UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 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,
2008
 or
  o
                  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 registrantas specified in its charter)
  Texas
              75-2095676(State
      or other jurisdiction of
      incorporation or organization)
              (IRS
      Employer Identification
      No.)
  3512 East
Silver Springs Boulevard  #243  Ocala, FL   
34470
 (Address of principal executive offices) (Zip
Code)
  Issuer’s
telephone number: (352)
427-6848
 
 
 (Former
name, former address and former fiscal year, if changed since last
report)


Securities
registered pursuant to Section 12(b) of the Act:





Title
      of each class
              
              Name
      of each exchange on which registered





Securities
registered pursuant to section 12(g) of the Act:





Common
Stock


(Title of
class)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes o  No x





Indicate
by check mark if there is no disclosure of delinquent filers 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 smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.




Large
      accelerated filer  o
              
              Accelerated
      filer oNon-accelerated
      filer    o  (Do not
      check if a smaller reporting company)
              
              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. x o
  State
issuer’s revenues for its most recent fiscal
year.  $998,972
  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 $5,910,636  As of September
1, 2009.
  State the number of shares
outstanding of each of the issuer’s classes of common equity, as of the latest
practicable date: 12,062,524 as of December 31, 2008 and October 1,
2009.
  Table of Contents




TABLE OF CONTENTS
  PAGEPART
      I.Item
      1.
                Description of Business
                3Item
      1A.
                Risk Factors
                6Item
      1B.
                Unresolved Staff Comments
                9Item
      2.
                Description of Property
                9Item
      3.
                Legal Proceedings
                9Item
      4.
                Submission of Matters to a Vote of Security
      Holders
                9PART
      II.Item
      5.
                Market for Common Equity and Related Stockholder
      Matters
                10Item
      6.
                Selected Financial Data
                11Item
      7.
                Management's Discussion and Analysis or Plan of
      Operations
                11Item
      7A.
                Quantitative and Qualitative Disclosures About Market
      Risk
                13Item
      8.
                Financial Statements and Supplementary Data
                13Item
      9.
                Changes in and Disagreements With Accountants on Accounting and
      Financial Disclosure
                13Item
      9A (T).
                Controls and Procedures
                13Item
      9B.
                Other Information
                14PART
      III.Item
      10.
                Directors, Executive Officers, and Corporate
      Governance
                15Item
      11.
                Executive Compensation
                17Item
      12.
                Security Ownership of Certain Beneficial Owners and Management
      and Related Stockholder Matters
                18Item
      13.
                Certain Relationships and Related
    Transactions
                19Item
      14.
                Principle Accountant Fees and Services
                19Item
      15.
                Exhibits, Financial Statement Schedule and Reports on Form
      8-K
                20SIGNATURES
                21


2
 Table of Contents




Item1.     Description of
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 from Gibbs Construction, Inc. 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 automotive
auctions, 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.
  The
Company considers its first 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.
  3
 Table of Contents
  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 and commercial
media.
  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.
  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.
  4
 Table of Contents
  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,
operates approximately 135 locations throughout the world, with more than 75
auto auctions in the United States. 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 45 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 nine
auto 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. (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.
  Employees
  As of
January 1, 2009, the company had two officer employees, Steven L. Sample, its
Chairman, President and Chief Executive Officer, and David Bynum, its Vice
President and Chief Operating Officer, as well as two other part-time persons.
The Augusta auction also employs eight full time and 21 part time
persons.  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 many
more.  The approximate size of our target auctions may more likely lie
within the range of 50 to 200 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
  5
 Table of Contents
  Item 1A. Risk Factors
  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.
  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.
  6
 Table of Contents
  The
Company will attempt to acquire 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.
  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 David Bynum and Steve Sample
  Our
future performance depends in significant part upon the continued service of our
Vice President and Chief Operating Officer, David Bynum, 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. Bynum or 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. David
Bynum, the Company’s Vice President and COO, and Steven L. Sample, the Company’s
CEO, currently own 54.34% of the Company’s issued and outstanding common stock.
Mr. Sample and Mr. Bynum 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. Bynum 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.
  7
 Table of Contents
 
 Management
of Growth
  The
Company is currently seeking to identify and acquire additional 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.
  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 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.
  8
 Table of Contents
  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.
  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. Unresolved Staff Comments
  None and
Not applicable.
  Item 2.    Description of Property
  In July
2008, the Company renewed a twelve month lease on the location where the Augusta
Auto Auction has operated for several years.  The lease term can be
further extended and currently has a monthly lease rate of
$2,835.  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 vehicle storage (both indoor and outdoor) and customer parking for
approximately 200 additional 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 $1230 per month. The portion of the
property (land and building) used for storage of sale units is also protected by
security fencing and alarm systems.
  The
Company also maintains administrative offices in Ocala, Florida, at a cost of
approximately $429.00 per month, which it may cancel at any time.
  Item 3.    Legal Proceedings
  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. Acacia’s management then acquired control of the shell with no assets
and no liabilities.
  Item 4.    Submission of Matters to a Vote of Security
Holders
  Not
Applicable
  9
 Table of Contents
  PART
II
  Item 5.    Market for 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, 2008, including the interim period in the
first quarter of 2007 prior to the registrant’s one for eight reverse stock
split. The following prices reflect inter-dealer prices without retail mark-up,
mark-down or commissions and may not reflect actual transactions.
 Closing
      Bid
                  
                  
                  Closing
      AskHigh
                  
                  
                  Low
                  
                  
                  High
                  
                  
                  LowQuarters
      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
                  
                  
                  
                  0.75Quarters
      ending in 2008March
      31
                  
                  
                  0.25
                  
                  
                  
                  0.10
                  
                  
                  
                  1.05
                  
                  
                  
                  1.01June
      30
                  
                  
                  0.20
                  
                  
                  
                  0.18
                  
                  
                  
                  1.01
                  
                  
                  
                  0.70September
      30
                  
                  
                  0.25
                  
                  
                  
                  0.20
                  
                  
                  
                  0.95
                  
                  
                  
                  0.55December
      31
                  
                  
                  0.20
                  
                  
                  
                  0.10
                  
                  
                  
                  0.66
                  
                  
                  
                  0.50
  As of
August 15, 2009, the Company had 123 stockholders of record. We believe that we
may also have 250 or more additional 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.
  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**
                
                
                410,000
                
                
                $
                0.51
                
                
                
                579,000Totals
                
                
                410,000
                
                
                $
                0.51
                
                
                
                579,000
                ***
 
 *
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. The goal for 2008 was not met, thus leaving the number of shares that can
be purchased pursuant to such warrants at 1,058,650, a reduction of 316,350, the
remainder having a weighted exercise price of $2.50. 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.
  ****
Effective January 1, 2009, the number of shares available under the Plan
increased by 482,501 shares.
  10
 Table of Contents
  Item 6.    Selected Financial Data
  Not
Applicable
  Item7.    Management's Discussion 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.
  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 improvements to the physical plant, upgrades to technology
equipment hardware and operating software.
  As a
result of our misguided confidence in the vendor of that new auction operating
software, we believed that the software and operating system objectives we
sought would be achieved, giving faster and broader access to its information
and operating statistics, 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, and
more.  Additionally, in a widely-published 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
was to be put into use) made public their intention to merge.  The
Company anticipated such a union would allow for smoother integration of its old
data to the new system, provide additional markets for Internet-based selling
efforts through the combined resources of the two vendors’ operations, and
provide the vendors with substantially greater presence in the marketplace than
either previously enjoyed.
  Unfortunately,
the new software fell far short of the Company’s expectations, and the two
software providers did not merge as anticipated.  Ultimately, the
Company was forced to discontinue use of the new software at mid-year due to
insurmountable problems that resulted in business disruptions and some loss of
support by our auction clients.  The Company subsequently reverted to
its original software vendor, upgrading to the latest versions of its programs,
and thereafter regained heightened stability in its operating status. The
abandoned operating system caused the Company to suffer delays in reporting its
financial results and filings with the SEC.  With the original, but
updated, operating system back in place, the Company has finally returned to
stability in its ability to meet reporting requirements.
  The
Company continues to believe that auto auctions are recession-resistant because,
in part, the industry is more dependent on the size of the U.S. “Car Park” (the
number of vehicles in operation or VIO) than it is upon manufacturing output,
retail sales of motor vehicles, or other factors.  Of the 258 million
units in the car park in 2007, 46 million were sold in used vehicle
transactions, and auto auctions sold over 10 million of those units. Through
September of 2008, auto auction volumes in the U.S. were off less than 1%, while
new vehicle retail sales declined more than 22%.
  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.
  11
 Table of Contents
  Operating
Results in 2007 and 2008
  Our
operations commenced in July 2007 with the acquisition of the Augusta auction
and this auction constituted our only operations from that date through 2008. In
2007 we generated approximately $425,000 in revenue compared to approximately
$1,000,000 in 2008 with quarterly revenue averaging approximately $212,500 and
$250,000 in 2007 and 2008 respectively, an average increase of approximately
18%. This increase was due, in part, to larger volumes of cars sold and
increased fees charged being more consistent with industry
standards.
  In 2008
our auction lost approximately $100,000. This loss included a charge of
approximately $25,000 for software and related hardware described above as well
as approximately $170,000 in amortization of a non-compete agreement and a
customer list. The auction also had depreciation expense of approximately
$46,000. Excluding depreciation expense because of the need to invest in
additional equipment, we incurred about $100,000 in positive cash flow from our
operation in 2008.
  For 2007
our auction lost approximately $185,000 with about $25,000 of non-recurring
start-up expense. With amortization of approximately $85,000, we had
approximately $100,000 of negative cash flow from operations.
  We
believe that we incurred a total of approximately $142,171 in expenses in 2007
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 year’s results to 2007 in comparable periods under our
ownership:
  Q3
                
                
                
                Q4
                
                
                Six
      MonthsUnits
      Entered vs. 2007
                
                
                +7.3
                %
                
                
                +33.0
                %
                
                
                +19.9
                %Units
      Sold vs. 2007
                
                
                +11.8
                %
                
                
                -1.0
                %
                
                
                +5.4
                %Conversion
      Rate 2007
                
                
                55.2
                %
                
                
                55.5
                %
                
                
                55.4
                %Conversion
      Rate 2008
                
                
                57.6
                %
                
                
                41.3
                %
                
                
                48.7
                %Change
      in Buy/Sell Fee Revenues
                
                
                +105.2
                %
                
                
                +7.5
                %
                
                
                +51.0
                %
 
 While
2008 saw large gains in revenues over 2007, the fourth quarter saw impact from
the deteriorating economy as well as the effects of December holidays falling in
proximity to our sale dates in trumping further gains.  While the
Company anticipated generally-weakening economic conditions, reduced
productivity at automotive manufacturers, tightening credit and higher consumer
interest rates, and other negative pressures affecting trade in general,
revenues were up 51% in the six month period year-over-year. In addition, the
Company continued to face operating hardships associated with the new operating
software instituted in December of 2007 and discontinued in July of
2008.
  Discussion
Regarding the Parent Company’s Operating Results
  The
Company incurred a loss of $910,497 in 2008 compared to a loss of $3,850,881 in
2007. In 2007, approximately $3,000,000 of the loss related to stock issued for
services, stock options issued for services and a beneficial conversion of
preferred stock to common stock, accruals largely made in restarting the company
in its current business. For 2007, the balance of the loss, when compared to the
results for 2008, was approximately $60,000 less than that that in 2008. While
our revenues were larger in 2008 when compared to 2007 by about $575,000, at the
corporate level our salaries for 2008 reflect twelve months of salary for one of
our executives compared to three months in the previous year for that
individual, as well as the addition of expense for another experienced auction
operations manager. During the year, the Company was engaged in additional
activities which included expenses for reviewing acquisition opportunities and
otherwise. In addition, we incurred a write off of approximately $25,000 in 2008
referred to above and amortization and depreciation expense of about $220,000 in
2008 compared to approximately $100,000 in 2007.
  In 2008
our corporate expense reflects principally $385,000 in salaries for executives
with related taxes and benefits. Corporate general and administrative expenses
of approximately $200,000 include legal and accounting expenses, expenses
incurred largely for being publicly held, as well as expenses for corporate
offices and other general expenses.
  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, which the Company anticipates raising through
sale of Common Stock.
  The
Company’s liquidity in 2008 was assisted through the closing of a private
placement of $130,000 of common stock in the second quarter of 2008. The
Company’s liquidity is also 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 $150,000, this line of credit is used
to cover some instances in which payments to dealers selling vehicles through
the auction is advanced prior to collecting payments from buyers of 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.
  12
 Table of Contents
  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 continues to seek additional capital through equity investment. With the
acquisition of an auction in Chattanooga, Tennessee, an acquisition that is
anticipated to close in late 2009, the Company is planning for those operations
to provide sufficient operating capital to fund the corporate overhead not
funded by our Augusta auction operations. The general operations of the
Chattanooga auction will be supported by a line of credit from the auction’s
seller.
  Financing
of Planned Expansions and Other Expenditures
  When
sufficient funding is available, the Company 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.
  Item 7A. Quantitative and Qualitative Disclosures About Market
Risk
  Not
Applicable
  Item 8.    Financial Statements and 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.    Changes in 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.
  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.
  13
 Table of Contents
  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).
  Our
independent auditor has indicated that we have three material weaknesses:
(i) Our reconciliations and account analysis is not performed in a timely manner
because we do not have full time financial accounting personnel; (ii) Our sales
and accounts receivable software is not integrated with our financial accounting
software and our accounting personnel do not perform routine reconciliations of
data entered on the sales reporting system to appropriate control accounts in
the general ledger system with reconciliations made in the aggregate without
individual account scrutiny regardless of materiality; and (iii) we made several
adjusting entries relating to the recording of options and the accrual of
certain liabilities.
  During
most of fiscal 2008, the Company had no full time financial accounting
personnel.  As such many reconciliations and account analysis were not
performed in a timely manner. However, contemporaneous to year-end, the Company
added a certified public accountant with financial reporting experience to its
staff.  The Company is also actively seeking a qualified CFO to join its
executive team, and feels that these additions will mitigate this
issue.
  As with
many vehicle auction companies of its size, the Company’s sales and accounts
receivable software is not integrated with its financial accounting
software.  In 2008, the accounting personnel did not properly perform
routine reconciliations of the results of the data entered on the sales
reporting system to the appropriate control accounts in the general ledger
system.  As such, certain reconciliations to the control accounts were made
in the aggregate without individual account scrutiny, regardless of materiality.
With the addition of the accountant, the Company will require reconciliations of
the control accounts with each accounting period close.
  The
auditors proposed significant adjusting entries to both the subsidiary and
parent companies that comprise the consolidated reporting entity. These entries
were principally the result of analyzing the Company’s recording of options and
the accrual of certain liabilities.  With the addition of the accountant,
the Company will perform this analysis on no less than a quarterly
basis.
 
 Item9B.  Other Information
 
 Not
applicable
  14
 Table of Contents
  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
                  
                  62
                  
                  Director,
      Chairman of the Board, and Chief Executive OfficerDavid
      Bynum
                  
                  61
                  
                  Director,
      Vice President and Chief Operating OfficerPatricia
      Ann Arnold
                  
                  52
                  
                  SecretaryTony
      Moorby
                  
                  61
                  
                  Director,
      Chairman of Advisory BoardDanny
      Gibbs
                  
                  52
                  
                  DirectorJames
      C. Hunter, MD
                  
                  51
                  
                  DirectorV.
      Weldon Hewitt
                  
                  72
                  
                  DirectorFrank
      Lawrence
                  
                  68
                  
                  Director
 
 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.
  On May
16, 2007, the registrant named David Bynum to its board of directors, and at the
end of December 31, 2008, named him its Vice president and Chief Operating
Officer.  Since 2006 and prior to joining Acacia,  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
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.
  Mr.
Moorby joined the Company in October 2006 when he was named as a director and as
President and Chief Operating Officer until retiring from that office at the end
of December 31, 2008.  After that time, Mr. Moorby agreed to serve as
Chairman of the Company’s new Advisory Board.  He has remained active
in assisting the Company with acquisition strategies and other
matters.  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 Carolina, 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.
  15
 Table of Contents
  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.
  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
  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.
  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 only instituted operations in the last two 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.  On April 4, June 3, July 7, September
12, and December 19, 2008, Mr. Sample gifted 5,000 shares, 50,000 shares, 20,000
shares, 57,500 shares, and 7,400 shares respectively of his Common stock. Those
transactions were reported on Form 4 on June 2nd and
December 31st of
2008.
  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 December 31, 2008, Mr. Moorby was granted 50,000 Common
Stock Options on his appointment as Chairman of the Advisory Board, a board that
has not yet been formed.  That transaction was reported on Form 4 on
9/18/2009.  Mr. Moorby remains a Director of the Company.
  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. On
December 31, 2008, Messrs Gibbs, Hewitt, and Hunter were awarded 15,000 Common
Stock Options each under the automatic options program for their annual service
to the Company.  Those awards were reported on Forms 4 on September
18, 2009.
  Messrs.
Bynum and Lawrence filed Form 3’s reflecting each’s appointment to the board of
directors on November 2, 2008, and their Option awards as Directors under the
Company 2007 Stock Incentive Plan.  Messrs. Bynum and Lawrence filed
Form 4’s reflecting outside director’s automatic stock option grants for 15,000
shares granted on the same date. On December 31, 2008, Messrs Lawrence, and
Bynum were awarded 15,000 Common Stock Options each under the automatic options
program for their annual service to the Company.  Those awards were
reported on Forms 4 on September 18, 2009. After December 31, 2008, Mr. Bynum
became an officer of the Company and no longer qualifies for non-employee
director awards, but was awarded 100,000 Common Stock options upon his
appointment as the Company’s Vice President and Chief Operating Officer on that
date.  Those awards were reported on Form 4 on September 18,
2009.  Beginning January 1, 2009, Mr. Moorby will be eligible for
non-employee Director Option awards unless he returns to active service to the
company within the year.
  16
 Table of Contents
  Item 11.  ExecutiveCompensation
  The
following table sets forth certain information concerning the compensation
earned during the year ended December 31, 2008 by the Company's Chief Executive
Officer and Chief Operating Officer for whom disclosure is
required:
  SUMMARY
COMPENSATION TABLE
  RestrictedAnnual
      Compensation(1)
                
                
                StockName
      and Principal Position
                
                Fiscal
      Year
                
                Salary
                
                
                Bonus
                
                
                Awards
                
                
                TotalSteve
      Sample(1)
                
                2008
                
                $
                150,000
                
                
                
                -
                
                
                
                -
                
                
                
                150,000Chief
      Executive Officer
                
                2007
                
                
                150,000
                
                
                
                -
                
                
                
                -
                
                
                
                150,000Tony
      Moorby, Presidentand
                
                2008
                
                $
                201,000
                
                
                
                -
                
                
                
                -
                
                
                
                201,000Chief
      Operating Officer(3)
                
                2007
                
                
                201,000
                
                
                
                -
                
                
                $
                5,000
                (2)
                
                
                206,000
 
 (1)
Amounts for Mr. Moorby and
  (2) In
February 2007, the Company’s Board awarded 500,000 shares to Mr. Moorby under
the Company’s 2007 Stock Incentive Plan.
  (3)
Excludes options to acquire 50,000 shares of Common Stock awarded to Mr. Moorby
upon his resignation as an officer of the Company and his agreement to serve on
the Company’s advisory committee. The exercise price of the options is $0.50 per
share with one half the options vesting January 1, 2009 and the remainder
vesting January 1, 2010.
  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, 2008)
  Number
      of
                
                
                Number
      ofSecurities
                
                
                Securities
                
                
                
                WeightedUnderlying
                
                
                Underlying
                
                
                
                AverageUnexercised
      Options
                
                
                Unexercised
      Options
                
                
                
                Per
      Share
                
                ExpirationName
                
                Exercisable(3)
                
                
                Unexercisable(1)
                
                
                
                Exercise
      Price
                
                DatesSteven
      L. Sample(1)
                
                
                0
                
                
                
                0
                
                
                
                n.a.
                
                n.a.Tony
      Moorby
                
                
                0
                
                
                
                0
                
                
                
                n.a.
                
                n.a.Patricia
      Arnold(2)
                
                
                10,000
                
                
                
                0
                
                
                $
                0.01
                
                2/1/17
 (1)
              Excludes
      1,425,000 warrants are held by Mr. Sample issued in exchange in 2007 for
      shares of the Company’s Preferred Stock and not for compensation. The
      average exercise price of such warrants was $2.33 per share, and 975,000
      of them were tied to specific future performance levels by the company
      over fiscal 2008, 2009, and 2010. The performance goals were not met in
      2008 and options to acquire 341,350 lapsed leaving a weighted exercise
      price of $2.50 and a total of 1,083,650 options pursuant to such warrants
      outstanding.
  (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 and an equal number of shares vest annually
      over a four year period.
  (3)
              Does
      not include 100,000 Common stock Options with an exercise price of $0.50
      per share granted to Mr. Bynum on December 31, 2008, for his appointment
      to the Vice Presidency of the Company beginning the following
      day.  One half of those options vest January 1, 2009, and the
      remainder vesting January 1, 2010 with his continued
      employment.
  17
 Table of Contents
  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. In
2008, each non-employee director was granted options to acquire 15,000 shares of
Common Stock at an exercise price of $0.50 per share.
  Benefit
Plans
  As part
of the reorganization proceeding in bankruptcy, all stock option plans and
warrants existing prior to change of control to Acacia’s management 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, Mr. Moorby was given a grant of 500,000 shares of
restricted stock.  In addition, the Company granted Ms. Arnold an
option to acquire 10,000 shares of Common Stock under the plan at the same
meeting.
  Compensation
Committee
  The board
of directors has 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 Compensation does not have a
charter, and on January 1, 2009, David Bynum became an employee of the Company.
The committee has not reviewed the compensation of executives as it presently
reflects basic compensation in a start up environment.
  Item 12.  Security Ownership 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 of
                  
                  No.
      ofBeneficial Owner
                  
                  Shares
                  
                  
                  PercentSteven
      L. Sample (1)
                  
                  
                  6,539,600
                  
                  
                  
                  54.2
                  %Danny
      Gibbs (2)
                  
                  
                  62,500
                  
                  
                  
                  0.5
                  %Tony
      Moorby
                  
                  
                  511,000
                  
                  
                  
                  4.2
                  %Patricia
      Ann Arnold (3)
                  
                  
                  -
                  
                  
                  
                  -James
      C. Hunter (2)
                  
                  
                  -
                  
                  
                  
                  -V.
      Weldon Hewitt (2)
                  
                  
                  -
                  
                  
                  
                  -David
      Bynum(4)
                  
                  
                  15,000
                  
                  
                  
                  0.1
                  %Frank
      Lawrence(5)
                  
                  
                  450,000
                  
                  
                  
                  3.8
                  %All
      directors and officers
                    as
      a group (eight persons)
                  
                  
                  7,578,100
                  
                  
                  
                  62.8
                  %
 (1)
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 1,000,000 of them are tied to
specific future performance levels by the company over the next three fiscal
years.  316,350 of those warrants expired at 12-31-2008. 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, and 100,000 shares for $0.50
each.
  (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 3512
East Silver Springs Boulevard - #243, Ocala, FL  34470.
  18
 Table of Contents
  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, 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, 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
                
                
                
                333,000
                *2009
                
                $
                3.00
                
                
                
                333,0002010
                
                $
                4.00
                
                
                
                334,000
  *  316,350
of these warrants issued to Mr. Sample and 16,650 warrants issued to Mr. Myers
expired at the end of 2008 as unearned and unvested.
  Item13.  Certain Relationships 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, an
IT and MIS expert, 10,000 shares of Common Stock for work performed in
installing and maintaining the company’s computer network system as well as
creating, hosting, and maintaining the Company’s e-mail system and Internet web
site.  Palmer 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 automobiles for the use of Mr. Bynum, Mr. Sample, and two other
employees at the auction level.
  Item14.  Principle Accountant Fees and Services
  The
following is a summary of the aggregate fees billed to us for fiscal 2008 by
Killman, Murrell & Company, P.C.:
  Audit
Fees
  Fees for
audit services totaled approximately $30,683  in 2008, 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-Q or Form 8-K.
  19
 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 to
      F-5Consolidated Statements of Cash Flows
                F-6Notes to Consolidated Financial
    Statements
                F-7 to
      F-20
 (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
  31.1
                Rule 13a-14(a)/15d-14(a) Certification (furnished
      herewith).
  31.2
                  Section 1350 Certification (furnished
      herewith).
 *           Previously
filed
  
 20
 Table of Contents
 
  
 PageReport of Independent Certified Public
      Accountants
                F-1Consolidated Balance Sheets
                F-2Consolidated Statements of Operations
                F-3Consolidated Statements of Stockholders’
      Deficit
                F-4 to
      F-5Consolidated Statements of Cash Flows
                F-6Notes to Consolidated Financial
    Statements
                F-7 to F-20
 
 
 
 Table of Contents
 
 
 Killman,
Murrell & Company P.C.
 Certified
Public Accountants
 
 3300
      N. A Street, Bldg. 4, Suite 200
                1931
      E. 37th
      Street, Suite 7
                2626
      Royal CircleMidland,
      Texas 79705
                Odessa,
      Texas 79762
                Kingwood,
      Texas 77339(432)
      686-9381
                (432)
      363-0067
                (281)
      359-7224Fax
      (432) 684-6722
                Fax
      (432) 363-0376
                Fax
      (281) 359-7112
 
 
 REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
 
 
 To the
Board of Directors and Stockholders
 Acacia
Automotive, Inc.
 Ocala,
Florida
 
 
 We have
audited the accompanying consolidated balance sheets of Acacia Automotive, Inc.
as of December 31, 2008 and 2007, and the related consolidated statements of
operations, stockholders’ equity 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 can plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material
misstatement.  The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting.  Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over consolidated
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 consolidated financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated 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 consolidated financial position of Acacia
Automotive, Inc. as of December 31, 2008 and 2007, and the consolidated 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 consolidated financial statements have been prepared assuming that
the Company will continue as a going concern.  As discussed in Note 12
to the consolidated 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 consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
 
 /s/Killman,
Murrell & Company, P.C.
  Odessa,
Texas
 August
26, 2009
 
 
 F-1
 Table of Contents
  ACACIA AUTOMOTIVE, INC.
 CONSOLIDATED
BALANCE SHEETS
 DECEMBER
31, 2008 AND 2007
  2008
              
              
              
              2007ASSETSCURRENT
      ASSETSCash
              
              $
              5,586
              
              
              $
              49,716Certificate
      of Deposit (Restricted)
              
              
              157,255
              
              
              
              153,361Accounts
      receivable
              
              
              236,524
              
              
              
              210,424Deposits
      and prepaid expenses
              
              
              3,481
              
              
              
              33,562Total
      Current Assets
              
              
              402,846
              
              
              
              447,063PROPERTY
      AND EQUIPMENT, net of accumulated depreciationof
      $52,103 and $13,707 in 2008 and 2007, respectively
              
              
              172,346
              
              
              
              203,142OTHER
      ASSETSGoodwill
              
              
              427,929
              
              
              
              427,929Customer
      list and Non-Compete Agreement, net of accumulated
      amortizationof
      $255,850 and $85,283 in 2008 and 2007, respectively
              
              
              385,284
              
              
              
              555,851Total
      Other Assets
              
              
              813,213
              
              
              
              983,780TOTAL
      ASSETS
              
              $
              1,388,405
              
              
              $
              1,633,985LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESCash
      overdraft
              
              $
              42,893
              
              
              $
              −Accounts
      payable
              
              
              277,561
              
              
              
              224,928Accrued
      liabilities
              
              
              404,374
              
              
              
              87,238Line
      of credit
              
              
              275,000
              
              
              
              139,900Capital
      lease obligations, current portion
              
              
              14,619
              
              
              
              11,706Stockholder
      payables
              
              
              -
              
              
              
              47,104Total
      Current Liabilities
              
              
              1,014,447
              
              
              
              510,876NONCURRENT
      LIABILTIESCapital
      lease obligations, less current portion
              
              
              16,900
              
              
              
              32,078TOTAL
      LIABILITIES
              
              
              1,031,347
              
              
              
              542,954COMMITMENTS
      AND CONTINGENCIES
              
              
              -
              
              
              
              -STOCKHOLDERS'
      EQUITYPreferred
      Stock, $0.001 par value,1,475,000
      shares authorized, none issued and outstanding
              
              
              -
              
              
              
              -Common
      stock, $0.001 par value, 150,000,000 shares authorized;12,062,524
      and 11,997,524 shares issues and outstanding, respectively
              
              
              12,062
              
              
              
              11,997Additional
      paid-in capital
              
              
              11,095,181
              
              
              
              10,918,722Retained
      deficit
              
              
              (10,750,185
              )
              
              
              (9,839,688
              )TOTAL
      STOCKHOLDERS' EQUITY
              
              
              357,058
              
              
              
              1,091,031TOTAL
      LIABILITIES & STOCKHOLDERS’ EQUITY
              
              $
              1,388,405
              
              
              $
              1,633,985
 
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
 
 
 F-2
 Table of Contents
  ACACIA AUTOMOTIVE, INC.
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 YEARS
ENDED DECEMBER 31, 2008 AND 2007
 
 2008
              
              
              2007REVENUESBuyers
      fees
              
              $
              447,751
              
              
              $
              159,288Sellers
      fees
              
              
              535,858
              
              
              
              225,876Other
      revenue
              
              
              15,363
              
              
              
              38,240Total
      Revenues
              
              
              998,972
              
              
              
              423,404OPERATING
      EXPENSESCost
      of fees earned
              
              
              85,950
              
              
              
              100,937Employee
      compensation
              
              
              848,556
              
              
              
              2,076,538General
      and administrative
              
              
              701,118
              
              
              
              1,498,506Depreciation
      and amortization
              
              
              219,829
              
              
              
              101,270Beneficial
      conversion of preferred stock
              
              
              -
              
              
              
              500,000Total
      Operating Expenses
              
              
              1,855,453
              
              
              
              4,277,251Operating
      loss before other income (expense)and
      income taxes
              
              
              (856,481
              )
              
              
              (3,853,847
              )OTHER
      INCOME (EXPENSE)Interest
      income
              
              
              5,595
              
              
              
              8,223Interest
      expense
              
              
              (20,378
              )
              
              
              (2,890
              )Loss
      on sale of assets
              
              
              (39,233
              )
              
              
              (2,367
              )Total
      Other Income (Expense)
              
              
              (54,016
              )
              
              
              2,966INCOME
      TAX
              
              
              -
              
              
              
              -NET
      LOSS
              
              $
              (910,497
              )
              
              $
              (3,850,881
              )BASIC
      AND DILUTED LOSS PER SHARELoss
      per share
              
              $
              (0.07
              )
              
              $
              (0.35
              )Weighted
      average shares outstanding
              
              
              12,017,524
              
              
              
              10,997,523
  The
accompanying notes are an integral part of these consolidated financial
statements.
 
 
 F-3
 Table of Contents
  ACACIA AUTOMOTIVE, INC.
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
 YEARS
ENDED DECEMBER 31, 2008 AND 2007
  AdditionalPreferred
      Stock
              
              
              
              
              
              Common
      Stock
              
              
              
              
              
              Paid
      in
              
              
              RetainedShares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              Capital
              
              
              Deficit
              
              
              TotalBalanceDecember
      31, 2006
              
              
              525,000
              
              
              $
              525
              
              
              
              9,935,024
              
              
              $
              9,935
              
              
              $
              5,703,930
              
              
              $
              (5,988,807
              )
              
              
              (274,417
              )February
      1, 2007Warrants
      Issued for
                Services
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              497,930
              
              
              
              -
              
              
              
              497,930Stock
      Options Issued for
                Equipment
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              15,060
              
              
              
              -
              
              
              
              15,060March
      31, 2007Stock
      Issued for Services
              
              
              -
              
              
              
              -
              
              
              
              500,000
              
              
              
              500
              
              
              
              999,500
              
              
              
              -
              
              
              
              1,000,000May   16,
      2007Stock
      Options Issued
                For
      Services
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,277
              
              
              
              -
              
              
              
              2,277May
      29, 2007Warrants
      Issued for
                Services
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              605,348
              
              
              
              -
              
              
              
              605,348June
      8, 2007Sale
      of Common Stock
              
              
              -
              
              
              
              -
              
              
              
              512,500
              
              
              
              512
              
              
              
              1,024,488
              
              
              
              -
              
              
              
              1,025,000Stock
      Warrants IssuedFor
      Services
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              430,300
              
              
              
              -
              
              
              
              430,300June
      22, 2007Conversion
      of  525,000shares
      of Preferred Stockto
      Common Stock
              
              
              (525,000
              )
              
              
              (525
              )
              
              
              525,000
              
              
              
              525
              
              
              
              500,000
              
              
              
              -
              
              
              
              500,000
 
  F-4
 Table of Contents
 
 ACACIA
AUTOMOTIVE, INC.
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
 YEARS
ENDED DECEMBER 31, 2008 AND 2007
 (continued)
 
 AdditionalPreferred
      stock
              
              
              Common
      Stock
              
              
              Paid
      in
              
              
              RetainedShares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              Capital
              
              
              Deficit
              
              
              TotalJuly
      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
                For
      Services
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              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
              )
              
              
              1,091,031Sale
      of
                Common
      Stock
              
              
              
              
              
              
              
              
              
              
              65,000
              
              
              
              65
              
              
              
              129,935
              
              
              
              
              
              
              
              130,000Options
      Issued for
                Services
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              46,524
              
              
              
              
              
              
              
              46,524Net
      Loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (910,497
              )
              
              
              (910,497
              )BalanceDecember
      31, 2008
              
              
              -
              
              
              $
              -
              
              
              
              12,062,524
              
              
              $
              12,062
              
              
              $
              11,095,181
              
              
              $
              (10,750,185
              )
              
              $
              357,058
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
 
  F-5
 Table of Contents
 
 
 ACACIA AUTOMOTIVE,
INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 YEARS
ENDED DECEMBER 31, 2008 AND 2007
 
 2008
              
              
              2007Cash
      flows from operating activitiesNet
      loss
              
              $
              (910,497
              )
              
              $
              (3,850,881
              )Adjustments
      to reconcile net loss to net cashused
      in operating activities:Depreciation
      and amortization
              
              
              219,829
              
              
              
              101,270Common
      stock issued for services
              
              
              -
              
              
              
              1,020,000Stock
      options issued for services
              
              
              46,524
              
              
              
              1,573,633Beneficial
      conversion
              
              
              -
              
              
              
              500,000Loss
      on disposal of assets
              
              
              14,234
              
              
              
              2,367Changes
      in operating assets and liabilitiesCash
      overdrafts
              
              
              42,893
              
              
              
              -Certificate
      of Deposit (Restricted)
              
              
              (3,894
              )
              
              
              (153,361
              )Accounts
      receivable
              
              
              (26,100
              )
              
              
              (210,424
              )Deposits
      and prepaid expenses
              
              
              30,081
              
              
              
              (33,093
              )Accounts
      payable
              
              
              52,633
              
              
              
              164,392Accrued
      liabilities
              
              
              317,136
              
              
              
              (152,160
              )Net
      cash used in operating activities
              
              
              (217,161
              )
              
              
              (1,038,257
              )Cash
      flows from investing activitiesProceeds
      from sale of assets
              
              
              26,400
              
              
              
              22,061Purchase
      of property and equipment
              
              
              (59,099
              )
              
              
              (136,759
              )Net
      cash used in investing activities
              
              
              (32,699
              )
              
              
              (114,698
              )Cash
      flows from financing activitiesBorrowings
      and repayments from/on line of credit
              
              
              135,100
              
              
              
              139,900Capital
      lease payments
              
              
              (12,266
              )
              
              
              -Sale
      of common stock
              
              
              130,000
              
              
              
              1,025,000Shareholder
      payables
              
              
              (47,104
              )
              
              
              36,339Net
      cash provided by financing activities
              
              
              205,730
              
              
              
              1,201,239Net
      increase (decrease) in cash and cash equivalents
              
              
              (44,130
              )
              
              
              48,284Cash,
      beginning of year
              
              
              49,716
              
              
              
              1,432Cash,
      end of year
              
              $
              5,586
              
              
              $
              49,716Supplemental
      Disclosure of Cash Flow InformationCash
      paid during period for:Interest
              
              $
              20,378
              
              
              $
              2,784Income
      tax
              
              $
              -
              
              
              $
              -
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
 
 
 F-6
 Table of Contents
 
 ACACIA AUTOMOTIVE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 
 NOTE 1 -
THE COMPANY
 
 Acacia
Automotive, Inc. (“Acacia” or the “Company”) is engaged in acquiring and
operating auctions that sell automobiles, trucks, equipment, boats, motor homes,
RVs, and other related vehicles.  Currently, Acacia owns one auction
in North Augusta, South Carolina.
 
 Acacia
was formerly named Gibbs Construction, Inc. (“Gibbs”).  “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 anOrder 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.
 
 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.
 
 
  F-7
 Table of Contents
  ACACIA
AUTOMOTIVE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 
 NOTE 1 -
THE COMPANY (continued)
 
 ·
              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.
 
 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.
 F-8
 Table of Contents
  ACACIA
AUTOMOTIVE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 
 NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 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.
 
 CERTIFICATE
OF DEPOSIT (RESTRICTED) – The Company holds a certificate of deposit maturing in
January 2009 that is pledged as a partial compensating balance with the
promissory note (line of credit).  The certificate automatically
renewed in January 2009 for nine months.
 
 ACCOUNTS
RECEIVABLE - The Company’s receivables are recorded when billed, advanced, or
accrued and represent claims against third parties that will be settled in
cash.  The carrying value of the Company’s receivables, net of
allowance for doubtful accounts, represents their estimated net realizable
value.  The Company estimates its allowance for doubtful accounts
based on historical collection trends, the age of the outstanding receivables
and existing economic conditions.
 
 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, 2008 and 2007 totaled $48,630 and $15,986, 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.
 
 FAIR
VALUE ESTIMATES – In September 2006, the FASB issued SFAS No. 157 “Fair Value
Measurements”.  The objective of  SFAS
157 is to increase consistency and comparability in fair value measurements and
to expand disclosures about fair value measurements. SFAS 157 defines fair
value, establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.
SFAS 157 applies under other accounting pronouncements that require or permit
fair value measurements and does not require any new fair value
measurements.
 
 The
Company measures it options and warrants at fair value in accordance with SFAS
157. SFAS 157 specifies a valuation hierarchy based on whether the inputs to
those valuation techniques are observable or unobservable. Observable inputs
reflect market data obtained from independent sources, while unobservable inputs
reflect the Company’s own assumptions. These two types of inputs have created
the following fair value hierarchy:
 
 
 •
              Level
      1 – Quoted prices for identical instruments in active
    markets;•
              Level
      2 – Quoted prices for similar instruments in active markets, quoted prices
      for identical or similar instruments in markets that are not active, and
      model-derived valuations in which all significant inputs and significant
      value drivers are observable in active markets; anddrivers
      are observable in active markets;
and
 •
              Level
      3 – Valuations derived from valuation techniques in which one or more
      significant inputs or significant value drivers are
      unobservable.
 
 F-9
 Table of Contents
 
 ACACIA
AUTOMOTIVE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 
 NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (continued)
 
 FAIR
VALUE ESTIMATES (continued)
 
 This
hierarchy requires the Company to minimize the use of unobservable inputs and to
use observable market data, if available, when estimating fair value. The fair
value of the options and warrants and long-lived assets held for sale at
December 31, 2008 was as follows:
 
 Fair
Value Measurements at Reporting Date Using
 
 Quoted
      Prices
                in
      Active
                Markets
      for
                Identical
                Assets
              
              
              Significant
                Other
                Observable
                Inputs
              
              
              Significant
                Unobservable
                Inputs(Level
      1)
              
              
              (Level
      2)
              
              
              (Level
      3)
              
              
              TotalOptions
              
              $
              -
              
              
              $
              46,524
              
              
              $
              -
              
              
              $
              46,524Long-lived
      Assets Held For Sale
              
              $
              -
              
              
              $
              26,400
              
              
              $
              -
              
              
              $
              26,400
  The
provisions of SFAS 157 are effective for fair value measurements made in fiscal
years beginning after November 15, 2007.
 
 Options
and warrants were valued using the Black-Scholes model.
 
 Long-lived
assets held for sale were valued by gross proceeds realized.
 
 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.
 
 COMPENSATED
ABSENCES -   The Company has not accrued a liability in
accordance with FAS 43 as the amount of the liability cannot be reasonably
estimated at December 31, 2008.
 
 REVENUE
RECOGNITION – Revenue is recognized when realized. Auction and related fees are
recorded when sales are consummated at time of vehicle sale.
 
 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, 2008 and 2007 amounted to $23,446 and
$17,739, respectively.
  F-10
 Table of Contents
 
 ACACIA
AUTOMOTIVE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 
 NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 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 - Effective at the beginning of fiscal year 2006, the Company
adopted the provisions of Statement of Financial Accounting Standards
No. 123R “Share-Based Payment” (“SFAS No. 123(R)”) to account for
stock-based compensation. Under SFAS No. 123(R), the Company estimates
the fair value of stock options granted using the Black-Scholes option pricing
model. The fair value for awards that are expected to vest is then amortized on
a straight-line basis over the requisite service period of the award, which is
generally the option vesting term. The amount of expense attributed is based on
estimated forfeiture rate, which is updated based on actual forfeitures as
appropriate. This option pricing model requires the input of highly subjective
assumptions, including the expected volatility of our common stock, pre-vesting
forfeiture rate and an option’s expected life. The financial statements include
amounts that are based on the Company’s best estimates and judgments. Prior to
fiscal year 2006, the Company accounted for stock-based compensation plans using
the intrinsic value method prescribed in Accounting Principles Board (“APB”)
Opinion No. 25, “Accounting for Stock Issued to
Employees.”  During the years ended December 31, 2008 and 2007, the
Company issued stock awards to employees in the amounts of $0.00 and $1,020,000,
respectively.
 
 Details
      of ValuationDate
              
              Shares
              
              
              Value3/31/07
              
              
              500,000
              
              
              $
              1,000,00011/3/07
              
              
              25,000
              
              
              
              20,000525,000
              
              
              $
              1,020,000
 
 
 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.
 
 F-11
 Table of Contents
 
 ACACIA
AUTOMOTIVE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 
 NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 COMMON
STOCK PURCHASE WARRANTS (continued) – In 2007, the Company issued stock purchase
warrants to purchase 2,206,250 shares of the Company’s common stock for $0.01 to
$4.00, with a life of five (5) years. The aggregate value of these stock
purchase warrants was $2,208,299 which was recognized as compensation expense at
December 31, 2007. The Black Sholes model assumptions were:
 
 RangeEstimate
      fair value
              
              $
              .80
              
              to
              
              $
              1.95Expected
      life (years)
              
              
              2.5
              
              to
              
              
              2.5Risk
      free interest rate
              
              
              4.88
              %
              to
              
              
              4.96
              %Volatility
              
              
              212
              %
              to
              
              
              212
              %Dividend
      yield
              
              
              -
              
              to
              
              
              -
  COMMON
STOCK OPTIONS – In 2007, the Company issued stock options to purchase 155,000
shares of the Company’s common stock for $0.01 to $0.80 with a life ten (10)
years in connection with Board of Directors authorizations.  The
aggregate value of these stock options was $278,392.  These options
can be exercised at the discretion of the option holder.  Black-Sholes
model assumptions were:
 
 RangeEstimate
      fair value
              
              $
              1.47
              
              to
              
              $
              1.95Expected
      life (years)
              
              
              5.0
              
              to
              
              
              5.0Risk
      free interest rate
              
              
              3.37
              %
              to
              
              
              3.37
              %Volatility
              
              
              212
              %
              to
              
              
              212
              %Dividend
      yield
              
              
              -
              
              to
              
              
              -
 
 
 On
December 31, 2008, the Company issued stock options to purchase 240,000 shares
of the Company’s common stock for $.50, with a life of ten (10) years in
connection with the Board of Directors authorization. The aggregate value of
these stock options was $112,763. These options can be exercised upon the
discretion of the option holder. Black Sholes model assumptions
were:
 
 Estimate
      fair value
              
              $
              0.44Expected
      life (years)
              
              
              5.0Risk
      free interest rate
              
              
              1.52
              %Volatility
              
              
              51
              %Dividend
      yield
              
              
              -
 
  F-12
 Table of Contents
 
 ACACIA
AUTOMOTIVE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 
 NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  IMPAIRMENT
OF LONG-LIVED ASSETS AND GOODWILL - The Company routinely evaluates the carrying
value of its long-lived assets, including good will. The Company records an
impairment loss when events or circumstances indicate that a long-lived asset’s
carrying value may not be recovered. These events may include changes in the
manner in which we intend to use an asset or a decision to sell an
asset.  The Company’s management believes that no impairment is deemed
necessary at December 31, 2008.
 
 RECENT
ACCOUNTING PRONOUNCEMENTS - In December 2007, the Financial Accounting Standards
Board issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS
No. 141(R)”) and SFAS No. 160, “Noncontrolling Interest in
Consolidated Financial Statements” (“SFAS No. 160”). These new standards
represent the outcome of the FASB’s joint project with the International
Accounting Standards Board and are intended to improve, simplify and converge
internationally the accounting for business combinations and the reporting of
noncontrolling interests in consolidated financial statements.
 
 SFAS
No. 141(R) replaces SFAS No. 141, “Business Combinations,” however, it
retains the fundamental requirements of the former Statement that the
acquisition method of accounting (previously referred to as the purchase method)
be used for all business
 combinations
and for an acquirer to be identified for each business. This Statement defines
the acquirer as the entity that obtains control of one or more businesses in the
business combination and establishes the acquisition date as the date that the
acquirer achieves control. The new standard requires the acquiring entity in a
business combination to recognize all (and only) the assets acquired and
liabilities assumed in the transaction; establishes the acquisition-date fair
value as the measurement objective for all assets acquired and liabilities
assumed; and requires the acquirer to disclose to investors and other users all
of the information they need to evaluate and under the nature and financial
effect of the business combination.
 
 SFAS
No. 160 amends Accounting Research Bulletin No. 51, “Consolidated
Financial Statements,” to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. This Statement clarifies that a noncontrolling interest in a
subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. This Statement
changes the way the consolidated income statement is presented by requiring net
income to be reported at amounts that include the amounts attributable to both
the parent and the noncontrolling interest and to disclose those amounts on the
face of the income statement. It also aligns the reporting of noncontrolling
interest in subsidiaries with the requirements in International Accounting
Standard 27.
 
 Both SFAS
No. 141(R) and SFAS No. 160 are effective beginning in our fiscal
2010. SFAS No. 141 (R) will be applied to business combinations that
are consummated beginning in fiscal 2010, and SFAS No. 160 will be applied
prospectively to all noncontrolling interests, including any that arose before
fiscal 2010. We are currently evaluating these Statements and have not yet
determined their effect on our consolidated financial statements.
 
 In
September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements” (“SFAS 157”) which addresses how companies should measure
fair value when they are required to use a fair value measure for recognition or
disclosure purposes under generally accepted accounting principles (“GAAP”). As
a result of SFAS 157 there is now a common definition of fair value to be
used throughout GAAP. The FASB believes that the new standard will make the
measurement of fair value more consistent and comparable and improve disclosures
about those measures. SFAS 157 will be effective for the Company for fiscal
year 2009. Management is currently evaluating the impact of the statement on the
Company. Management does not believe the adoption of SFAS 157 will have a
material impact on its consolidated financial statements.
 
 F-13
 Table of Contents
 
 ACACIA
AUTOMOTIVE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
  
 NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 RECENT
ACCOUNTING PRONOUNCEMENTS (continued)
 
 In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities” (“SFAS 161”). SFAS 161 requires entities to
provide enhanced disclosures about derivative instruments and hedging
activities. SFAS 161 is effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008. The Company
does not currently have any derivative instruments or hedging
activities.
 
 NOTE 3 -
RELATED PARTY TRANSACTIONS
 
 The
Company’s Chief Executive Officer (“CEO”) and majority stockholder has 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:
 
 2008
              
              
              2007Description
              
              Amount
              
              
              AmountDue
      to Stockholder January 1
              
              $
              47,104
              
              
              $
              10,765Payments
      made by stockholderOpening
      expenses
              
              
              -
              
              
              
              154,453Operating
      expenses
              
              
              -
              
              
              
              47,104Equipment
              
              
              -
              
              
              
              7,248Prepaid
              
              
              -
              
              
              
              469-
              
              
              
              220,039Less:Cash
      Payments
              
              
              (47,104
              )
              
              
              -Purchase
      ofCommon
      Stock
              
              
              -
              
              
              
              (138,862
              )Stock
      Purchase Warrant Exercise
              
              
              -
              
              
              
              (2,500
              )Payment
              
              
              -
              
              
              
              (31,573
              )Due
      to StockholderDecember
      31
              
              $
              -
              
              
              $
              47,104
 
 The
Company granted 10,000 common share purchase 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 his appointment.
 
 Additionally,
upon each annual stockholders meeting 15,000 common share purchase 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, valued at $1,000,000.  In 2008, options to
purchase 90,000 shares of common stock with an aggregate value of $42,286 were
issued to eligible directors.  Additionally, 150,000 options were
issued to employees for services, with an aggregate value of
$70,477.
 
 F-14
 Table of Contents
  ACACIA
AUTOMOTIVE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 
 NOTE 4 -
PROPERTY AND EQUIPMENT
 
 Property
and equipment consisted of the following at December 31, 2008 and
2007:
 
 2008
              
              
              2007Leasehold
      improvements
              
              $
              43,351
              
              
              $
              40,987Vehicles
              
              
              45,360
              
              
              
              31,860Capital
      Leases
              
              
              43,785
              
              
              
              43,785Furniture
      & fixtures
              
              
              3,154
              
              
              
              2,403Computers
      & Equipment
              
              
              88,799
              
              
              
              97,814224,449
              
              
              
              216,849Less
      accumulated depreciation
              
              
              (52,103
              )
              
              
              (13,707
              )$
              172,346
              
              
              $
              203,142
 
 NOTE 5 -
INCOME TAXES
 
 At
December 31, 2008, the Company had a net operating loss carryforward of
approximately $14,747,323 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:
 
 2008
              
              
              2007Benefit
      for Income Taxes Computed
                using
      the statutory rate of 34%
              
              $
              309,569
              
              
              $
              1,309,300Non-Deductible
      Expense
              
              
              (26,673
              )
              
              
              (1,043,549
              )Change
      in Valuation Allowance
              
              
              (282,896
              )
              
              
              (265,751
              )Provision
      for Income Taxes
              
              $
              -
              
              
              $
              -
 
 Significant
components of the Company’s deferred tax liabilities and assets were as follows
at December 31, 2008 and 2007.
 
 2008
              
              
              2007Deferred
      Tax AssetsTax
      Operating Loss
                Carryforwards
              
              $
              5,029,303
              
              
              $
              4,746,407Total
      Deferred Tax Assets
              
              
              5,029,303
              
              
              
              4,746,407Valuation
      Allowance
              
              
              (5,029,303
              )
              
              
              (4,746,407
              )$
              -
              
              
              $
              -
 
  F-15
 Table of Contents
  ACACIA
AUTOMOTIVE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 
 NOTE 6 -
STOCKHOLDERS’ EQUITY
 
 Preferred
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.
 
 The
following contingent warrants are still outstanding to those same
individuals:
 
 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.  No warrants have been executed as of December 31,
2008.  The value of these contingent warrants will be recognized as a
current expense upon vesting, if and when it occurs.
 
 F-16
 Table of Contents
 ACACIA
AUTOMOTIVE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 
 NOTE 6 -
STOCKHOLDERS’ EQUITY (continued)
 
 Common
Stock
 
 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 25,000 shares issued in the fourth quarter of 2007 for
services.
 
 On
September 3, 2008, 65,000 shares of common stock were issued for
services.
 
 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 auction industry.  Acacia Augusta Vehicle Auction,
Inc., a subsidiary of Acacia, operates this auto auction 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.
 
 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
 
 Based
upon the positive cash flow of the acquired entity, no impairment of goodwill
was deemed necessary as of December 31, 2008.
 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 $170,567 and $85,283 for
the years ended December 31, 2008 and 2007, respectively.
 
 F-17
 Table of Contents
 
 ACACIA
AUTOMOTIVE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 
 NOTE 7 -
BUSINESS COMBINATION (continued)
 
 Future
estimated amortization expense is:
 
 2009
              
              $
              104,0342010
              
              
              37,5002011
              
              
              37,5002012
              
              
              37,5002013
              
              
              37,500Thereafter
              
              
              131,250$
              385,284
 
 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 for up to $300,000.  As of December 31,
2008, $275,000 was owed the bank.  The LOC is partially collateralized
by a certificate of deposit maturing January 2009; automatically renewing for
nine months.  The restated certificate of deposit amounted to $157,655
and $153,361 on December 31, 2008 and 2007, respectively.
 
 NOTE 9 -
NON-CASH INVESTING AND FINANCING ACTIVITIES
 
 As of
December 31, 2008 and 2007, the Company had the following non-cash investing and
financing activities:
 
 2008
              
              
              2007Preferred
      stock
              
              $
              -
              
              
              $
              525Common
      stock
              
              
              -
              
              
              
              (1,025
              )Non
      Compete Agreement
              
              
              -
              
              
              
              266,134Additional
      paid-in capital
              
              
              -
              
              
              
              (1,097,196
              )Prepaid
      expenses
              
              
              -
              
              
              
              -Accounts
      payable
              
              
              25,000
              
              
              
              (6,173
              )Accrued
      liabilities
              
              
              -
              
              
              
              -Shareholder
      payables
              
              
              -
              
              
              
              -Equipment
              
              
              -
              
              
              
              34,806Vehicles
              
              
              -
              
              
              
              -Intangibles
              
              
              -
              
              
              
              802,929Leased
      Equipment
              
              
              (31,519
              )
              
              
              (43,785
              )Capital
      Lease Obligations
              
              
              31,519
              
              
              
              43,785Software
              
              
              (25,000
              )
              
              
              -
 
 F-18
 Table of Contents
 
 ACACIA
AUTOMOTIVE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 
 NOTE 10 –
OPERATING LEASES
 
 The
Company leases office space from Murray Investments on a month-to-month basis
for the Augusta Auto Auction a subsidiary of the Company. The rent is $2,700 per
month. Rent expense amounted to $33,345 and $13,500 for the years ended December
31, 2008 and 2007, respectively.
 
 The
Company also temporarily leased office space in Brentwood, Tennessee from
September, 2007 through August 31, 2008.  Rent was $2,000 per
month.  Rent expense amounted to $16,000 and $8,000 for the years
ended December 31, 2008 and 2007, respectively.
 
 
 NOTE 11 –
CAPITAL LEASES
 
 The
following are capital leases are outstanding as of December 31,
2008:
 
 IBM
      Credit, LLC – monthly payments of $164, including interest at 8.01%
      secured by computer equipment, matures December 31, 2010
              
              $
              3,985CIT
      Technology Financing Services, Inc – monthly payments of $436, including
      interest at 20.24% secured by computer equipment, matures November 30,
      2010
              
              
              10,636CIT
      Technology Financing Services, Inc – monthly payments of $716, including
      interest at 20.82% secured by computer equipment, matures November 14,
      2010
              
              
              17,685VAR
      Resources, Inc – monthly payments of $591, including interest at 24.18%
      secured by computer equipment, matures September 30, 2010
              
              
              6,873Total
      payments under capital lease
              
              
              39,179Less
      interest
              
              
              (7,660
              )31,519Less
      current portion
              
              
              (14,619
              )$
              16,900
  
 F-19
 Table of Contents
 
 ACACIA
AUTOMOTIVE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 NOTE 11 –
CAPITAL LEASES (continued)
 
 Future minimum lease payments under
capital leases are:
 
 2009
              
              
              19,3362010
              
              
              19,842$
              39,178
  NOTE 12 –
GOING CONCERN
 
 As of
December 31, 2008, 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.  This factor raises 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-20
 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: October
      28, 2009
                By:
                /s/
      Steven L.
      SampleSteven
      L. SampleChief
      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
                
                October
      28, 2009Steven
      L. Sample/s/ David Bynum
                
                Director
                
                October
      28, 2009David
      Bynum/s/ Tony Moorby
                
                Director
                
                October
      28, 2009Tony
      Moorby/s/ Danny R. Gibbs
                
                Director
                
                October
      28, 2009Danny
      R. Gibbs/s/ Dr. James C. Hunter
                
                Director
                
                October
      28, 2009Dr.
      James C. Hunter/s/ V. Weldon Hewitt
                
                Director
                
                October
      28, 2009V.
      Weldon Hewitt/s/ Frank Lawrence
                
                Director
                
                October
      28, 2009Frank
      Lawrence
    21
 Table of Contents