
              333,0002010
              
              $
              4.00
              
              
              
              334,0001,000,000
 
 The
vesting is subject to the Company attaining certain performance
levels.
 
 (Continued)
  F-15
 Table of Contents
 ACACIA
AUTOMOTIE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
 
 NOTE 6 - STOCKHOLDERS’
EQUITY (continued)
 
 Common
Stock
  Prior to
July 25, 2006, the Company had authorized 15,000,000 shares of $0.01 par value
common stock and 8,561,000 common shares outstanding. On July 25, 2006, the
Company’s Board of Directors approved the following actions which have been
retroactively reflected in the Statement of Stockholders’ Equity.
 
 ·
              The
      abandonment of 501,000 shares of common stock issued to the creditor
      trust, on October 5, 2006.
 ·
              Change
      in par value for $0.01 to $0.001.
 ·
              One
      (1) for eight (8) reverse stock
split.
 
 In the
second quarter of 2007, 512,500 shares of common stock were sold and 500,000
shares were issued for services.
 
 On July
10, 2007, the Company issued 500,000 shares of common stock and 50,000 stock
warrants in exchange for the acquisition of certain assets and liabilities of
Augusta Auto Auction, Inc.  The warrants have an exercise price of
$1.00 per share and expire on July 10, 2012.
 
 There
were 50,000 shares issued in the fourth quarter for services.
 
 As of
December 31, 2007, the company had 11,997,524 shares of $0.001 par value common
stock outstanding.
 
 Retained
Deficit
  Gibbs
Construction, Inc ceased operations in 2002 until it was purchased by the
Company in July, 2006.  The retained deficit balance as of December
31, 2007 and 2006 amounted to $9,816,930 and $5,988,807,
respectively.
 
 NOTE 7 - BUSINESS
COMBINATION
 
 On July
10, 2007, Acacia Automotive, Inc. (“Buyer”) purchased certain assets and
liabilities of Augusta Auto Auction, Inc. (“Seller”) in exchange for 500,000
shares of common stock and 50,000 stock warrants in order to expand operations
in the automotive industry.  Acacia Automotive, Inc., through its
wholly-owned subsidiary Acacia Augusta Vehicle Auction, Inc., operates an auto
auction in the Augusta, Georgia area from a leased facility located in North
Augusta, South Carolina.  The purchase was accounted for under the
purchase method of accounting.  The results of operations for the
Acacia Augusta Vehicle Auction, Inc. business are included in these financial
statements from the date of the purchase.
 
 (Continued)
  F-16
 Table of Contents
 ACACIA
AUTOMOTIE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
 NOTE 7 - BUSINESS
COMBINATION (continued)
 
 The
following table summarizes the amounts assigned to the assets acquired and the
liabilities assumed at the date of acquisition:
 
 Property
      and equipment
              
              $
              34,806Customer
      list
              
              
              375,000Goodwill
              
              
              427,929Non
      Compete Agreement
              
              
              266,134Total
      assets acquired
              
              
              1,103,869Current
      liabilities
              
              
              (6,173
              )Total
      liabilities assumed
              
              
              (6,173
              )Net
      assets acquired
              
              $
              1,097,696
 
 
 The
      non-compete agreement was purchased in conjunction with the business
      combination for $266,134
 and
      is being amortized over two years. The customer list is being amortized
      over ten years. Amortization
 expense
      totaled $85,283 for the year ended December 31,
  2007.
 
 Future
estimated amortization expense is:
  2008
                
                $
                170,5672009
                
                
                104,0332010
                
                
                37,5002011
                
                
                37,5002012
                
                
                37,500Thereafter
                
                
                168,750
 NOTE 8 - PROMISSORY NOTE
(LINE OF CREDIT)
 
 On July
31, 2007, the Company entered into a loan agreement with Wachovia Bank, NA to
provide a credit facility up to $300,000.  During the period ending
December 31, 2007, the Company borrowed approximately $667,900 and repaid
approximately $528,000 on this credit line.  As of December 31, 2007,
$139,900 was owed the bank.
 
 F-17
 Table of Contents
 ACACIA
AUTOMOTIE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
 
 NOTE 9 - NON-CASH INVESTING
AND FINANCING ACTIVITIES
 
 As of
December 31, 2007 and 2006, the Company had the following non-cash investing and
financing activities:
 
 2007
              
              
              2006Preferred
      stock
              
              $
              525
              
              
              $
              500Common
      stock
              
              
              (1,025
              )
              
              
              8,368Non
      Compete Agreement
              
              
              266,134
              
              
              
              -Additional
      paid-in capital
              
              
              (1,097,196
              )
              
              
              132,494Prepaid
      expenses
              
              
              -
              
              
              
              (469
              )Accounts
      payable
              
              
              (6,173
              )
              
              
              -Accrued
      liabilities
              
              
              -
              
              
              
              23,825Shareholder
      payables
              
              
              -
              
              
              
              (133,645
              )Equipment
              
              
              34,806
              
              
              
              (7,248
              )Vehicles
              
              
              -
              
              
              
              (23,825
              )Intangibles
              
              
              802,929
              
              
              
              -Leased
      Equipment
              
              
              (43,785
              )
              
              
              -Capital
      Lease Obligations
              
              
              43,785
              
              
              
              -
  NOTE 10 – OPERATING
LEASES
 
 The
Company leases office space from Murray Investments for the Augusta Auto Auction
a subsidiary of the Company. The rent is $2,700 per month. Rent expense amounted
to $13,500 and zero for the years ended December 31, 2007 and 2006,
respectively.
 
 The
Company also began leasing office space for the corporate office in Brentwood,
Tennessee in September, 2007.  The lease is for 12 months, with an
option for renewal at the end of the lease. Rent is $2,000 per
month.  Rent expense amounted to $8,000 and zero for the year ended
December 31, 2007 and 2006, respectively.
  F-18
 Table of Contents
 ACACIA
AUTOMOTIE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
 
 NOTE 11 – CAPITAL
LEASES
 
 The
following are capital leases acquired as of December 31, 2007:
  IBM
      Credit, LLC – monthly payments of $164, including interest at 8.01%
      secured by computer equipment, matures December 31, 2010
                
                $
                5,903CIT
      Technology Financing Services, Inc – monthly payments of $436, including
      interest at 20.24% secured by computer equipment, matures November 30,
      2010
                
                
                15,692CIT
      Technology Financing Services, Inc – monthly payments of $716, including
      interest at 20.82% secured by computer equipment, matures November 14,
      2010
                
                
                25,780VAR
      Resources, Inc – monthly payments of $591, including interest at 24.18
      secured by computer equipment, matures September 30, 2010
                
                
                10,633Total
      payments under capital lease
                
                
                58,008Less
      interest
                
                
                (14,223
                )43,785Less
      current portion
                
                
                (11,706
                )$
                32,079
 Future minimum lease payments under
capital lease are:
 
 2008
                
                $
                19,3362009
                
                
                19,3362010
                
                
                19,336$
                58,008
 
 NOTE 12 – GOING
CONCERN
 
 As of
December 31, 2007, the Company has limited disposable cash and its revenues are
not sufficient to, and cannot be projected to, cover operating expenses and
expansion by the Company.  The factors raise substantial doubt as to
the ability of the Company to continue as a going
concern.  Management’s plans include attempting to find additional
operational auto auctions to buy and raising funds from the public through a
stock offering. Management intends to make every effort to identify and develop
sources of funds.  There is no assurance that Management’s plans will
be successful.
   F-19
 Table of Contents
   SIGNATURES
 
 
 In accordance with Section 13 or
15(d) of the Exchange Act, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
  Acacia
      Automotive, Inc.Date:
      April 15, 2008
                By:
                /s/ Steven L.
      SampleSteven
      L. Sample,Chief
      Executive Officer and Principal Financial and Accounting Officer
  In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
  Signature
                
                Title
                Date/s/ Steven L. Sample
                
                Director
                April
      15, 2008Steven
      L. Sample/s/ Tony Moorby
                
                Director
                April
      15, 2008Tony
      Moorby/s/ Danny R. Gibbs
                
                Director
                April
      15, 2008Danny
      R. Gibbs/s/ Dr. James C. Hunter
                
                Director
                April
      15, 2008Dr.
      James C. Hunter/s/ V. Weldon Hewitt
                
                Director
                April
      15, 2008V.
      Weldon Hewitt/s/David Bynum
                
                Director
                April
      15, 2008David
      Bynum/s/ Frank Lawrence
                
                Director
                April
      15, 2008Frank
      Lawrence
     28
 Table of Contents